February 22, 2024

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38-Year-Old CEO of Korean Fintech Leader Seeks $200 Million

(Bloomberg) — Viva Republica Ltd., operator of South Korea’s largest fintech startup Toss, is planning to raise about $200 million from investors to bankroll its expansion in online banking and security trading services.

The company just embarked on its funding round and hopes to complete it in coming months, founder Lee Seung-gun said in an interview, declining to disclose the expected valuation. Lee is also aiming to go public in two to three years, with a listing in South Korea, Hong Kong, the U.S. or two of the destinations, he said.

Toss, founded in 2011 and incorporated in 2013, is South Korea’s largest fintech startup with some 10 million monthly active users. It reached its first break-even month in April and is now processing 4.5 trillion won ($3.7 billion) of transactions a month after handling about 9.2% of the country’s online transfers in 2019. The company is planning to start a securities brokerage service in the second half of this year and build an internet bank in July next year, helping it win a bigger slice of the $43 billion financial market in South Korea.

“At a time like this, a company that grows fast and makes profit will get more money,” Lee, the 38-year-old dentist turned startup founder, said in an interview. “Our goal is to become a finance super app, making people open Toss for any financial activities without question.”

The Seoul-based company was able to cut spending thanks to a new open banking system adopted by the government late last year. That helped shrink commission payments to banks to a third of the original cost. Revenue grew six times in the last two years, and Lee aims to generate tens of billions of won in profit this year and more than one hundred billion won next year.

Lee’s goal is make Toss the world’s first super app that aggregates all the services provided by fintech giants such as Paypal Holdings Inc., Robinhood Markets Inc. and Credit Karma. Out of a total of 40 services, Toss’s five major units — money transfer, loans and credit rating management, insurance, investment and credit cards — evenly generate most of the revenue and profit.

Toss wants to offer securities brokerage services and loans to small businesses and consumers with interest rates between 5% and 15%. By eliminating complicated interfaces and terminology, Lee’s betting that the two services could lure half the country’s population, or about 25 million people, to actively use its app in two years.

Lee will hire around 200 workers for the online bank unit and as many as 90 employees for the brokerage service.

In a country dominated by family-run conglomerates, Toss stands out for advocating policy change. Lee said the government is now encouraging more “destructive players” to innovate in the finance industry.

“The founder dreams big, but he’s also great with execution and quick to deliver on his promises,” said He Tiantian, vice president of Sequoia Capital China, which invested in 2018 and followed up in every ensuing round. “Korea’s financial market is very well developed and the market potential for fintech is huge.”

Toss has raised a total of more than $350 million and was valued at $2.4 billion in its previous fund-raising round. It’s also backed by PayPal Holdings Inc., Goodwater Capital, GIC Pte, Altos Ventures.

Lee is looking for expansion outside of South Korea. The company started a reward service in Vietnam, giving people monetary incentive for completing tasks such as walking thousands of steps a day. It’s lured 300,000 monthly active users. It’s exploring opportunities in Southeast Asia and Japan as well.

For Lee, this is the first time he has broken even in his 10-year startup career. A yoga enthusiast, Lee said he’s planning to take a trip to Hawaii with his employees — all 350 of them — to celebrate the turnaround when the virus outbreak settles.“There were concerns among the market whether fintech is a profitable business,” said Lee. “Toss proves that it can achieve fast growth and make profits at the same time.”

(Updates with fundraising timeframe and transactions growth from the second paragraph)

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