Fintech company MatchMove clarifies that 80% of US$100m funding will be in services; cash component comes with conditions

Claudia Chong, The Business Times, 10 December 2021

MATCHMOVE on Wednesday disclosed that US$80 million of its US$100 million funding from US-based Nityo Infotech will be in the form of in-kind transactions, while the rest will be in cash.

Nityo's investment has also been approved by the Monetary Authority of Singapore, according to MatchMove.

This comes after The Business Times last month reported a delay in Nityo's investment. Sources had told BT that Nityo, an outsourcing company, agreed to invest in the startup only if majority of the funding is in the form of services.

Filings with the Accounting and Corporate Regulatory Authority (ACRA) on Dec 2 showed that there are certain restrictions on how the cash from Nityo can be used.

The cash has to be used entirely for MatchMove's quarterly expenditure, which refers to the total operating and capital expenditure projected to be incurred by the company in the quarter.

According to the parties' share subscription agreement, MatchMove is required to notify Nityo's investment arm KFC Ventures of the amount of expenditure due, which will determine the quarterly transfers from KFC.

MatchMove made the US$100 million funding announcement in June but regulatory records indicated no money had come through after five months.

Non-cash startup fundraising of this size is rare in South-east Asia, industry experts told BT last month. It also raises questions about how such deals are publicly portrayed.

A source close to the matter said an in-kind agreement was made as early as June 10, the date of the funding announcement. A copy of the share subscription agreement filed with ACRA on Dec 2 was dated June 2021. When queried by BT on June 10 about the terms of the funding, MatchMove CEO Shailesh Naik said the US$100 million would be cash-only.

In the press release dated Dec 8, MatchMove said the deal has been further refined since the announcement of the term sheet with Nityo in June.

Naik also said: "After a challenging 2020, we will close 2021 showing 400 per cent revenue growth and a strong increase in software as a service (SaaS)-based recurring revenues."

That would mark a stark contrast to its financial standing even before the pandemic. In most recently filed financial statements, MatchMove's revenue in 2019 was mostly flat at US$7.7 million and driven by transaction-based income. The shift to the SaaS model began last year.

In Wednesday's statement, MatchMove said the in-kind component will consist of technology services, specialist personnel, "cost synergies" and enhanced sales and distribution.

MatchMove's early investor Credit Saison last month said it was not comfortable endorsing the Nityo transaction, but declined to elaborate. The Japan-based company exited its entire stake to Naik about a month after the deal was announced.

Industry sources had told BT that Nityo's investment arm KFC Ventures approached their startups, offering to make an investment that included a non-cash component such as services or a promise to help increase revenue. The parties walked away from the offer.

Regulatory filings dated Dec 2 showed KFC Ventures has made a US$1.5 million equity investment in MatchMove.

MatchMove issued 66.9 million Series C convertible preference shares to KFC Ventures (not fully paid up), in line with their share subscription agreement.

The total subscription consideration set out in the agreement was US$99.8 million. It includes a cash consideration of at most 20 per cent of the total consideration, which will be paid quarterly.

The payments will continue until one of four conditions are fulfilled, including the company recording free cash flow each month for three months straight or a fundraise of at least US$50 million.

MatchMove added on Wednesday that Nityo's founder and chairman Naveen Kumar and Nityo's chief technology officer Vivek Chadha will join its board following completion of the investment.

Finian Tan, chairman of MatchMove's biggest backer Vickers Venture Partners, resigned from the board on Dec 3, regulatory filings show.