Qifang.cn founder Calvin Chin interview

Calvin Chin, founder/CEO Qifang.cn

I got a chance to speak with Calvin Chin, co-founder of Qifang.cn, during his recent trip to the San Francisco Bay Area.  Qifang is a for-profit venture in China that can be considered a “microfinance”  startup focused on sourcing educational loans for Chinese students.  It is focused on delivering the social outcome of more affordable education in China for students, and if it were in the US or Europe would probably be set up as a non-profit or Non-Governmental Organization (NGO).  But in China, NGO status is more difficult to get and can be problematic.

We first interviewed Calvin at the CHINICT 2008 conference when he was just getting started.  Here are some notes from my discussion with Calvin this time.

Elliott:  So catch me up on how Qifang is doing since we last interviewed you.

Calvin: Well, last time we talked we had basically just gotten started.  We started the company in August 2007, and we are 2 years old this year.  [Back in 2008] when we talked, we were just doing R&D, calling prospects to get some customer feedback, calling a bunch of school administrators to get some pilots going.  The rest of 2008, we did a few pilots, and then started fundraising at the end of 2008.  We’re raising money from socially-conscious Angel investors.

Elliott: Why is Qifang a for-profit company?
Calvin: There are two factors, “push” and “pull”.  First, “push” – impossible to actually set up non-profits in China.  There are many structural difficulties around licensing.  Secondly, “pull” – got early interest from angels with a social venture perspective.  If we want to solve education finance, then growing like a [profitable] tech company could be catalytic to transform to the space.  It will make the venture viable and independent.

Elliott:  What financing have you received?
Calvin: We received seed capital of $250k in end of ‘07 and are working on a second round of Series A.

Elliott:  what were your initial pilots like? What is your basic model?
Calvin: In some ways, we are like Kiva and like Prosper.com [which was shutdown by the SEC for 9 months].  Kiva partners with 3rd parties, such as microfinance institutions (MFI) in Vietnam.  Qifang has the schools as 3rd parties.  We find borrowers through the school, who screen for need, verify identity, and channel money to the students.

Elliott:  As the CEO, what are you focusing on personally?
Calvin: I’m looking different lender channels, such as Give2Asia.  Other groups include foundations, clubs, fraternal organizations.

Elliott:  how has model changed (since we last met in 2008)?
Calvin: A few things are fundamentally the same.  First, our service is delivered via the web.  Second, our service is a P2P (person-to-person) lending platform.  However, many things have also changed.   First, charitable donations are a component – we didn’t anticipate the power of this model.  Second, in 2007 we thought we would build Prosper China by starting in Education and what we realized is…there are structural flaws in that strategy in China.  The Key Performance Indicators for a Prosper model is loan volume.  The problem is that if we prove that this is a good business, as we grow, then we become head to head with traditional finance industry.  Banks and credit cards own the market.  Given regulatory environment and market dynamics, we didn’t want to do that.

Instead, we want to focus on getting good at screening small borrowers, finding borrowers at low-cost, and servicing loans at very low cost.  We no longer want to build a loan marketplace, but to do things well where we can partner with the traditional finance industry to serve an underserved market.  For example, we want to build a pool of data around student loans.  Commercial banks in China could ultimately access data across the market.  We could provide non-traditional credit scoring data and other social metrics that help banks underwrite loans.

Elliott:  What advice would you give a foreign CEO trying to lead a Chinese startup company?
Calvin: there is a Yin-Yang balance toward applying foreign methods and expertise.  Bringing an international perspective, a culture, and a Silicon-Valley style of operations, for example, can be valuable and leveraged judiciously to provide advantage.  But you have to be careful because all the things that you think that you know may not translate well to the local environment and the local team.  You can’t be all mouth and no ears, but also can’t be all ears and no mouth.  If you only listen, you don’t bring any value.  If your only talking, you could get yourself into trouble.  You’ve got to be judicious about deploying foreign expertise vs. adapting and learning and listening.  Don’t squander your advantage.

Thanks Calvin, for your thoughts, and best of luck with Qifang!