Startup Industry: For many years, the major objective of startups was to become a unicorn. Now that venture capital is becoming scarce and the fate of many startup companies is in question, another species is making headlines: the cockroach.
The city-huge state’s coming-out-of-Covid celebration saw venture capitalists and technology titans congregate in Singapore in recent weeks to mingle at a series of high-profile annual conferences. However, the glitz and promises of blitzscaling were gone, and participants now concentrated on the urgent need for money management and a bleak future.
It’s cockroach time — do whatever it takes to survive.
Tessa Wijaya, co-founder of Xendit, a $1 billion digital payments company, stated during a panel discussion led by Square Peg Capital partner Piruze Sabuncu, “It’s cockroach time — do whatever it takes to survive.” “Even though it’s a little nasty, it sort of works. If you can make it through the next two to three years, you should do well.”
Richly funded businesses routinely had growing teams
In recent years, investors wanting to stake their money on one of the internet economies with the quickest growth rates have poured a lot of money into Southeast Asia. Richly funded businesses routinely had growing teams, and for many young executives and employees, this was the only environment they had ever known.
The startup ecosystem is now experiencing difficulties. According to CB Insights, global venture capital dropped to $74.5 billion over the last three months, the lowest level in nine quarters. That was the largest quarterly decline in a decade, at 34%.
Raj Ganguly, who co-founded B Capital Group with Facebook co-founder Eduardo Saverin, declared at SuperReturn Asia, a conference that attracted a record 1,500 senior executives, that “cash is not only king, it’s king, queen, and everything else.” We’ve been encouraging businesses to have more honest dialogues about their cash runway, in large part.
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Jenny Lee, managing partner of GGV Capital and one of the most in-demand speakers, reiterated that opinion while addressing five conferences, including the Forbes Global CEO Conference and the Milken Institute Asia Summit.
“This is arguably the most difficult environment in my 22 years as an investor,” remarked Lee on September 21 at the Tech in Asia Conference, which was held six floors below SuperReturn Asia at the Marina Bay Sands. She emphasised that the value is never more crucial to keep in mind during a downturn than “your ability to have a cash runway.”
Her VC business advises its portfolio companies to have enough cash on hand to cover expenses for 36 months without needing to raise further money. According to Lee, who established GGV’s first office in China in 2005 and currently oversees the company’s US fundraising efforts, over 80% of them are currently in that category.
Tech companies throughout the world have experienced their worst year ever as a result of rising interest rates and sky-high valuations. To strengthen balance sheets ahead of a potential recession, many are laying off employees and shuttering portions of their businesses.
The largest tech businesses in Singapore, Grab Holdings Ltd. and Sea Ltd., are representative of this new reality in Southeast Asia: They have cautioned that they don’t expect to be able to raise money in the market after their US-traded equities have lost more than half of their value this year.
At the beginning of the month, during Singapore’s Formula One race week, Grab held its maiden investor day. Among the 90,000 attendees were former Google CEO Eric Schmidt and General Atlantic Vice Chairman Ajay Banga. Top officials at Grab sought to reassure investors by stating that the company is adjusting to a slump and accelerating attempts to turn around years of losses.
Managing director of Sequoia Capital India Shailendra Singh advised founders not to be afraid about raising money at a lower valuation.
According to Singh, “down rounds are like your math exam in 10th grade: It could make you more anxious at the time, but it doesn’t matter in the long run.” “If and when you list, you will constantly deal with market volatility.”
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Founders with experience in prior cycles were optimistic about the future of businesses with tried-and-true business models.
FastGig’s creator, Julian Tan, said he hasn’t had any trouble raising money this year and has received calls from investors looking for sustainable firms that also strive to address social concerns. FastGig’s app connects employers with part-time job seekers. According to him, the bulk of workers in Southeast Asia are manual and semi-skilled labourers, and there are currently few services available for them.
“The bad startups have been eliminated. Real businesses can capitalise on this opportunity by seeking out value investors “said Aung Kyaw Moe, whose 19-year-old payments company 2C2P sold a portion of itself to Ant Group Co. this year. “We cannot use investor money to go out and purchase $1 in revenue with a $2 subsidy. This needs to end.”
Efficiency is starting to take centre stage, just like in prior downturns.
For years, this word has not been utilized, according to Ganguly of B Capital. “Always, everything revolved around progress. We now frequently discuss efficiency.”
GoTo, the largest internet operator in Indonesia, according to its president Patrick Cao, would prioritise cutting operational costs and eliminating subsidies while providing services that business partners may further monetize. There is still a lot of work to be done, he added, adding that we have accelerated our break-even targets.
Grab, GoTo’s main rival, downplayed its enduring claim to be “Southeast Asia’s top superapp,” a catchphrase that was essential in the company’s success in raising billions of dollars from investors like SoftBank Group Corp.
Its newly stated objective, which is highlighted in its ambition to become more focused after burning through capital since its beginning, is disclosed in its investor day presentation slides: “The biggest and most effective on-demand platform for local trade and mobility in Southeast Asia.”
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