The fintech firm is also expanding into the Philippines and currently in the process of obtaining a lending licence from the country’s regulators

Indonesia’s online P2P lending startup UangTeman today announced that it has closed the first tranche of its Series B round of financing led by Draper Associates, the VC firm owned by well-known American investor Tim Draper.

New and existing investors, including KDDI Open Innovation Fund (corporate VC arm of telco KDDI) and Japan’s Global Brain, also participated.

The company plans to make the final close of the Series B round at US$10 million, with the second and last tranche targetted for the end of October 2019. This part will be anchored by Spiral Ventures.

According to a press release, UangTeman is also concurrently raising debt capital financing.

Also Read: 10 keys to a startup surviving the first five years

The startup recently obtained its permanent online lending licence from the Indonesian Financial Service Authority, OJK.

“We will begin the Series B2 round as a fintech company that has officially obtained the permanent licence from OJK. This effectively removes any regulatory risk involved in investing in this sector as we are now one of the key forerunners of a socially responsible online lending in Indonesia,” said Co-founder and CEO Aidil Zulkifli.

The firm plans to double down on growth within Indonesia. It will be diversifying its lending book into productive micro-business lending through an acquisition of an existing registered P2P lending platform whose core business is in invoice financing and payroll lending. That acquisition transaction is set to close in September 2019.

The company has also set its eyes on geographic expansion into the Philippines and is currently in the process of obtaining a lending licence from the country’s financial services regulators.

The fintech firm also intends to commence its Series C financing round in mid-2020 in order to fuel its further growth across Southeast Asia.

Operated by PT Digital Alpha Indonesia, a subsidiary of Digital Alpha Group, UangTeman uses Machine Learning credit algorithms to provide short-term microloans for consumers and MSMEs.

“UangTeman is transforming credit in Indonesia. We were ready to fund their Series B before they were granted the permanent license from OJK. This approval only solidified our thesis that UangTeman is poised to dominate the online lending industry in Indonesia, and eventually, globally,”  Tim Draper, Founder of Draper Associates.

“In Indonesia, the online loan industry is definitely becoming a social infrastructure, but by following the growth of UangTeman, we hope to learn more deeply and contribute to the social infrastructure that is really necessary for small business owners in Indonesia,” Yuji Horiguchi, CEO of Spiral Ventures.

In 2017, UangTeman had raised US$12 million Series A funding round in debt and equity, led by K2 Venture Capital.

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Understanding the demand of the market is key for innovation hubs to attract talents and cultivate successful companies

The model that was proven – Silicon Valley

The success of Silicon Valley in San Francisco is famous globally. With tech giants like Google and Facebook carrying its banner, Silicon Valley continues to prove its strength, building 32 new unicorns in 2018.

Ranking 1^st in the 2019 Global Startup Ecosystem Ranking by Startup Genome, Silicon Valley boasts excellent scores in almost every area that matters – performance, funding, research, connectedness, talent, knowledge, experience.

It is clearly a giant in this field with an ecosystem value of USD 312 billion, nearly 5x of USD 64 billion for New York City to secure its place as a second.

Looking at its success, every other major city around the world has started to compete in this race to establish its tech hub.

Also Read: The benefits of coworking based on business size

As such, it can attract talents, foreign investments, technological (human and machine) growths, completed with a global reputation that creates a cycle to cause exponential growth in all three areas.

For governments, it reeks of development opportunities for the economy and its people.

The struggle of Silicon Valley

Despite this image of a self-sustaining growth model, the Valley has started to face some headwinds in continuing its pace.

While the local share of Venture Capital (VC) flowing into Silicon Valley continues to rise, albeit arguably losing the global share, its share in the number of VC deals has dropped. VCs are starting to source for other investment opportunities.

Pressure points

Costs

The cost of living in San Francisco has skyrocketed, likely due to the success of tech companies, with the overall cost of living nearly three times the average U.S. cost of living. The cost of housing is almost thrice that of the national median and twice that of New York.

With such high costs, companies would face much higher operating expenses for office spaces and employee compensations.

Keeping low costs is a goal of almost every startup, be it funded or not. Investors will rather spend on costs that can increase returns such as research and development, assets and inventory.

It is no wonder that both founders and VCs are looking at other cities where funds can be put to more productive use than high rental fees and inflated employee salaries.

Talents

One of the biggest draws from Silicon Valley used to be its pool of talents – tech talents in specific.

With its connections with top institutions such as Stamford and a global reputation, it has been wildly successful in attracting talents.

However, times are changing, and the definition of talent is shifting away from pure academics to other factors, reducing the attractiveness of Silicon Valley.

The rising costs in San Francisco have not been helpful in the situation as equivalent salaries are worth much more in other cities, pushing talents further out of reach. One of the fastest-growing towns in Seattle, USA.

It has an average software engineer salary of USD 180,000 after adjusting for cost of living. This is 34.3 per cent higher than the fixed salary of USD 134,000 in San Francisco. A LinkedIn report even shows that San Francisco contributed the most significant number of workers moving to Seattle in 2017 at a rate of 9.71 per 10,000 members.

Culture

Another constraint on talents is one of the hottest topics regarding employment today – culture. 86 per cent of millennials (aged 22-37) who dominate the younger workforce, and technology talent pool will instead work at a company with goals and values they can identify with than of higher pay.

The infamously low retention rates of these tech giants are evident. The median employee tenure at Apple was 2.0, which seemed high compared to the 1.1 at Google, with millennial median employee ages of 31 and 29, respectively.

Data privacy and security

As the home for the giant unicorns, many are successful from artificial intelligence (AI) and data – Google and Facebook.

The idea of monetising data has seeped into the DNA of Silicon Valley. The ethics regarding the use of data is being challenged daily, with consumers becoming increasingly aware of how much personal data these companies have.

A tweet by Netflix backfired and creeped many netizens out as the company tried to flex its data capabilities.

Also Read: 5 ways coworking can give your business a much-needed boost

The famous, or infamous Facebook has also been under strong political fire as U.S. lawmakers question them heavily on how data is collected and used. Even Google is unable to shy away from the ongoing pressure.

Such culture and reputation of mistreating and monetising user data as much as possible is likely to be disconcerting and may drive talents away to new startups that are coming up with solutions to help users protect more data instead.

Workforce diversity

Another highly voiced issue is the lack of diversity in Silicon Valley, be it educational, racial or gender diversity. Diversity is a widely propagated concept today, and it is necessary to provide equal opportunities to everyone.

It is essential for companies to prevent overlooking talents and to attract talents that value the incorporation in a company.

Silicon Valley has built an influential culture among itself, but not necessarily that is attractive to the current generation of the workforce. That can be its weakest link.

Will Silicon Valley be superseded?

Just as Apple is positioning itself as a high-end tech brand and Indian Creek Island Road is known for its expensive houses. Silicon Valley has established its brand as a high-end innovation hub.

The current problems do not signal the end for Silicon Valley, but a niche market of companies and investors it can attract.

Companies are continually looking for large funding rounds and of course, investors with deep pockets. They may even shift from alluring startups to attracting small, medium enterprises (SMEs) who have gone through several rounds of funding and are looking to scale up rather than exit through acquisitions.

However, its biggest threat is competition for talents. Money and fame are no longer the recipes for the best employees. There will have to be changed to the culture in Silicon Valley as to how companies are groomed to treat consumers and employees well, or it may spell disaster.

Global innovation scene

North America is losing its shareholding in the VC industry quickly, even though it remains strong. Capital is diversifying itself geographically in a globalised economy.

The factors previously mentioned are all contributors to the growing success of tech hubs around the world. China, for example, is performing well with two cities in the top 10 within 5 years.

Globalisation effect:

• Education: Increasingly available with talents blooming in every other city.
• Infrastructure & Policy Development: Funding and supports are extending its global reach rapidly.
• Purchasing Power: As developing countries grow their middle-income population, untapped populations like those in Southeast Asia are gaining attractiveness.

Silicon Valley and by extension, USA, is no longer the best option for founders to build their businesses nor the sole birthplace for unicorns.

Will this be the same inevitably?

Following the model of Silicon Valley may result in similar problems in the future. Rising costs are already a real concern with ballooned housing prices and talent costs.

Like any other business, these hubs need to have an intended brand and messages to attract VCs and startups. It is not a matter of which is right, but which to choose.

Also Read: Silicon Valley evolution: Sand Hill Road is the new Wall Street

If strong attractiveness is the focus, ensure that it is incorporated in the culture. Make decisions based on long-term social impact, rather than short-term economic gains.

This may include limiting employee sizes of a certain number to prevent overcrowding and inflated real estate prices. It can also mean diversifying the size of startups to attract VCs with smaller funds.

Ultimately, the rules of demand and supply continue to shape the markets – labour, economic and financial. Silicon Valley answered the call for a more connected, more efficient way of handling technology, attributing to its great success today.

A culture to adapt rather than to defend must be present to continue creating feasible solutions, especially in a space where the competition is growing aggressively.

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Companies looking to enter this treasure trove must devise a feasible plan that tackles the differences in the region

Treasure trove

Southeast Asia (SEA) has over 600 million people in its population, which is nearly twice that of the United States (US).

Looking at how the US built its economy primarily through domestic consumption from its large population, there is vast potential waiting to be captured in SEA.

With rapid globalisation, evident from the phenomenal growth of China in the past two decades, why does this market remain untapped?

The answer lies in the complexity of the cultures filled by a myriad of languages, ethnicities and beliefs that even make difficult for locals to penetrate the neighbouring countries. Foreigners will then find the journey much more arduous.

In recent times, political landscapes are starting to stabilise, and governments are focusing efforts on economic growth rather than internal power struggles.

Southeast Asia is opening up to foreign investments and pushing for more infrastructure developments to foster long-term growth.

With the ongoing US-China trade dispute, SEA countries are reaping the benefits as investment sights set upon SEA alternatives like Vietnam and Thailand. This could be the time for the region’s expansion boom.

How can businesses then tackle the complexities that revolve around the region and succeed?

Also Read: 4 key points to consider when scaling in Southeast Asia

Key factors

1.Timing

Timing is arguably an essential factor in creating a successful business, as well as the most significant reason why some companies fail.

While local governments continue to debate on economic development plans, it is essential to be patient for favourable conditions before jumping into SEA.

Indonesia, for example, has a cap on foreign holdings of companies at 40 per cent. Some may be willing to take the risk of having a local partner in name, but it may not work-wise if the business is thriving.

Many governments like Thailand are also concerned with local employment and have strict local-foreign employment ratios of 4:1 to promote local employment.

However, local talent is a significant concern in many of these countries, with demand outweighing the supply.

While measures are being taken by both the public and private sectors to address these issues, companies should continue monitoring the landscape to determine the optimal time to enter and be aware of the risks it will take.

Gaining favour from the local governments will also serve as a huge advantage as it implies faster processing in almost every application.

2. Talent

As addressed earlier, talent is a pressing concern for the private sectors in many SEA countries. Singapore has done well in attracting various foreign companies into its shores to hire local talent, allowing the locals to learn and grow from them.

Technology transfer is a point of contention between foreign companies and governments.

Foreign businesses want to prevent their knowledge from being used against them by locals, whereas the governments want their locals to absorb the knowledge to push for a more developed economy.

Talent retention will be a means to mitigate such an issue. Companies that can succeed in formulating the strategy to retain talent is highly likely to succeed in the region by killing three birds with one stone.

They would save costs on finding new talent, minimise leakage of trade secrets and gain favour from the local governments. With the shifting focus of jobseekers from salary to other factors (e.g. company culture, values), properly structured strategies can be extremely cost-efficient.

Strong talent development programmes will also provide companies with an edge in entering these markets earlier before a fully developed labour market. This may be costly at the beginning, but it can serve as an unfair advantage if carried out successfully alongside a talent retention strategy.

3. Branding

Branding is another big challenge that companies will face entering the SEA. This fragmented region is known for its diverse and rich cultures, resulting in the business landscape that varies widely across countries.

Achieving a balance between the localisation of the brand and the maintenance of core values is tricky yet imperative.

Also Read: These 5 fintech startups cater to the bottom of the income pyramid in Southeast Asia

One key direction that companies can look at is their media plans to maximise efficiency and cost-effectiveness.

Media planning focuses on the return on investment (ROI) at a channel level and its relevance to the audience. In SEA, each country has its own culture where different media forms and brands are popular.

For example, WhatsApp is more commonly used in Singapore and Indonesia, while the LINE is more prevalent in Thailand. Companies must understand the various stages in the customer journey and which platform is most relevant in reaching out to them at the different phases.

Community building is one of the aspects of branding that the companies should explore. A community allows the customers to be engaged and gives them a voice to be heard, creating brand loyalty that is deeper than the product.

One success contributor of Chinese tech giant Xiaomi is their Mi community that provides a platform for customers to come together and meet the company on a social level. Creating moments for the members to experience and share can become the building blocks of a community.

4. Data

With the rapid technological improvements in our world, data is easily accessible and collected. Data is indispensable when a company wants to enhance customer experience effectively.

Machine learning (ML) and artificial intelligence (AI) programs utilise data greatly to develop personalised customer profiles, recommending suitable products and services.

However, making use of AI has its difficulties with the most complicated portion being the building of the infrastructure for the AI to work. It takes a lot of work for big data to be connected before it is sent to the different market technologies.

Data collection can be varied across companies to achieve the qualitative and quantitative requirements to validate decision-making models.

Corporations with larger customer bases can collect first-party data for higher accuracy while SMEs should focus on gathering third party data, from Google or Facebook, due to the limited number of customers. For many corporations, it is also more cost-effective to use teams as ROI is much higher when collecting first-party data on a large scale.

Conclusion

The strategy has always been a differentiating factor between winners and losers in business.

This strategy should incorporate specific plans regarding the four key factors – timing, talent, branding and data.

Also Read: These agritech startups will take Southeast Asias emerging market to the next level

Seeking external help can also be a useful tool to gain insights from experienced players, be it from experienced investors, consultancy firms or local partners. However, the strategy will prevail and even determine who to approach when seeking external supports.

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Join our e27 Telegram group here, or our e27 contributor Facebook page here.

Image Credit: Ben Lee

 

 

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Only when the customers are willing to pay for the solution can the idea be said to be validated

A startup exists to solve a problem or a pain point.

Upon coming up with the idea for a startup, the founders may choose to invest time and capital immediately into developing a product to solve a pain point.

Also Read: 3 ways startups should assess different financing options

Alternatively, they may choose to test whether this pain point exists before spending more time and capital in the product.

This is to avoid the situation where time is spent developing a product or solution that nobody wants or where demand is weak.

The smarter option is to first establish the intensity of the painpoint on the customer.

It could be that the pain exists only to a moderate degree. A solution may be nice to have but may not be needed asap.

In such a scenario, the customer is able to live without a solution or with an alternative despite it being imperfect.

It is where the pain point is serious enough and where a good proportion of customers are willing to pay for the solution can the idea be said to be ‘validated’.

The founder can then pour in more capital and effort, developing the product with good confidence that it is something the customers need.

This concept was famously set in various books, including ‘The Lean Startup by’ Eric Ries.

One simple example of a process to validate an idea would be:

Reach out to a sample of intended users or customers and take them through a description of the proposed product or solution. This can be done through –

1.A landing page on the web describing the solution. Advertise digitally to pull visitors to the page. Track the level of favourable response from the visitors to the page.

2. Face to face conversations with intended users – approach them in a public space, attend relevant events, etc. Document the response and feedback from the users.

3. Reaching out to users via direct email/calls, social media or via third party agents. Track the level of favourable response and feedback.

Before reaching out to the users set a benchmark for what would constitute a successful level of response. If the response received achieves or exceeds this benchmark, then indications are that there is a serious enough pain point.

If not, listen to the feedback and change the idea accordingly. It may be that the idea can be tweaked or ‘pivoted’ to address a different but related pain point or a diverse customer group. Subsequently, test out the pivoted idea using the same process.

With this process, a founder can find out objectively the right product or solution to focus on instead of developing something where demand is weak.

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Image Credit: Olav Ahrens Røtne

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She had her mind set on becoming an astronaut, but eventually pivoted to become an innovator in the manufacturing field

(Editor’s note: Here is an article from our archives which we think is still relevant)

As a child, she dreamt to become an astronaut. As she grew up, the intensity of her ambition also grew. So after finished schooling, she went on to attend a graduation programme in Aerospace Engineering at IIT Bombay, one of the prestigious higher education institutes in India.

However, this programme changed her mind — and perhaps her life itself.

“During the graduation programme, I made electric race cars for Formula Student UK, and also worked in the Formula Student team of the college as Project Manager,” Sonam Motwani narrates her story to e27.” This was my first encounter with designing and building a serious hardware product ground up. The experience of building four life-size vehicles with a team of 20 sowed the seeds of passion for hardware inside me.”

Soon after completing graduation in 2013, she joined the consumer goods giant Procter & Gamble in its technology division and developed solutions to speed up packing lines for haircare products, before moving to manufacturing sanitary napkins.

“It was sometime during the later half of 2015 when I seriously began considering starting my own business,” she adds. “When I decided to leave my job and start up in the manufacturing industry, my parents were a little apprehensive. But largely they have been supportive of all my career and life decisions. They tried their best to equip me with the right tools for sound decision making and prefer trusting the decisions I make thereafter.”

P&G was a learning experience for Motwani. She learnt how large companies approach product development, sourcing and deployment. Working closely with vendors in China and India gave her insights into challenges in the manufacturing ecosystem.

Also Read: Being a remote-working tech-writer and father has taught me these things

“With deeper analysis, it became more evident that the world of design and manufacturing was pretty much the same as it was a decade ago; the issues such as difficulty in accessing resources, lack of cost transparency and idle unutilised capacity at manufacturers still exist,” she notes.

“I began to see an opportunity in this unaddressed gap, and spent my weekends meeting hardware startups, design firms and manufacturing suppliers in Mumbai, Bangalore and Pune,” she says.

With a mission to address this gap, sometime in 2016, she put together a framework for an online platform that would simplify manufacturing. “I promised myself that if — during this period — I could establish a handful of businesses/innovators and suppliers who find value in my proposition, I would quit the job and commit full time to doing this. Fortunately, I achieved my goal, held myself to the promise, and put in the papers to kick start Rolling Cube in April 2016.”

Rolling Cube was meant to be a custom manufacturing startup that would enable anyone to build customised personalised products at the ease of their desktop.

Disrupting the manufacturing process

“Manufacturing is an industry where there’s quite a big market for B2C, but the supply chain is poorly understood or appreciated by the average customer. This makes pricing a difficult balance to strike. So more than a year ago, we introduced the concept of pooling, wherein we put orders in waitlist until sufficient volume was achieved for optimum material usage, hence optimising the customer’s price point. As it turned out, patience isn’t the customer’s greatest strength either,” she goes on.

Amidst all this, the bulk of Rolling Cube’s business was coming from its B2B services. The startup got into taking clients through the entire process of new product development — engineering their product design, prototyping various iterations and taking the products into mass production.

“A big challenge though was to scale our approach, where we took on any and every manufacturing project like consultants and then tried to source vendors for them. Moreover, our website looked like a very B2C e-commerce platform. The best way ahead for our team of four at this point seemed to be to completely split the B2C and B2B components. So that’s exactly what we did,” Motwani adds.

In July 2018, Rolling Cube revamped the business, and the team behind the project started Karkhana.io.

Also Read: How the son of a humble watch repairer became the owner of a multi-million dollar realty tech startup

Karkhana is an online manufacturing platform, which interacts with your design, provides manufacturing feedback and pricing based on its inbuilt algorithm. “We have a large network of skilled suppliers. By identifying machines best suited for each job and intelligently routing orders, we offer a far shorter turnaround time than that of traditional manufacturers,” Motwani shares.

How Karkhana.io works

Step 1 – Submit your design inputs (Upload your design file in the supported format. Select the material and manufacturing process of your choice)

Step 2 – Get design consultation (Review manufacturing recommendations and upload revisions directly on your account. Schedule a call or visit by our engineer for design-related help)

Step 3- Receive quotation and timelines (Get a fair estimate of cost and turnaround time through Karkhana.io’s pricing algorithm which accounts for manufacturing complexity and material utilisation)

Step 4- Place order for any quantity (Make one or many, it will make sure each of your product meets the quality requirements)

Step 5 – Track your order (Track exactly where your project is in the production process from your account).

The company provides manufacturing in over 20 materials, including steel alloys, aluminium alloys, copper alloys and plastics. The manufacturing services include CNC machining, sheet metal fabrication, 3D printing, Injection moulding and vacuum casting.

Challenges of building a hardware startup

According to Motwani, India does not have many women working in the manufacturing industry. And most workshops and industrial units are located in far off, not-so-convenient areas.

“When I started out, I’d visit the suppliers quite often and there were times when certain suppliers didn’t seem comfortable interacting with me. Probably, because it was an exception for them talking to a woman about manufacturing. But with time, as I stayed persistent, it became easier to get new suppliers onboard,” she reveals.

Having worked with a number of customers, including some popular household names in India, and developed a wide variety of hardware products, the company is now looking to achieve scalability.

“The next big milestone we are striving towards for achieving scalability is the automation of our pricing engine and online design for manufacturing feedback on our platform,” she says.

“We believe this will be a game changer in the way manufacturing interactions have been happening and accelerate the hardware development cycles for engineering teams. Our bigger ambition is to digitise the manufacturing ecosystem, which will democratise the process and make it accessible to everybody, just like software.”

Motwani is one of the 30 women entrepreneurs selected for Zone Startups India’s third edition of startup accelerator programme, empoWer.

Talking about the Indian startup ecosystem, she says that a lot of startups in the country aren’t able to reach their key milestones for success due to delay in establishing the product market fit. There might be multiple reasons for this: inability to reach critical mass for validation, lack of a network for feedback and learning, delay in acquiring resources for product development, insufficient funds.

Also Read: How a lazy student who caught and sold spiders transformed himself into a successful founder

“In general, the challenge in India seems to be about finding the right resources at the right time, maybe because the startup ecosystem is still young and developing as compared to the more successful examples that we look up to, such as Silicon Valley or Singapore,” she concludes.

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