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The rise of the subscription economy in Southeast Asia

The subscription economy has seen a BOOM over the past 5 years, particularly in the United States, where there is an abundance of new offerings targeting the recurring payment space. Now, there is pretty much a subscription for everything from monthly gift boxes for your cats to weekly fresh food delivery.

The attraction of subscription is the mere fact that recurring payments allow the ability to maintain a customer relationship, which also allows cross-selling that could eventually increase your customer lifetime value (CLV). More and more startups coming has inadvertently attracted traditional business giants such as P&G, Adobe and Disney to enter the subscription space.

According to the Subscription Economy Index (SEI) by Zuora, it is mentioned that subscription businesses increased their revenues 5 times faster than the S&P 500 companies’ revenues (18.2 per cent versus 3.6 per cent). Besides that, Credit Suisse estimated that the market size of the subscription economy to reach US$530 billion in 2020. Such high growth would only attract the attention of investors, which adds fuel to the already growing industry.

What does this tell us about Southeast Asia?

Well, a similar transition of business models in startups would eventually attract traditional businesses to come in as well. Drawing back in time, the subscription model has been around the region for ages. Look at the old TV channel subscription, gym memberships or even your internet connection. These are all one form of subscription either way.

What started the shift in charging methods? Well, initially local startups have attempted to emulate similar models or even businesses in the West and try to replicate it in Southeast Asia. Look at iFlix, a video streaming service similar to Netflix or even media websites taking the paywall subscription approach similar to The Wall Street Journal.

Also Read: In-app messaging, How to convert trial users to paying subscribers

All in all, there was a form of replication either purposely or indirectly due to the increase in Internet penetration growth in the region. Majority of these early subscription models have worked by maintaining an increasing recurring revenue, as long the churn rate is not above the growth rate in users.

Like all money chasers, other businesses have looked at this model and see opportunity in this golden industry. Then, innovation begins, and previously traditional industries attempt a subscription approach. For example, there is the influx of car subscriptions, as seen in GoCar and Flux in Malaysia.

The more fixed commitments that an average individual has, the lower the stickiness he or she has for non-key payments. Thus, an exponential increase in subscription businesses occurs to be able to attract their customer base back. For example, Grab launched a subscription plan for bubble tea in Singapore and a GrabFood-no delivery fees plan as well.

What is the key to this industry?

Data is everything.

As the saying goes: “Data is the oil of the 21st century”, we now know that understanding your customer’s data is the key to unlocking high growth rate. The constant reevaluation of your customers’ preferences would push the business to relook at its pricing strategy, improve product offerings and improve the overall user experience for the product.

At the same time, the same data is instrumental in refining any marketing strategy that the company has. At present, all the social media ads have become so robust that you can drive down to the interest and locations, among others. Through this data, can subscription-based business only measure and improve their metrics.

The key subscription metrics that all businesses have to measure is mainly these four: Monthly recurring revenue (MRR), churn rate, customer acquisition cost (CAC) and customer lifetime value (CLV). Through measuring these numbers effectively, a company can make readjustments and improve its overall operations to grow the company, as customer preferences are constantly shifting.

Challenges facing the industry

Subscription-based business models do not have all just positive attributes. Controlling the churn rate is difficult because more people have increased the number of subscriptions in one’s monthly expense, which results in higher demands for user experience and product offerings. Thus, the process of matching the demand of customers is not necessarily a simple solution considering the financial and time constraints.

Also Read: Vewd CEO: APAC users more likely to use ad-supported streaming services compared to North American users

The increase in churn would lead to a decrease in the customer lifetime value (CLV), which simultaneously increases the acquisition cost. Besides that, there are numerous challenges approaching the industry such as high payment failure rates and financial data protection. Not all subscription-based model would work in the region, as customer preferences are constantly changing, and an increasingly crowded space would lead to a price war if the product offering is not attractive enough.

Opportunities for the future

Overall, the region would continue to see an increase in the subscription economy, as the attractive components still outweigh the possible downsides to it.

However, I believe there would be opportunities that would allow startups to capture a large market in the space that supports this industry.

Your everyday digital marketing company would need to implement data crawling to better understand users and managing the subscription plan would require enhanced user experience in payments and the onboarding process.

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Image Credit:  freestocks.org

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Bloo Co-founder Emanuele Faja

In 2016, Emanuele Faja (known as Manny among friends and in the tech industry) started a UI/UX and development agency, called Mäd, in his home country Cambodia. As the business grew, the number of software tools used in the company also grew. They were not just expensive but also complex to use.

“I had to spend a lot of time teaching both our team and clients on how to use and familiarise with various tools/platforms. I wanted to develop a simple tool, which would not just be easy to use but also powerful enough to run complex projects. This led me to create Bloo.io,” he tells e27.

Bloo.io, a product of Bloo Inc., a startup based out of Phnom Penh, is a project management tool. The product was developed and launched in April 2018 by Manny, who was later joined by Dong Truong, former CTO at Nam Kim Steel, a large steel company in Vietnam.

Beat the Bloo

An online platform, Bloo enables businesses (large and small) to manage all their team communications, files, ‘to-do’s, and processes. Business can sign up for an account on Bloo, create projects corresponding to each main functional divisions (sales, marketing, finance, web, brand, etc.), start building their processes, and track ‘to-do’ lists. All data and files uploaded are taggable, searchable, and can be accessed by web, Mac, Windows, iOS, and Android applications.

“Your teams can find all the information needed to do their jobs on Bloo, instead of using multiple disconnected tools,” he explains.

One of the critical features of Bloo is its user-friendliness, claims Manny. The product was tested for almost two years with employees that have little-to-no computer literacy, and they were able to pick up and use Bloo quickly, he says.

“Our apps follow Google Material design to ensure that anyone who has used any Google app (for example, Gmail) feels right at home. Our iOS app follows Apple’s Human Interface guidelines closely to ensure a familiar experience,” he continues.

A cost-effective and multi-lingual platform

Unlike its bigger competitors such as Trello, Asana, Basecamp, which charge clients on a pay-per-use basis, Bloo charges a flat fee of US$50 per month per organisation, irrespective of the number of users. Manny claims a 100-person organisation is likely to spend between US$25,000 and US$80,000 on similar software, but Bloo costs them just US$500 per year.

The Bloo platform also supports unlimited file hosting with files up to 2GB in size, whereas companies like Trello limit usage to 20MB on their free version, and only 250MB on premium accounts. According to Manny, this is a deterrent for companies, like architecture and design studios, that regularly deal with large file sizes. Bloo also claims to have built-in file management across all projects.

“Finally, the way we handle notifications is different from other tools. We give users complete control over notifications they want to receive. It is often a big issue on other platforms, where you either get spammed with lots of emails/push notifications or you receive no notifications about what’s important for you,” he asserts.

Manny believes that hundreds of millions of people in Asia, who are becoming knowledge workers, will need tools that are simpler to use and less intimidating than what Silicon Valley provides. Bloo aims to be one with its multi-lingual platform. It, however, doesn’t want to restrict itself to Asia.

Also Read: Cambodia to embrace tech future with the upcoming BarCamp ASEAN 2019

“Asia is a fast-growing market and is under-served. We have added many languages from this geography to our platform. Apart from English, the platform is available in Khmer and Vietnamese. We plan to eventually roll out in other languages such as Thai and Chinese and even Spanish,” he shares.

Dong Truong

Besides, the company plans to take advantage of the changing tech landscape to differentiate itself from its competitors. “We have been able to use the latest technologies such as VueJS and GraphQL, which enable us to quickly ship features to customers. Besides, because of our smaller size, we can stay much closer to our customers.”

He also claims that many customers of Dropbox, Trello, Basecamp, Asana, and Briefcase have already switched to Bloo. “Our lower cost base may also make a lot of companies consider switching to us, especially if there is a recession in the future and budgets tighten up.”

Bloo, which underwent the Stripe Atlas startup programme in the US, has already integrated a payment feature to its platform, and has paying customers since day one, he says. “NGOs, banks, design agencies, schools, retail locations, and even a large multinational construction are already using Bloo,”

While it is a highly-competitive industry, Manny doesn’t see this as a ‘winner-takes-all’ market. It is always going to be very fragmented, he says. “There are over 30 million SMEs in the US alone, and several hundred million worldwide. Even a small share of this market is enough to build an extremely healthy business that provides great service to customers,” he concludes.

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There is more than one type of investor to fundraise from, in fact, there are eight types of investors. So, how are they different? Which may be a good match and when?

Below is a list with the different types of investors that you could approach for your startup. Once you know who to pitch, it is all about the pitch deck to close your round of funding. For a winning deck, take a look at the pitch deck analysis web site created by nfinitiv advisors. When it comes to pitch decks analysis, we pride ourselves in our understanding of what VCs expect and demand because all our team are made up of advisers, angel investors and VCs.

Friends and family

The first type of investor entrepreneurs should be approaching at the very beginning are friends and family and close personal contacts.

At this stage, there is very little hard evidence and proof to base a real investment or funding on. They are essentially investing in the idea, and far more importantly – you. These are the people that already know you, like and trust you and believe in you the most.

This type of investor may not provide a lot of money. It could be in the range of US$1,000 to US$200,000. Though if you cannot raise money from this group, other investors are probably going to ask themselves why.

Also Read: Chatbot developer startup Pand.ai takes home US$1M seed funding, eyeing scaleups

Banks and government agencies

These are not true investors like the others on this list, but they can be sources of capital. Traditional banks are generally not an easy source of capital for early-stage startups and small businesses. However, as you gain traction, they may offer business credit cards, lines of credit, and business advance loans.

There may also be government programmes providing grants for certain types of projects. That does not mean that bringing in this type of capital will be any easier, and loans require repayment, often when you really need as much liquidity and slack as possible. They will not require giving up equity in your company, but they can impact your profitability, which may show up when you try to raise money from other investors later.

One thing to note about government programmes is that in many instances the come with certain restrictions and limitations which may be burdensome for startups. Founders should review very carefully what those expectations are.

Angel investors

Professional angel investors are normally approached when it comes to the seed round and beyond. They are willing to fund smaller operations than VCs, may be more flexible in terms, and can offer a lot of value in wisdom and connections.

Angel investors can be approached directly online, at live pitch events, and through introductions from other startup founders.

Angel groups

Angel groups have been increasing. They have become more popular and more organised. These are groups of angel investors who band together to make investments in startups. This enables them to invest with more confidence, with larger check sizes, and with lower exposure to risk.

Also Read: Funding news is not public relations: Building your startup’s story world

Accelerators and incubators

These vehicles can ultimately be a gateway to a variety of the types of investors on this list. If accepted into one of these programmes you may receive anywhere from US$10,000 to US$120,000 in seed money to cultivate your idea and gain traction, while benefiting from additional knowledge and resources. If everything is going well, you will be pitching larger investors and be introduced to funding sources during their demo days that can help take you to the next level. Just be ready to hustle, these programmes want to speed you on the way to the next stage quickly.

Family offices

Family offices are increasingly being drawn to the advantages of investing in startups. However, as some of the most successful entrepreneurs have pointed out, as investors, family offices can have quite different interests and game plans. Each can be very different.

Working with them can be very different depending on who is managing the decisions and process. Taxes, long term multigenerational investing, prestige and income may be more important for these investors than others on this list who are pushing to an earlier exit.

Venture Capital firms

VCs are the holy grail of investors for fundraising entrepreneurs. They come with the biggest checks, the most power to fuel success and gaining market share, and most juice when it comes to achieving more credibility and visibility.

More venture capital firms are looking at and are participating in earlier funding rounds. Though it is much more likely these investors will show up and be secured in Series A, B and C fundraising rounds than earlier.

Do note that not all of these firms are created equal. The best match can be influenced by location, the timeline of their funds, their interest and expertise in a certain field, their power to help you get to the next stage and of course, how they treat their founders.

Also Read: Tickled media’s theAsianparent closes a seven-figure Series C funding to expand its baby products business

Corporate investors

Investing in startups carries a variety of benefits for big corporations. Including supporting their own growth numbers, diversifying assets, and identifying talent and technology which can help them fend off industry changes and fuel revenues and profits. Some have funds to invest in outside startups. More are launching their own accelerator and incubator programmes and ecosystems for cultivating these opportunities.

These investors can be great allies in taking your business to the next level. Though they can be quite different to work with, and any integration or collaboration on sales channels, systems and customer bases needs to be approached carefully and with a lot of patience.

Founding entrepreneurs and corporate investors often have completely different styles and perspectives. It is going to be vital to learn to understand each other and have some boundaries set up when going in, if this is going to be an enjoyable relationship.

Summary

As you can see from this list, there are a wide variety of very different types of investors for funding startups. Some are very specialised in the stages and funding rounds they will invest at. Though these lines are increasingly blurring. Think of this as a ladder, not an A or B menu list.

As your startup grows different sources of capital will be more advantageous and valuable to fuelling that next level of growth. Understanding these differences will be invaluable for an efficient fundraising campaign and targeting the right investors at each raise.

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A previous version of this article first appeared on nfinitiv.

Image Credit: NESA by Makers on Unsplash

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Chosen from over 2,400 applications, the Top 100 Global Startups are set to pitch their most innovative ideas on stage next week at Asia’s hottest deep tech pitching competition

Overpopulation. A warming planet. Decreasing food and water security. In an increasingly globalised world, our planet is facing new challenges that threaten our existing way of life.

But there’s a silver lining – as our global needs evolve, so does technology. New disruptive technologies are invented by startups every day, and their innovations could be the key to paving the way for a sustainable future.

With that, sustainability is at the heart of tech at SLINGSHOT 2019, a deep tech startup pitching competition held at SFF x SWITCH from 11 to 13 November. This year, SLINGSHOT received more than 2,400 applications from 120 countries!

The selected Top 100 Global Startups will finally take the stage next week to pitch their most innovative ideas to the world, and battle it out for more than US$2 million in prizes.

Check out these four participating startups from SLINGSHOT 2019, and their commitment to ensuring there is a future for our next generations:

Biteback (Singapore) – Disrupting the US$60 billion palm oil industry with bugs

Cooking oil and butter made from insects? Agri-food tech startup Biteback has created a healthier and more sustainable alternative to palm oil – the production of which is a major contributing factor to climate change.

“Growing up in Indonesia, we witnessed the destruction of natural resources due to the ever-increasing demand for palm oil and the endless expansion of palm plantations,” said Biteback Co-Founder Mush’ab Nursantio, who studied agricultural technology.

Biteback was born out of a university research project that he was working on with fellow Co-Founder Ifdhol Syawkoni. Initially, they looked at insects as a source of protein, but soon realised its potential to create oil-based products.

Together, the pair developed a refining technology to manufacture ingredients, such as cooking oil, butter, fatty alcohol and biofuel, from edible insects.

Biteback is a novel solution to the way humans produce and consume food. Not only is their insect-based oil rich in nutrients, using insects reportedly produces an oil yield 40 times more than palm oil on the same land area.

Biteback has offices in Indonesia, the United States, and Singapore. As the company continues to scale, both Nursantio and Syawkoni hope they can help to reduce deforestation in their home country.

BeON Energy (Portugal) – The world’s first plug-in solar micro-inverter

BeON Energy is making clean green energy accessible and affordable to all households with revolutionary do-it-yourself plug-in solar kits. This allows customers to connect a solar panel to their home power socket, and convert solar energy into electricity to power their entire homes.

BeOn Energy’s kits contain a solar panel, micro-inverter, cable and other accessories. The product’s value lies in how easily they can be installed in one’s property, just like any regular home appliance – as “simple as connecting to a television”, according to Rui Beon, CEO and Founder of BeON Energy.

Also read: An exploration of deep tech with SLINGSHOT 2019

What spurred the creation of these kits was the unreliability of solar technology in the market, said Beon, who has experience working in the solar industry overseas. He realised that many of the complexities and costs of domestic solar energy usage lay in the final step, of connecting the system to the household.

“We wanted to democratise solar power and accelerate the mass adoption of domestic renewal energy generation. By connecting the power generation device directly to a socket, we save time and money,” he added. Each solar kit from his startup costs around the same price as a television.

Founded in 2015, BeON Energy is headquartered in Portugal and has presence in France and Germany. To date, the startup has sold over 100,000 solar kits, which have been installed in 20,000 homes.

Revolv (Hong Kong) – A deposit-based rental system to reduce single-use plastic waste

Say bye to takeaway culture – Revolve is on a mission to eliminate single-use plastic waste for a greener planet. The startup has created a deposit-based tech platform that enables the seamless borrowing, using, and returning of reusable cups, bottles and containers at no cost.

Revolv was launched in Bali, Indonesia in April 2018 as a response to the visible plastic pollution back there. “In our first pilot location of Bali, there are daily reminders of how dire the current situation is. The rivers, beaches, and surrounding areas are submerged in discarded single use plastics,” said Francis Brian Reilly, Founder and CEO of Revolv.

By placing a deposit, customers can grab their coffee to go in a reusable cup at any one of Revolv’s participating food and beverage outlets. They can get back their deposit by returning their cups – which are tagged – to any partner within Revolv’s network. Each reusable will then be cleaned and re-circulated to its outlets for reuse.

“We hope to educate consumers and businesses alike that there are more sustainable alternatives,” added Reilly. “By bringing additional awareness to our everyday habits, we can make a tremendous difference and lasting impact.”

Revolv is currently operating in 18 venues in Bali – Canggu, Berawa and Seminyak. They have also rolled out the system in Hong Kong and most recently Singapore, at four environmentally-friendly cafes in the district of Tiong Bahru.

Altaroad (France) – Making roads safer and more environmentally-friendly

We’ve all been there – wasting precious time being stuck in a massive traffic jam at peak hour. But Altaroad is on a mission to make our roads more intelligent and sustainable.

The French startup has created an industrial internet of things (IoT) platform for infrastructure to optimise traffic and reduce emissions. They have embedded sensors beneath the road surface to generate real-time road data, in order to evaluate traffic patterns, monitor dangerous driving behaviour, track the weight of vehicles and assess their impact on the road.

Such data is useful, as it gives an indication of the road’s condition at any time, allowing maintenance or repair to be deployed. This data is made available through a cloud-based dashboard to road operators, city traffic managers, logisticians, and autonomous and connected cars.

Altaroad’s clients at present include French construction companies such as Eiffage and Leon Grosse.

This is just a teaser. To catch more startups changing the world for the better, come for SLINGSHOT 2019!

SLINGSHOT 2019, powered by Startup SG, is happening from 11 to 13 November at SFF x SWITCH. Register for your free Trade Visitor Pass to attend SLINGSHOT 2019 here!

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