Black Friday is a phenomenon like no other. It’s where our hard-earned money finds salvation. Marking the official commencement of the festive season, Black Friday is when our year-long wait to finally purchase that one electronic gadget at the cheapest rates possible comes to an end.

Be it an iPhone upgrade, a smart television, a gaming console, or a microwave oven, most of us wait until this day to purchase as this is the time our wallets don’t take an official beating.

The fanfare is so interesting that you could call Black Friday the Freddie Mercury of shopping. People flocking in lines hours or even a day before the d-day and getting all excited about finally getting hands-on with their gadgets or product are sights to behold.

The major characteristic –or let’s call it an attribute of Black Friday– is the way people gather outside stores. The lines are pretty huge and everyone is crammed up to make their way into stores. Malls are usually full and there’s always a group gathered everywhere.

Black Friday has always been like this. But this year, it certainly seems questionable and uncertain.

The COVID-19 effect

Scott Rankin, KPMG US’ principal and national consumer and retail strategy leader, shared that he doesn’t envision any of these happening this year.

Also Read: Is COVID-19 the catalyst B2B e-commerce companies needed?

With the world crippling with the COVID-19 situation, things have changed drastically. A dystopian scenario has already kicked in with people staying inside unwilling to step outside. And even those who do are seen wearing a mask.

This is not how the world used to be. There would be crowds everywhere. From restaurants and cinema halls to malls and retail stores, you would always see people. But with the onset of coronavirus, the gathering has become something distant.

With the contagion numbers showing no signs of curtailment and with the development of a vaccine seeming a time-consuming affair, people wouldn’t want to step out to get anything unless and until they are groceries and essentials that need to be procured.

When there is no crowd at the store, there would be no purchases as well. And storekeepers are definitely anticipating this. Stores wouldn’t dare to stock in their inventory hoping people would miraculously storm in. That’s very risky.

So, what about Black Friday this year?

Is it officially dead?

The answer is e-commerce

E-commerce and its ally – the on-demand economy – have been a boon for mankind. During this global pandemic, they have turned out to be the only reliable entities in the world. They prevent us from stepping out and at the same time, deliver what we want, where we want.

Thanks to these, this year’s Black Friday still seems promising and hopeful and all that storekeepers and offline businesses have to do is take their stores online.

Also Read: Is COVID-19 the catalyst B2B e-commerce companies needed?

And this is not a wild theory or a statement under the assumption to lure businesses into e-commerce app development. Studies and statistics have clearly shown the impact of e-commerce on Black Friday.

• According to Adobe Holiday Shopping Report, the Black Friday online sales in 2019 numbered to US$7.4 billion. This number is US$1.2 billion more than its previous year.
• Last year, around 58 per cent of the online traffic during Black Friday came from smartphones. Tablets accounted for just five per cent and desktops accounted for 37 per cent.
• Out of this, close to 36 per cent of the sales were completed on mobiles and 59 per cent of the sales were completed on desktops. This further pushes the need for e-commerce app development or e-commerce website development.
• The same report also shares that traffic redirected from social media have increased from four per cent in the year 2016 to 11 per cent in the year 2019.
• Not just that. With the rise of Instagram, what has equally grown is the concept of influencers. With a steady following, Instagram celebrities today significantly influence our shopping and purchasing behaviour.
• According to Adobe Holiday Shopping Report, over 20 per cent of the overall consumers have made a purchase after being recommended by an online celebrity or an influencer.

If the above-shared numbers matter, imagine that this is from an era before COVID-19, where people still had the option to step outside and shop their hearts (and wallets) out.

In the US, e-commerce sales grew by 49 per cent during the month of April when the pandemic started to become more serious. While the sales of electronics grew by 58 per cent, the sales of groceries increased by 110 per cent.

The new normal

With people getting a taste of the on-demand economy, e-commerce is finally attaining the new normal status. At the same time, one should also acknowledge the steps and initiatives taken by e-commerce companies in ensuring a safe and hygienic delivery mechanism.

• Delivery agents are being checked for temperatures and symptoms
• they are perpetually masked during their shift hours
• They have their vehicles sanitised
• And they even follow a contactless delivery process.

Also read: 10 ways to get a customer to buy from your e-commerce site

Is your business e-commerce ready?

If these numbers don’t entice you to take your business online, understand that e-commerce offers more convenience in terms of wholesome shopping experience.

With an e-commerce website or an app, you can –

• Understand the behaviour of your individual users and personalise selling and sales
• Offer personalised discounts and deals when they abandon carts or don’t purchase anything in a while
• Consistently engage and interact with them
• Announce new products and availability of them
• Run giveaways and build a brand around your niche
• Optimise customer retention and do more

When you have an e-commerce platform (desktop or mobile), you could run your own Black Tuesday or Black Sunday. The point is, e-commerce platforms are revolutionising industries and they give you authority over your business and sales.

With the unfortunate onset of the pandemic, an optimistic side is the alternatives we have in our hands thanks to technology. One wise move today can reshape our future.

We have given you the facts, statistics, and opinions and it is up to you to decide how you would want the remaining year for your business to be.

Good luck and here’s to a safer and healthier year!

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Image credit: Ashkan Forouzani on Unsplash

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Singapore-based surgical robotic company, NDR Medical Technology, announced today it has raised SGD$8 million (US$5.8 million) in a Series A round of investment, led by Chinese medical devices maker Microport Scientific Corporation.

This is MicroPort’s maiden equity investment in Singapore.

Kava Ventures, a partnership founded by the owners of Transmedic (an advanced medical technology distributor in Southeast Asia), and existing SGInnovate, also participated in the round.

NDR will use the capital to prepare for the expansion into the US, regulatory submission across other major markets, as well as to further enhance the team’s technical capabilities and explore other clinical applications for the product.

Additionally, NDR will be establishing a joint venture in China with MicroPort Urocare, a subsidiary of MicroPort. This will advance the Singaporean company’s entry into the China market, tapping on existing networks and engineering resources that the partnership brings.

Also Read: Ecosystem Roundup: Grab reportedly in talks for US$500M bank loan; SCB to launch food delivery service in Thailand

“With MicroPort as our strategic investor alongside Kava Ventures that has rich commercial experience in distributing surgical robotic systems, NDR will be able to accelerate our growth plans in Asia with greater assurance, fulfilling our vision of ensuring safer surgical procedures with better clinical outcome,” said Alan Goh, Co-founder and CEO of NDR.

Founded in 2014, NDR has developed an Automated Needle Targeting (ANT) system for robotic-guided access to obtain precise targeting. The system uses Artificial Intelligence (AI) and medical image processing to identify the targeted lesion and perform insertion trajectory planning, with the robot executing a range of motion to assist surgeons in obtaining accurate access.

The solution can be applied to biopsy, ablations and other surgical procedures that require precision.

NDR has an ongoing clinical trial in Japan and is continuing its development of ANT for other imaging modalities and medical applications.

Lung cancer has the highest incidence among all tumors worldwide, especially in China. The incidence of lung cancer is also increasing every year and affecting more and more young adults.

The increase in the survival rates of lung cancer patients depends not only on improvements in treatments but also on the availability of precise early diagnosis.

Clinical results have shown that the 5-year survival rates of early-stage lung cancer patients who have timely diagnoses and treatment far exceed those of advanced-stage patients. Percutaneous biopsy is one of the most popular methods in the diagnosis of lung cancer.

Also Read: Malaysia’s Dropee raises US$1.3M from Y Combinator, others

The ANT-C robotics system can assist physicians to perform CT-guided operations more precisely, which further boosts the accuracy of needle biopsy, reduces complications and widens the access of precise diagnosis of early-stage lung cancer. In addition, the low-profile robot could be applied in multiple disciplines, which expands the use of the CT-guided procedure.

The ANT-X robotics system is indicated for percutaneous nephrolithotomy (PCNL) procedures. The precise needle positioning is the most critical step in PCNL. Compared to conventional manual needle positioning, the application of the ANT-X robotics system could reduce the complexity, shorten physicians’ learning curve, increase procedure accuracy and minimise complications, which will benefit the patients with kidney stone and ureteral stone.

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Image Credit: NDR Medical Technology

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During a chat back in 2014, John Rasjid, Christopher Madiam, and Chrisanti Indiana, three friends with backgrounds in finance, IT, and design and communication, respectively, agreed that beauty and personal care products required a dedicated place. Back then, there didn’t exist any online platform that catered to this specific market in Indonesia.

“Chrisanti was the beauty aficionado. She tossed the idea about beauty, and upon further learning the industry, we jumped right into it bringing our interests and skills to the table,” Rasjid said in a virtual interview with e27.

The beginning

The beginning of the startup was not a coincidence, says Rasjid. “There were many reasons for the trio to start Social Bella, including the need for authenticity and trust in the platforms.

We looked at what examples there were in the market, and Dollar Shave Club came to our mind. Its premise when it was launched in 2011 was pretty straightforward; it wanted to deliver razors and other personal grooming products to customers by mail. And it worked,” Rasjid explained.

The American company that inspired Rasjid today delivers razor blades on a monthly basis and offers additional grooming products for home delivery. The convenience of having one’s personal care products delivered to the customers’ doorstep should be and could be the norm, and it’s proven so today.

“Social Bella started out as a B2C e-commerce platform focussed on a single category, walking side by side with larger horizontal/marketplace e-commerce with much larger resources. The challenges have been there since day one; they just evolve from year to year,” remarked Rasjid.

He further added that identifying the right people to join the company was hard since the founders needed to look for the right team members from the same scarce talent pool and with industry interests. “Starting in mid-2018, when our ecosystem was finally formed, the execution wheel started to spin faster and we were able to serve a much larger customer base.”

Also Read: Indonesian beauty platform Social Bella embraces O2O with the launch of physical store

Social Bella’s commitment has always been centred around the needs of its customers. “Customers have always been our top priority and we want to continue to stay relevant for our dynamic customers, and that’s how we ran Social Bella with its three business channels, and now, with a new one in the equation,” according to him.

Building beauty ecosystem

Talking about the approach the Social Bella team is striving to provide, he said that the team continues to innovate to meet their needs and to support companies that provide holistic beauty services in Indonesia.

“Having said that, we conclude how we should aim to build a complete ecosystem to serve the growth of the beauty industry. Our focus now is to ensure that the innovations that we do continue to focus on the customer experience and seamless shopping experience,” he added.

The company has three business units:

• SOCO, an online consumer review platform for beauty and personal care products
• Beauty Journal, an online beauty and lifestyle media with O2O marketing service
• Sociolla, a beauty and personal care e-commerce which also has an offline store with the omni-channel concept
• Lilla by Sociolla, a beauty and personal care e-commerce service specifically designed for mothers
• Brand Development, the business unit that offers end-to-end distributor service for beauty and personal care brands.

A few days ago, the company announced a US$58 million funding round from Temasek, Pavilion Capital and Jungle Ventures. Along with this, Social Bella also announced the establishment of Lilla by Sociolla (lilla.id).

“Lilla is specifically built for young and sophisticated mothers who are looking for the best-curated products for children and themselves. There are growing needs for good quality products by mothers in Indonesia and we strive to deliver our best to serve their needs. We will focus on growing those existing business lines and strengthen our tech capability,” he explained.

Offline expansion

With the current business units, Social Bella is estimated to serve around 30 million users in 2020, Rasjid claimed.

Last year, Social Bella completed its ecosystem as an integrated beauty-tech and end-to-end brand distributor in Indonesia by launching a flagship omnichannel store in Lippo Mall Puri. At present, Social Bella owns six physical stores across the country.

“We started with e-commerce with Sociolla.com, yet we understand that when it comes to beauty products, physical shopping experience remains relevant. Customers want to feel, touch, smell and try the products. The offline experience provides that experience and serves our customers in a more interesting, personalised, and enjoyable way made possible by our tailored technology for beauty and personal care,” Rasjid said explaining the rationale behind the decision to go offline.

“At the same time, it creates a platform for new aspiring brands that we curate to get closer to customers. However, I don’t believe that an offline store is a one-size-fits-all solution for all e-commerce and even if one decides to have an offline presence, she certainly needs to be mindful of the degree of prevalence of their offline store versus digital,” Rasjid emphasised.

The beauty tech in hindsight

The Internet has enabled new brands since the early days when Dollar Shave Club hit the US market in 2011. It was a tectonic change in the consumer brand world and the beauty market has particularly witnessed a number of global-hit brands in the past five to six years.

The beauty industry in Asia, especially Indonesia, is growing very rapidly, especially thanks to the development of infrastructure and technology. Meanwhile, in Indonesia, the rising lifestyles and a growing middle class are driving growth in demand for beauty products.

Together with the strong influence of social media, this creates the new generation of consumers, who are more sophisticated and also more demanding of having the beauty and personal care products that are suitable for their skin type, skin tone, facial features, and more.

Also Read: Indonesia’s beauty-tech startup Social Bella raises US$58M Series E from Temasek, Pavilion, Jungle Ventures

“Looking at this huge opportunity, constant innovations supported by creative, highly-skilled and experienced talents are needed to grow our business and capture the market potential. Technology development is also important to identify consumer behaviour, thus we can stay relevant to the market needs,” Rasjid added.

Coming up next

Looking at retailers around the world today, the digitisation trend is stealing news headlines, especially during the COVID-19 outbreak. “No one knows and everyone is guessing how the post-COVID-19 era will alter customers’ behaviours and hence, the responses by industry players. Microsoft, for one, decided to permanently close all their physical stores,” said Rasjid.

New trends have been coming from new brands born out of the digital realm. This will continue to shape up the beauty and personal care industry. Going forward, the tech will continue to play big roles in marketing efforts.

“Now, armed with the latest funding from investors, we will focus on building our technology infrastructure and digital assets to meet users’ need for a more optimal, relevant, and personalised shopping experience. This allows us to expand into broader market segments, accelerate our business even further and provide more comprehensive beauty services,” he went on.

Social Bella’s new plans are to provide beauty products that are of high quality and affordable for beauty enthusiasts in Indonesia in a more personal and fun way. In addition, Sociolla Store also connects consumers with various brands.

“This affirms Social Bella’s vision to position itself as an incubator for beauty and self-care. We’ll also focus on SOCO. By focussing on improving the quality of user experience, this platform integrates Sociolla and the Beauty Journal to answer the needs of Indonesian women for safe personal care and personal care products,” said Rasjid.

The Social Bella innovation in technology is highly relevant in response to the challenges in the beauty industry, especially when facing business turbulence amid COVID-19 pandemic.

McKinsey in its report entitled “How COVID-19 is Changing the World of Beauty” states that there are several things players must keep in their radar in the beauty industry to be able to survive amid COVID-19, one of which is shoring up digital aspects and speed of innovation.

Also Read: Sociolla’s parent secures US$40M to develop its community platform SOCO

The report said fortifying the digital aspects is necessary to accommodate the needs of consumers who have now turned to online shopping activities. On the operations side, the use of Artificial Intelligence (AI) for contactless production and personalisation must also be expedited to accommodate consumers’ attention to product hygiene, especially if it involves direct contact.

“Answering the challenges that have emerged since the onslaught of the COVID-19 pandemic, where activities are centred at home, we are strengthening Sociolla by introducing a new feature, namely live chat with beauty consultants. We understand, however, that shopping for beauty products cannot be compared to shopping for other needs,” said John.

Before the latest round of funding, Social Bella had secured a Series D investment of US$40 million in September 2019. The investment was led by East Venture Growth, Temasek, Pavilion Capital, and Jungle Ventures.
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Picture Credit: Social Bella

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Property technology (proptech) was riding high on the strong demand in the real estate industry in Southeast Asia until the onset of the novel coronavirus towards the end of 2019.

The pandemic created a panic in the real estate market, prompting customers to defer their property purchase decisions. This, in turn, dealt a huge blow to the overall proptech sector in the region.

As the contagion spread rapidly, businesses suffered. While a few proptech startups were pushed to the brink some were forced to change their business model for survival.

Industry experts believe that the full picture of the effects of the crisis will become more visible in the coming months, although they hope for a rebound.

But will it come back to the pre-pandemic glory?

“If we look at the past long-term property trends in Asia, it has always come back after demand shocks. This might be a a testament to the fact that Asia is still urbanising and the long-term demand for property and the related proptech sector is still trending upwards,” says Kay Mok Ku, Managing Partner of Gobi Partners, a leading ASEAN-focused VC firm.

Also Read: How Indonesian beauty e-commerce startup Social Bella finds balance between commerce, content, community

“It is likely that the real estate industry in Asia will return to its previous glory. What is unknown, however, is how long the recovery will take, given that we do not know when a vaccine will be available. It should revert to the previous normal as long as a vaccine removes the need for social distancing,” Mok Ku predicts.

Still in the early stages

As Mok Ku points out, Asia’s — particularly Southeast Asia’s — proptech industry is small and still in its infancy. The market still largely remains untapped.

The pandemic hasn’t had much impact on the VC investments into the region’s proptech. As per the data collated by startup research platform Tracxn, in FY2019-20, more than US$202 million venture capital was invested in the industry across 25 deals. During April 2020 to June 2020 (when the pandemic was at its peak), upwards of US$25 million was invested across six deals.

Across all the markets, companies based in Singapore (12) and Vietnam (seven) bagged the most number of deals during the April-June 2020 period. These numbers are expected to rise, thanks to the growing middle-class and salaries, growing urbanisation and younger population, and massive smartphone penetration.

“Property is one of the least disrupted industries in Southeast Asia; the market is still gigantic despite the fact that economic recession is imminent. Hence the opportunity is still great,” remarks Wong Whei Meng, Founder-CEO of SPEEDHOME.

For SPEEDHOME, a home rental platform in Malaysia, the first signs of a recovery are already showing; its May sales rebounded to the pre-COVID19 level, claims Wong. “The numbers looked great in June and we expect it to grow more than 20 percent (in the coming months),” Wong said.

“The effects of the pandemic are still working their way through the Southeast Asian economies and it’s too early to get a clear view of how this pandemic will unfold in the proptech sector,” said Ali Fancy, Principal at Cento Ventures, which is focused on the emerging markets in Southeast Asia.

“Perhaps the first set of early data points we’ll see will be towards the end of July/early August,” he added.

Having said that, consumers have been cautious about investing in the sector. They are no longer going out to public spaces, with social distancing becoming part of the routine. As a result, the co-working space has lost business.

But it has a positive side to it; the demand for affordable private spaces, such as enclosed offices, rather than hot desks in co-working spaces has risen. Consumers are also more comfortable with virtual viewing — so proptech platforms tapping this have an opportunity to grow.

“Proptech firms use technology to manage supply and demand for properties in innovative ways; for example, co-working/short-term residential rental. This means most of them are not saddled with huge fixed costs of the assets,” adds Mok Ku. This augurs well for the overall industry.

The other key outcome is that the pandemic has accelerated digitisation across industries: digital property platforms now have new opportunities to offer easier and smoother journey and experience for customers looking to purchase or rent a house.

Also Read: Propzy secures US$25M in Series A funding led by Gaw Capital, SoftBank Ventures Asia

“Digital acceleration may spur demand for housing in city outskirts as people are warming up to working from home. We will start to see this happen in the next two to three years as companies adapt to the advanced communication/collaborative tools to support the work-from-home policy,” Wong says.

What is lacking?

Southeast Asia is not a single homogeneous market, which means the real estate market conditions vary widely across the countries. There are many local brands that are still developing and not ready for regional consolidation. While there are the likes of heavily-funded PropertyGuru (both Singapore), Propzy (Vietnam), and iMyanmarHouse — which have been leaders in their respective real estate markets — there is no single player that has monopolised the Southeast Asian market yet. In the next three to five years, the region will see new giants emerge, predicts Meng.

Experts agree that only the surface has been scratched as of now and the Southeast Asian market is yet to see major innovation. A lot of things are on-demand now; the sales journey is still very tedious. “There should be strong proptech in the scene where it can offer to buy a house within a day, like Unmortgage in the UK,” he opined.

“In general, direct transactions between owners and renters, especially on a short-term basis, still suffer from trust issues, e.g. properties often differ from online description or cleanliness is not up to standard. This has affected the take-off of P2P marketplaces such as Airbnb. Instead, B2C models, similar to Tujia in China, seem more appropriate for Southeast Asia,” Mok Ku explained.

Conclusion

While the real estate market has been bearing the brunt of the COVID-19 pandemic, all is not lost yet if experts are to be believed. The sector will come back as it is still in its nascent stage, and there is massive potential. The pandemic will trigger more innovations, which will help the consumers as well as the industry in the long-term.

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Image Credit: 123rf.com

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Karana gets US$1.7M seed funding for its ‘whole plant-based’ meat alternative made from jackfruit; Investors include Henry Soesanto, CEO of Monde Nissin, foodtech fund Germi8, Big Idea Ventures; Karana will also use the funding to launch its plant-based products in restaurants in Asia. More here

Has COVID-19 pushed us into the digital future?; If the pandemic has exposed anything, it is the need to transform the industry “T minus ten minutes” from now; However, the digital transformation we need has to balance between machine intelligence and human imagination. More here

Here is what a bag of popcorn can teach us product pricing; ‘Anchoring’ may be one of the simplest and most powerful tactics you can use in your pricing; It’s about using the human need to make comparisons in order to make supposedly rational and correct decisions; It allows us to hack our customers’ brains, influence their decisions to a certain extent. More here

Zilingo cuts Singapore and global headcount, puts Singapore HQ up for rent; The fashion e-commerce startup has laid off another 11 employees as part of a 12 per cent global cut to its staffing; In April, the Temasek-backed startup had laid off less than 5% of its 796-strong global workforce. More here

Myanmar’s telemedicine startup MyanCare secures US$600K led by SPARX; Japan’s Scala and AIN Holdings co-invested; MyanCare offers MyanCare healthcare app and YinThway paediatric medical call centre service; WHO says Myanmar has one doctor for every 2K patients in urban areas, only one healthcare worker for every 5K patients in rural areas (This article is yet to be published).

Vietnam to commercialise 5G in October; It’s one of the few countries that can produce 5G equipment; The government will facilitate directing local businesses to invest in research and production of the equipment towards commercialising 5G products this year. More here

Singapore tops autonomous vehicles readiness index for the first time; The island state edged out the Netherlands which had ranked first in the past two editions of the index; The ranking reflects Singapore’s leadership in areas of consumer acceptance and policy as well as legislation pillars. More here

How fintech can help reach the unbanked and underbanked in SEA; The region’s 70% of the adult population is either unbanked or underbanked; Integrating blockchain in financial services can significantly enhance access to credit by using alternative sourcing data such as payment transactions. More here

Thailand’s NRF seeks to invest in 100 startups over 2-3 years; This will allow the food distribution major to learn about food innovation and tech; In 2019, NRF invested in 19 startups globally; This year, it has invested in another 12 startups, aiming for 40 by year-end. More here

Indonesia’s Bukalapak turns street sellers (warungs) into banking agents; Users will be able to deposit and withdraw cash at warungs, and conduct transactions such as transfers and payments; About 5M warungs move over US$70B worth goods a year, a quarter of Indonesia’s US$380B retail market; The Ant Group-backed e-tailer is valued at US$2.5B. More here

Thailand Post plans Smart Mailboxes using IoT; It will work with CAT Telecom to produce the mailboxes that can detect when parcels are deposited; By the end of 2021, they aim to install up to 22K smart mailboxes nationwide to cover the increasing needs of customers, especially those in e-commerce and logistics industries. More here

MDIF invests US$750K in Indonesia’s Arkadia; The company owns news portal Suara.com, sports portal Bolatimes.com, ads platform Iklandisini.com; The investment will enable Arkadia to further develop its regional content and networks. More here

A snapshot of the 3 startups graduated form VIISA’s batch 7; The three startups are Ask Locals (traveltech), Medigo (medtech), Gring (employee training); So far, VIISA has accelerated 32 startups over six batches; It is looking to launch batch 8 in August 2020. More here

How early investment in tech pays off when startups expand to other markets; Ohmyhome’s co-founder says investing early in tech allows you to see opportunities to fill gaps in the market; By automating administrative tasks as much as possible, employees will be freed up to do higher-value work.  More here

Korea sets up K-Startup Centre (KSC) in Singapore; It focuses on fintech and cybersecurity; The KSC is supported by ESG and will serve as a launchpad for Korean SMEs and startups to plug into Singapore’s and the region’s innovation ecosystem; ESG also has a partnership with Korea Institute of Startup and Entrepreneurship Development. More here

Japan’s IntegriCulture, Singapore’s Shiok Meats partner to ramp up cell-based seafood production; The two will develop inexpensive cultured serum for growing shrimp meat in the lab; Shiok Meats raised US$3M in a bridge round last month. More here

Mastercard, fintech startup tonik partner to create digital Neo Bank in Philippines; As a mobile-only bank, tonik will be able to develop a highly customised, scalable banking solution; It’s set to launch by Q3 of 2020, with a full range of banking services, including transactional savings account with a debit card, savings, term deposit accounts, consumer loans. More here

Sunway, Celcom, Huawei ink MOU to develop 5G in Sunway City in Malaysia; The collaboration will see the development of smart solutions in the areas of public safety and security, telehealth, e-learning, hospitality, leisure and retail experience using the latest telecom tech; It will also contribute towards achieving sustainable development. More here

Indosat launches digital operation with Ericsson, Huawei; The digital transformation will make the Indonesian telco’s back-end system more sophisticated; The telco reported 56.2M mobile consumers and registered a 7.9% yoy increase in revenue to US$454M in Q2. More here

Philippine government eyes support for e-commerce boom; The country has one of the slowest internet speeds in SEA; Reforms can be done by opening the telco sector through amendments in the foreign investment and public service laws. More here

Thai Tapioca Starch Association’s (TTSA) new president to promote local startups in global arena; It will build network with international startups and work closely together with government and business sectors; TTSA will also team up with Thai SME Association to help SMEs make a smooth transition from traditional business to digital business. More here

Singapore digibank contender picks Tencent’s cloud platform to provide digital banking to SMEs; The collaboration will have a focus on inclusive and green finance and aims to create a regional flagship digital bank; Asia Digital Banking Corporation is a Chinese consortium that includes Shanghai Jifu, JIC Technology Investment; More here

Line looks to influencer commerce in Thailand; The partnership aims to help brands increase their sales during the economic downturn while attracting influencers to the platform; Line recently launched Line Idol as a place where artists and online influencers can connect and engage with their fans by becoming chat friends via official accounts. More here

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Image Credit: 123rf.com

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At the beginning of this year, the labour market was strong. The Straits Times reported that over the past 10 years, local employment had grown steadily to 80.8 per cent with low unemployment at 3.1 per cent according to the Ministry of Manpower.

Real wages grew by 3.8 per cent over the last five years. If you were a business leader who foresees strong growth for your company, you would be mass hiring like Dyson who sought 2,000 new employees over four years.

As a forward-looking employer, you might have hired for stellar growth in your business. This is especially common if you are involved in promising technology sectors. Then you witnessed an unprecedented 80 per cent drop in revenue in three months.

Don’t worry. You are in good company. Even established companies such as Grab had to retrench five per cent of their workforce, followed by Airbnb with 25 per cent and Singapore’s 3,220 retrenchments in the first quarter of this year alone.

This scenario is more common than you think. If this reflects your situation, you must realise that there must be a better way to deal with all these upheavals. Even if your business is super resilient like Facebook or Microsoft, who can afford to hire more during this period of economic carnage, steps to increase the resilience of your workforce should be accepted by the organisation.

Also Read: In brief: Whole-plant based meat brand Karana raises US$1.7M

Accept the reality of retrenchment

One of the major drivers of employment pain lies in the false belief that economic cycles will last every 10 years. The reality is that while COVID-19 happened slightly over 10 years after the Global Financial crisis of 2008, companies had been forced to retrench due to a variety of factors such as technology disruption, competition, or poor management. There is a significant chance that you have to conduct a responsible retrenchment exercise for your company and cut working ties with cherished employees.

The table showed that despite the worst pandemic since the 1918 Spanish Flu, the first quarter retrenchment was the lowest over the past five years. 2015 was the famous year when Singapore added a net 100 new jobs over perceptions of peak workforce and 2016 saw record retrenchments for middle-aged and highly skilled workers.

Genting Singapore and RWS had to cut their manpower in 2016 over China’s economic slowdown and graft fighting campaign. Hence, this is not the first time where even large companies had to bow to changing macroeconomic conditions. This would not be the last time either. The reasons for retrenchment would be different for each period but volatility is clearly here to stay.

Hire millennials

Millennials grew up in an era where their parents experienced uncertain employment conditions in the 1980s, 1990s and 2000s. If you recall, the major events were the 1984 recession, 1997 Asian Financial Crisis, SARS of 2003, and the Global Financial Crisis of 2008. They have seen their parents join and leave jobs at least three times in their lives as job security eroded steadily over the past three decades.

Also Read: How SSIVIX LAB aims to make a difference in time of global health crisis with a one-stop healthcare app

The majority of millennials are working in full-time jobs now, but they are open to jobs with lesser security such as self-employment and freelancing. They will do it for the sake of more money, recognition, and good co-workers. For millennials, the definition of security lies not in the security of full-time work but in the skillset which they possess. In other words, they value career security over job security.

So, while they might be sad initially to receive your retrenchment letter, they bounce back faster than you imagine. They can always work for someone else or themselves in the meanwhile and you can hire them back when the company gets back on its feet. Ninety-three per cent embraced life-long learning and would probably be glad to take a master’s degree during the break.

Flexible working arrangements

Permalancing might not be familiar with you yet. It involves the combination of freelancers and permanent work assignment. Freelancers focus on doing piecemeal jobs which might not work if you have to continuously brief a person to a piece of recurring job. You would get the operational flexibility to increase and decrease your production capability with permalancers.

Permalancers would typically work with two to three companies at any one time. It would not be devastating for them to lose a client. You might have to pay more for permalancers than employees.

Clearly define work scopes for established positions would be necessary. Established positions are work areas where the work value is defined, requires specialised skills, and could be done in a reasonable set of time. Scope creep is a common blunder for companies, be it with employees or other forms of labour.

For instance, 3E Accounting has a clear work scope even for their interns. They have a structured and consistent process to deliver results. This type of structured process provides permalancers with the confidence to take on regular projects in the long run. Clearly, this would not apply for all companies as some work processes are inherently complex.

Stability in volatility

We live in interesting times. How we organise our ability to contribute to society, be it for monetary or other rewards, would determine our quality and way of life. It is not just about structural skills mismatch but also the arrangement for skills to be applied for goods and services to be created. That arrangement had to provide a level of stability in this volatile environment.

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Trade tensions between the US and China have been the talk of the town since the year 2018. With the two world powers undergoing a lengthy trade dispute, there are unending speculations on the impacts on both nations, and also the probable spillover effects on the Southeast Asian (SEA) countries.

Rumour has it that Vietnam is poised to be one of the biggest winners of all – let us dive a little into it.

According to the Foreign Investment Agency (FIA) of Vietnam, the total newly registered, adjusted and contributed capital of foreign investors have been stagnant since the trade war started, after experiencing a surge of 47 per cent in the year 2017. This is mainly due to the dive in capital inflows for existing projects over the past few years.

On the other hand, a spike can be observed from the year 2018 onwards when it comes to newly registered capital and capital contribution for share purchases – the number of new projects granted has increased by 18 and 27 per cent in years 2018 and 2019, respectively.

Apart from that, the FIA has disclosed that Manufacturing and Processing Industry is the top industry that the capital flows to, accounting for 65 per cent of total foreign direct investment (FDI) and recording a 48 per cent growth in the year 2019.

Also Read: Why is Vietnam going to emerge the strongest post-COVID-19?

This is not surprising since it reinforces the common belief that the US-China trade war is accelerating the pace of businesses relocating their operations elsewhere from China as a diversification strategy.

Vietnam is well known as a rising manufacturing hub in the region, particularly for these top sectors: (1) Electronics sector; and (2) Textile, Garment and Footwear sector.

To name an example of the relocation of operations, Luxshare-ICT, assembler of Apple’s AirPods wireless earphones in Vietnam, has gone on a hiring spree for thousands of new workers in June this year.

Another phenomenon that can be observed that supports the possibility of production moving away from China away to Vietnam is that Vietnam’s share of US apparel imports has benefitted as China’s share in the market is slipping – the country even surpassed China and ranked the top apparel supplier to the US in March and April this year.

Taking a glance at Vietnam’s position in the global value chain for both these sectors, the country primarily engages in mid-stream (lowest value-added) activities – being very dependent on imports of raw materials and only playing the role of manufacturing and assembling products for exports.

Vietnam is also highly reliant on foreign players, backed by the fact that FDI holds 80 per cent of the local market share of the Electronics sector, while 80 per cent of material supply for textile and garment production in the country comes from overseas.

Also Read: Is Vietnam the new golden child of tech startups in SEA?

Undeniably, Vietnam is emerging as an alternative favourite for businesses to set up their supplementary manufacturing facilities due to a number of reasons, mainly to take advantage of the affordable labour costs and free trade agreements (FTAs) that it has to offer.

The recently ratified EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) are the spotlights of all FTAs, helping Vietnam to harness the opportunities arising from the shift of supply chains.

However, the nature of the manufacturing industry in Vietnam poses a potential threat – if the country does not move up in the value chain, other countries in the region such as Thailand or Cambodia might also compete in terms of labour costs.

Despite the government’s efforts to spur investments into hi-tech manufacturing and infrastructure to align further with the global supply chain, only a few multinational companies (MNCs) have limited research and development (R&D) activities in Vietnam, namely Samsung, Renesas Design Vietnam, and the latest one being Qualcomm with its first R&D facility in SEA.

Apart from the above, other considerations include the size of labour pool, availability of skilled workers, capacity to absorb a sudden surge in production demand, and many more. Therefore, it is important for businesses to take a step back and rethink their relocation strategy – given that the country still has a long way to catch up with China’s pace, would it be ultimately more feasible to go for the ‘China-plus-one’ strategy instead?

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Before the dawn of the 21st century, the e-commerce space was largely dominated by American companies. US-based companies such as Amazon and eBay were leading the global e-commerce space and are amongst the most well-known e-commerce sites in the world.

However, in the last two decades, their leadership position appears to be challenged by their Asian counterparts.

In the early 2000s, Alibaba.com, a Chinese tech company under the leadership of Jack Ma revolutionised online cross-border business-to-business (B2B) transactions, allowing buyers across the world to easily discover and acquire affordable Chinese made products.

Soon, other business-to-consumer (B2C) focussed Chinese marketplaces such as JD.com, Tmall, Taobao, and Pinduoduo also started to emerge, this time enabling millions of consumers globally to browse and purchase affordably priced, quality products from furniture to consumer electronics.

As a result, eMarketer reported that in 2018, Taobao and Tmall, which are part of the Alibaba Group, were generating a total Gross Merchandise Value (GMV) of US$515 billion and US$432 million respectively. This number far exceeded Amazon’s GMV of US$344 billion.

Also Read: Why humanising e-commerce will be the game changer for DTC brands

In another example, Amazon Prime Day 2019, which is Amazon’s biggest annual shopping event, generated a whopping US$5.8 billion in sales. However, this was only a fraction of Alibaba’s Singles Day 2019 event for the same year, which generated a sales volume of US$38 billion, which was six times larger in comparison.

So how did Chinese e-commerce companies leapfrog other global giants to become the undisputed leader in e-commerce globally?

China’s massive consumer market

Unknown to most, Chinese e-commerce growth is largely locally driven as a result of the explosive growth of affluent and internet savvy Chinese consumers. In fact, the International Trade Administration estimated that China alone accounts for over 50 per cent of all global online transactions.

China has been a notable economic miracle this past half-century.  Since it started to open its economy to the world in 1978, its GDP has on average grew by 10 per cent per annum and lifted more than 850 million of its 1.4 billion population from poverty.

This has created an entire segment of nouveau rich middle class, with high disposable income and a vast appetite to acquire various luxuries from around the world. According to the World Economic Forum, the proportion of Chinese consumers making cross border e-commerce transactions had doubled from 34 per cent in 2015 to about 67 per cent in 2017.

Also Read: B2B e-commerce in Asia is increasingly successful. Here’s what we can learn from them

As China leads the way in e-commerce globally, it becomes important for both major consumer brands and technology companies around the world, eager to participate in this ever-growing tech-savvy Chinese market to be aware of some of the emerging online shopping trends.

Here are some key observations to prepare for:

The growing dominance of mobile payment and mobile shopping

Over the past decade, there has been widespread adoption of mobile payment methods and the prevalence of mobile shopping, to the point where it’s now the default mode of transaction across the country. In fact, according to JP Morgan, almost three out of every four e-commerce transactions in China are carried out on a mobile phone, generating over US$873 billion in sales annually.

In addition, the sheer monopolistic prevalence of mobile payments such as Alipay and WeChat pay has made the country almost entirely cashless. According to PwC, Mobile payment methods are so prevalent in China that they account for about 85 per cent of all online payments in China.

Furthermore, the rise of “super-apps” such as WeChat has integrated mobile shopping into the daily life of many Chinese residents. They provide users with an integrated, comprehensive suite of services from messaging, shopping, lifestyle, entertainment, and payment.

The rise of influencer online marketing

As a precaution against counterfeit products, which was unfortunately common in the past, Chinese consumers are heavily reliant on online reviews to guide their purchases.

As a result, consumers have grown to rely on digital influencers, live stream videos, and online articles to learn about the latest trends, popular products and to ascertain if they can trust a particular product or brand.

Online marketplaces such as Tmall and JD.com have thus invested heavily in enabling good product review capabilities and also driven a trend towards live steam online shopping events.

Also Read: DTC and native: Is it the perfect e-commerce partnership?

Furthermore, many of the live streaming sessions provide interesting content that engages consumers while steering them towards a purchase. In fact, live stream shopping events are so popular that in 2018, Alibaba’s Taobao Marketplace generated more than US$15.1 billion in gross merchandise volume (GMV) through live streaming sessions, an increase of almost 400 per cent year-on-year.

Emergence of the inverted O2O strategy

Traditionally, O2O (offline to online) refers to brick-and-mortar stores expanding their business sales channels to online spaces. However, in China, another form of O2O is emerging, which is from online to offline where Chinese online giants are starting to open physical stores, interacting with the same customers on both fronts.

This has completely redefined customer experience and has integrated technology and data in a far more pervasive way.

For example, in Herma Supermarkets (owned by Alibaba Group), customers can buy, dine, and order products straight from the shelf like a regular supermarket.

Also Read: Top 10 predictions for China cross-border e-commerce in 2019

However, shoppers can easily scan the products with their mobile phones to receive more information (e.g. pricing and product specifications) and pay for them directly through Alipay, a mobile payment method. Customers can also indicate on the spot collection or have the products delivered straight to their homes.

The omni-channel retail strategy has greatly increased convenience and improved shopping experiences for consumers, making it a popular retail strategy in China. McKinsey estimated that about 85 per cent of shoppers in China have engaged with both online and offline touchpoints during their purchase journey.

The longevity of Chinese marketplace dominance

China’s success over the e-commerce space is largely attributed to its massive domestic markets. In other global markets such as North America and Europe, Amazon still has a secure footing. However, China’s e-commerce companies are in no rush to invest heavily beyond its borders to claim world dominance.

There is still significant room for growth within China’s borders with the growing affluence of consumers and digital savviness in third and fourth-tier cities.

The next few decades belong to the Chinese, as they slowly expand their foothold overseas. Is China the emerging global e-commerce leader? I think that there is definitely clarity in that question.

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According to Fashion United, the Fashion industry was riding an enormous success in the past decade with the market value at a whopping US$406 billion.

However, the tables soon turned with the dawn of COVID-19, and the global retail scene soon became one of the industries reeling the hardest from its impact. Depending on the duration a store closes, McKinsey has revealed that 75 per cent of apparel and fashion companies could face challenges managing debt levels in the near future.

On the other hand, the global video game industry is thriving with the practice of social distancing becoming the “new norm”. Gaming now offers an engaging distraction for people at home craving for social interaction. Asian gaming giants Nintendo and Tencent both saw sales increases during the first quarter.

The former sold almost half of its games digitally, a record that helped increase profits by 41 per cent, while Tencent’s year-on-year online games revenue increased by 31 per cent. Analysis from GamesIndustry.biz also shows that sales across 50 key markets rose by 63 per cent.

When comparing fashion and gaming, they are at opposite ends of the spectrum.

Let’s take a deep dive into the commonalities of both sides and what the former can learn from the latter to tide through the pandemic and restore its former glory.

Also Read: What are the key trends in mobile gaming ads in Southeast Asia?

Embracing technology in products

We are in an era of digitalisation where consumers and businesses are brought to an online world at an accelerated pace due to COVID-19. With physical shops closing around the world, businesses are seeking to strengthen their online presence as a key to their survival through digital enablement.

Lesson 1: Companies should view state-of-the-art technology as an enabler for sales, revenue, and competitive advantage rather than a possible risk. Progress in digital transformation allows them to explore new business models or new revenue streams

At Europe’s largest games trade fair in Cologne, Gamescom, one can witness the ever-faster pace of innovation. The latest technological trends, hypes, and games are presented to appeal to consumers’ senses. Technological interfaces such as APIs or interconnected software systems are also a prerequisite for operational speed in product development, marketing and personalisation in real-time.

A personalised experience, highly interactive engagement and convenience in all shapes and forms have ingrained themselves as a critical part of consumers’ expectations in the gaming industry. In fact, these expectations have slowly spilt over to other industries, including the line of fashion.

Many large retail companies have made good progress in the digital transformation of their business models. However, it is not enough. Many businesses report that e-commerce sales are still flat compared to the same period last year. Even retailers with higher online penetration, such as direct-to-consumer speciality-apparel players, face challenges as consumers pull back on discretionary spending.

Companies that recognise the shift to retail digital transformation and take the initiative to further their digital strategies will be the ones that emerge stronger.

Also Read: Why brands fail on e-commerce and what they can do about it

Several notable cases are Lazada, Benefit Cosmetics, and Bazar adopting Augmented Reality (AR) and 3D technology to engage consumers with a personalised experience when shopping online.

Revisiting marketing strategies

The reality is that it is no longer enough to market the point of differentiation in one’s brand. While the quality of the product, as well as the ability to market the service, delivery, and overall convenience, is still crucial, marketing strategies have to be agile to adapt to changing circumstances. The Pandemic is a prominent illustration.

Same day delivery, curbside pick-up, and buy online or pick-up in-store have become table stakes and the competitive advantage derived from presenting these components becomes more important.

Lesson 2: Marketing strategies must create value for consumers and stakeholders. Organisations need to understand consumer’s changing behaviours to tweak their gameplay and ensure that these strategies capture value for themselves too.

The Gaming industry understands that ultra-high-end gaming is likely to remain popular but the emergence of services such as Arcade (Apple) and Game Pass (Microsoft) serve to disrupt the trend by providing gamers with a large library of video games without the need for advanced and expensive software.

Also Read: How this entrepreneur is stepping up the game for gaming tech e-commerce

In response, free-to-play models were developed, allowing developers to monetise without needed to convince consumers to make up-front purchases. Instead, they offer in-game upsell opportunities such as upgrades and expansion packs.

With evidence showing that cheaper entertainment tends to prosper during recessions, these low-cost, high-value offerings are a serious way for the gaming industry to expand.

The fashion industry consequently has to accelerate investments to enhance its marketing efforts. With the consumer shift online, businesses should consider enhancing their digital marketing strategies to build a stronger e-commerce presence but entice customers to visit physical stores when they reopen.

Exploring partnerships with online marketplace providers or wholesale partners is another alternative. One recent example is Walmart’s partnership with ThredUp. The former is offering some 750,000 pre-owned clothing through the resale site. The partnership is a win for both, as bringing in used apparel drives foot traffic to stores, and the established retailers provide ThredUp with new customers.

Similarly, the retailer has collaborated with Shopify. Walmart in recent years has evolved its strategy to stock more emerging and speciality brands on its shelves to match changing consumer tastes. The partnership with Shopify will broaden the visibility of smaller niche businesses to more than 120 million monthly visitors at Walmart.com, creating a better experience for merchants and consumers alike.

Overcoming challenges with compromises

COVID-19 has exposed the weaknesses of supply chains in businesses, with every industry experiencing negative supply shocks. How a business effectively moves away from supply chain bottleneck countries or companies will determine the speed and sustainability of their recovery.

Also Read: ZeusX to bring mobile gaming to the next level in 2020

Lesson 3: Companies should not depend on one external party when it comes to a crucial business process. Do not hesitate to make short-term compromises or be innovative to diversify the supply chain

For the wider gaming industry, the Pandemic has resulted in delays in the production of gaming hardware as factories around the world face supply chain interruptions. Pandemic-related delays have already been announced by game developers at Amazon, a Sony-owned studio and Square Enix. A loss of efficiency will also occur with more employees working remotely.

Nintendo has issued a warning that a situation of prolonged remote working will impact its processes, and the New York Times reports that developers as large as Sony, Amazon and Square Enix are facing difficulties. Some developers have found ways to adapt — albeit not without compromise. Gearbox Software, which makes the Borderlands series, has avoided delays on the deadline they had already committed to by deprioritising certain projects, some of which are unannounced.

Traditional retailers should thus rethink their smart supply network to match the new standards set by e-commerce and digital native players. Previous methods of reassessing inventory and segmenting stock in each category to assess the supply chain will not work any longer. New thinking and courage to step out of the old are required.

There is a shift in focus towards flexible supply chains over low-cost ones with fashion companies looking to onshore or nearshore. Deloitte has broken down four key digital retail trends that retailers can consider when tackling supply chain challenges: urban fulfilment, inventory strategy, flexible network and data, and technology adoption.

Preparing for a post-COVID era

The pandemic has brought to light the importance of forward-thinking. Leaders should look beyond epidemiology and sales data when reshaping their ecosystems to prepare for the future.

Instead, they should focus on becoming more customer-centric to avoid being crushed by unforeseen circumstances and competitors.

Also Read: Who’s driving e-sports and gaming in Southeast Asia: Gamers or fans?

Lesson 4: Never rest on your laurels. Constantly reflect on your consumers’ experience and build your roadmap from there.

While the boom time has been celebrated, gaming industry leaders are sober when assessing the future. They recognise the accelerated shift towards the delivery of games via mobile and cloud-based platforms, seeing the potential in this distribution model.

Google recently removed a US$130 sign-up fee for its cloud gaming service, Stadia, hoping that the value offered will convince consumers to stay for the long-term.  The rising tide of video games over the past couple months has also buoyed e-sports with licensed video games of Major League Baseball, NBA, NFL, FIFA, Formula 1 and NASCAR being aired variously on Fox, Fox Sports, NBC, ESPN and ESPN2 during prime slots. E-sports are subsequently seeking deeper investments from their sponsors so that their gains are sustainable.

We see BMW announcing a deal to sponsor four e-sports organisations in the US, the United Kingdom, Germany, South Korea, and China. Zenni, an eyewear company has also expanded its footprint by adding two new e-sports organisations in their current deal.

With permanent shifts in consumer shopping behaviour pushing more traffic and categories online, recent McKinsey research highlights that retailers could see broader adoption of e-commerce in previously under-penetrated categories (e.g. lingerie) and consumer segments (e.g. baby boomers).

The Fashion industry could leverage this opportunity to revise channel-mix targets and investment allocation to give a greater share to online channels, gaining growth momentum through these channels while protecting brand equity.

Also Read: Who’s driving e-sports and gaming in Southeast Asia: Gamers or fans?

As more consumers are emphasising quality over organic or all-natural ingredients, retailers can keep a close eye on this consumer base and determine what it means for their brand and strategies.

In conclusion, the biggest lesson out of the crisis is to focus on customers. Customers are the foundation of every business’s success. Understanding customers ensures that one’s products and services attain greater satisfaction for them, increasing the long-term goal of repeat business.

If companies do not constantly develop or innovate further to meet clients’ needs, they must be prepared to face high customer churn. For instance, PUBG has lost 50 per cent of its players within half a year. The reasons for this are a lack of focus on the players (customers), unfixed bugs in the game and poor public communication with the players.

With accelerated digitisation in our interdependent world today, businesses should thereby undertake the consumer-centric approach when charting their success to ensure business continuity.

Those who do not prioritise their customers’ journeys and experience will have serious reputational ramifications that threaten their survival, even more than the virus itself.

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Financial projections are an essential part of a startup’s pitch to investors. They are a feature from the initial pitch to the due diligence process as well as valuation discussions. When we look at an early stage startup’s financial projections, we are fully aware that they may not be highly accurate.

After all, there’s usually no historical track record to act as a guide. Furthermore, the business may still be undergoing further changes and pivots.

However, achieving accuracy is not the only aim of preparing financial projections. It is the thought process involved in coming up with projections that gives a better understanding of the startup.

This process benefits both the founder as well as the potential investor. Projections help answer the question of whether capital raising is required and the amount that needs to be raised. They also guide investors on whether the investment returns justify the entry valuation.

Revenue

A good starting point in looking at a startup’s projections would be the revenue forecasts. We typically begin by analysing user growth projections. To set the stage, we try to understand the size of the addressable market and find out the segment of the market to be served by the startup.

We then assess the user growth forecasts in light of this market size. We ask if the market penetration rates are in line with the market sizing and competitive landscape.

Also Read: Mulling over the future of investing with Paul Meyers and Jussi Salovaara

To understand more about user growth, we find out how the startup plans to secure customers. We look at what is known as the sales funnel which tracks the conversion of potential leads into customers. What is the proportion of visitors to the website that turns into potential leads? How many of these leads convert into eventual paying customers?

We also consider how long the sales gestation period is and the time it takes for a customer to make a buying decision. For instance, B2B businesses generally have a much longer sales gestation period than B2C businesses.

With this knowledge, we are able to assess if the user growth is achievable given the resources available to the startup. This can be external resources like sales channels relied on to reach customers eg alliance and JV partners, distributors, or online advertising.

In addition, we gauge if internal sales resources are sufficient to attract and convert the number of leads required to achieve the growth targets. Operationally, the company needs to show that it can handle increased users too. We examine how easy or difficult it is to scale up operations by making new hires, increasing back-office capacity, or having an overseas presence.

Timing plays a part in revenue projections. Unit sales volumes should reflect sales cycles and seasonality. In cases where the startup’s business depends on specific milestones eg first prototype, regulatory approval, or pilot production, the timing of revenue should be aligned to these milestones.

A startup’s growth depends as much on user engagement as it does on new user acquisition. It is not all about securing new customers but how existing ones behave. Delving into the revenue projections will reveal the user engagement levels that the startup is expecting. We look at the rate of users coming back repeatedly to the service, the average order value, and how long a user engages with the service before dropping off.

Also Read: Singapore’s personal finance app Fincy secures US$11M from parent GBCI Ventures

This is where metrics such as customer lifetime value and churn rates play a part in revenue projections. User engagement gives us an idea of stickiness, providing further evidence that the pain point exists and how close the startup is to achieve a product-market fit.

Another metric to look at is whether revenue per user is expected to increase or decrease over time. Different cohorts of users coming on board at different timing may have their own purchasing patterns. The product mix will affect revenue per user as well.

Apart from user growth, the selling price assumptions make up another side of revenue projections. We need to ask whether the prices are consistent with current as well as future competition.

Tied into pricing assumptions would be the revenue model adopted by the startup eg. SAAS, freemium, profit share, etc. This is a good opportunity to examine on paper, the viability and profitability of the current revenue model.

Costs

Aggressive growth comes with its requisite expenditure. That’s why it is important to see if the increase in Selling, General & Admin costs and R&D costs correspond to revenue growth. It will not be realistic if such costs are increasing at a drastically lower rate than that of revenue. We should also benchmark these costs against competitors’ margins.

Another relevant metric to look at is Customer Acquisition Costs or CAC, which tracks the expenditure required to secure new customers. We compare the CAC to the customer lifetime value to measure how cost-effective it is to acquire new customers. This provides an indication of how easy or difficult it is to scale the business.

Cash flow projections

After looking at things from the perspective of revenue and costs, we examine them from a cash flow point of view.

Also Read: How to impress with your startup pitch

In order to forecast operating cash flows, the company makes certain assumptions on its working capital levels. This offers a glimpse of the impact of receivables and payables on its cash flows.

Startups may forecast aggressive revenue growth but the effects of supplier and customer credit payment terms will be felt on its cash flows. This is where the timing of payments to suppliers and payments from customers becomes relevant.

Another important element in the cash flow forecasts is capital expenditure. The higher the revenue growth projected by the startup, the higher the capex and reinvestment needed to power such growth. Whether it is supported by cash flows from operations or external funding, the projections should indicate how such capex is to be funded.

The cash flow projections give us an idea of when the company will likely reach cash flow breakeven. We get to see how far the business is from being sustainable and whether a minimum volume needs to be achieved for that to happen.

Hitting the benchmarks

The projections will shed light on how much runway the company has before it runs out of cash. They provide clarity on the amount that needs to be raised in the current round of funding.

Projections should paint a picture of the startup hitting the next key milestones with or without funding. We can then see how this increases the value of the company. In the fundraising process, this allows investors to estimate the potential valuation at the exit of the investment.

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