Along with Airbnb, DoorDash is planning one of the most anticipated IPOs of 2020. Its anticipated valuation is also similar to Airbnb’s at around US$32 billion. While we have a positive outlook for Airbnb, our evaluation of DoorDash is more negative.

In short, DoorDash’s tremendous growth and market share gains, particularly during the COVID-19 pandemic, don’t seem defensible in the long run.

A closer look at the facts and similar industries around the globe actually just makes Uber look more attractive as an investment since there’s nothing structurally that prevents Uber from making DoorDash into a Lyft of food delivery industry.

DoorDash’s growth is purely due to suburban focus

The most prominent bull thesis on DoorDash is that it is, and will continue to be the market leader in a growing market. For instance, its market share in meal delivery has reached 51 per cent as of October 2020, a very impressive feat for a company that has been competing against giants such as GrubHub and Uber Eats.

DoorDash’s secret sauce has mostly been its focus on suburban areas. While GrubHub, Uber Eats and Postmates have been competing fiercely for market share in urban markets, DoorDash simply casted a wider net on areas that its competitors weren’t paying much attention to.

And the COVID-19 pandemic boosted its market share even further as consumers and their wallets moved away from cities to suburbs. Competitors such as GrubHub and Uber Eats that had a much bigger exposure to markets such as New York City (NYC) suffered due to this transition.

Also Read: Ecosystem Roundup: Govt. pushes for LinkAja IPO within the next year and a half; What SEA can learn from Pinduoduo’s success in China

Certainly, DoorDash and its management team deserve all the credit for making such a strategic decision and successfully executing on their plan. Even in NYC, where GrubHub has enjoyed a massive market share, we actually see more restaurants on DoorDash in suburban areas outside of Manhattan such as Queens and Brooklyn. However, their success doesn’t seem defensible for a few reasons.

First, aside from their geographic focus, their product isn’t inherently different from those of competitors. They all offer deliveries from restaurants, and charge similar levels of fees. And more importantly, the global travel industry, food delivery industry in China and global ride hailing industry have all proven that merchants who are already using an online marketplace want to be on others in order to maximise their business.

Just like hotels and airlines, most restaurants and drivers that are already on DoorDash are highly motivated to get on Uber Eats and Grubhub to get more business as long as these platforms provide similar treatments, especially during a pandemic driven recession.

Uber Eats had thus far chosen not to focus on suburbs because it was prioritising bigger markets while controlling their cost. Now that DoorDash has proven how attractive suburban markets have become due to COVID-19, there’s nothing structural that prevents Uber Eats from aggressively expanding in DoorDash’s home turf.

Uber’s structural advantage

And Uber has every motivation to grow its delivery business aggressively because its main ride-sharing business has been suffering due to the pandemic. This is where Uber’s structural advantage comes into play. First, unlike its rivals, Uber can make money from the same user and rider in two different ways, rides and food delivery.

Also Read: Meet these 22 under-the-radar ride-hailing startups catering to Southeast Asia’s hustle and bustle

This means that Uber could potentially acquire customers more efficiently, shown by its lower S&M marketing expense historically (prior to COVID-19). This also means that Uber could potentially afford to spend more than its competitors to acquire customers (i.e. marketing and promotions) to or to simply charge them slightly less. Secondly, Uber’s war chest of US$8 billion of cash sitting in its bank account (compared to roughly US$4.5 billion DoorDash is about to have after its IPO) means it can indeed do exactly this.

Uber already has drivers and riders in many suburban markets. All it has to do is to call restaurants that are already on DoorDash in those areas, and spend some money on marketing and promotions to get consumers to use Uber Eats in those areas.

When DoorDash was private, it could afford to spend aggressively because it didn’t have investors who care about profit. Now that it’s publicly listed, it will be playing on the same field as Uber under public scrutiny. With a smaller war chest, and a structural disadvantage of just playing in food delivery (as opposed to delivery and rides), DoorDash starts to look a lot like Lyft. On the flip side, Uber starts to look more attractive because its potential to grow its food delivery business seems more sure than ever.

A tale of two IPOs

Airbnb and DoorDash may seem similar at first glance. Both are hot consumer technology companies valued at around US$30 billion, competing against larger companies valued at around US$85 billion.

However, there’s a big difference between the two companies. Airbnb has a distinctive competitive advantage in being the trusted network of travellers and single-home owners who aren’t motivated solely by money. The travel leader Booking.com has been trying to compete against it for several years with limited success.

This doesn’t bode well for pure online delivery companies in Asia such as Foodpanda and Deliveroo that have to compete with rides + delivery companies such as Grab, even more so if the rumoured merger between Grab and Gojek actually occurs.

Structurally, pure delivery companies with smaller budgets are disadvantaged against bundlers who not only can monetise their users and riders more efficiently, but also tend to have a bigger war chest to spend on marketing. And given that Asian markets tend to be a lot more urban than suburban, the geographic distinction and advantage DoorDash has been enjoying will be even less available in Asia as well.

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The Carsome senior management team

Carsome, a leading integrated car e-commerce platform in Malaysia, announced today it has raised US$30 million in Series D funding.

The round was led by Asia Partners, with participation from existing investors Burda Principal Investments and Ondine Capital.

As per a press note, the fresh funds will be utilised to strengthen Carsome’s consumer-to-business (C2B) and business-to-consumer (B2C) offerings.

Also Read: Digitalisation is driving the new normal for Southeast Asia’s automotive sector

Besides, the money will also be used to support Carsome’s potential M&A opportunities in acquiring ancillary capabilities and consolidating their supply chain.

Founded in 2015, Carsome provides end-to-end solutions to consumers and used car dealers — from car inspection to ownership transfer to financing.

Every car that transacts on the platform goes through a comprehensive 175-point inspection, and every car purchase is backed up with an extended warranty and a money-back guarantee, it said in a statement.

With operations across Indonesia, Thailand and Singapore, besides Malaysia, the firm claims currently it is transacting an annualised 70,000 cars totalling US$600 million in transacted value.

Also Read: Carsome closes US$50M Series C; aims to be operationally profitable by end-2020

It has more than to 1,000 employees across all its offices.

The company further claimed that it doubled its Q3 2020 revenues from the pre-pandemic period, and achieved operational profitability as of October.

Eric Cheng, Co-founder and Group CEO of Carsome said: “Over the past six months, we have doubled our monthly revenue compared to pre-pandemic levels, a dramatic acceleration due to the impact of the ongoing COVID-19 pandemic on consumer behaviour across our region.”

“Consumers across our core markets of Malaysia, Indonesia, Thailand, and Singapore are increasingly purchasing cars to keep their families safe and adapt their businesses,” he added.

“Carsome’s integrated approach offering a one-stop solution to used-car buyers and sellers is genuinely impressive. We see that this will be the way forward for the used car industry, and we look forward to working closely with Eric and his capable team in further scaling the business across the region,” said Oliver M. Rippel of Asia Partners.

“We have built a defensible, scalable, and profitable business with very healthy unit economics attributed to both growth in gross margin and steady improvements in productivity and conversion metrics,” said Juliet Zhu, Carsome Group CFO.

While the platform flourishes from digitalisation tailwinds, Carsome said it remains focused on supporting its partners to navigate new challenges brought about by the pandemic.

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Image Credit: Carsome

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The impact of COVID-19 on the hiring plans of fintech firms is negligible, with the overwhelming majority of firms still looking to expand their headcount in the coming months, finds a survey.

For firms which are not looking to hire more staff, the pandemic was cited as a reason by half of respondents surveyed.

The survey, titled FinTech Talent Report 2020, was conducted jointly by the Singapore FinTech Association (SFA) and PwC Singapore. It explored the impact of the pandemic on the attraction, recruitment and retention of talent among fintech firms in Singapore.

Also Read:  From 30 to 400: TNG Fintech Group founder and CEO Alex Kong shares how to grow your human capital

As per this survey, talent gaps exist across the various identified job functions. But for the most part, these are manageable with firms generally reporting no shortfalls or a shortfall of 0-25 per cent in their desired headcounts.

When hiring talent, fintech companies are likely to draw on their own personal networks and connections, in addition to job portals, to find the right talent for their needs — a trend similar to findings from the 2019 Talent Survey.

Compared to the 2019 findings, more Singaporean fintech firms are focussing on hiring local talent, though the majority of respondents were in favour of hiring both foreign and domestic talent.

This could be due to a combination of factors like increased capabilities of domestic talent and greater challenges in hiring foreign talent.

The Ministry of Manpower (MOM) recently raised the minimum salary required for new Employment Pass (EP) and S Pass (SP) applicants in early August to encourage firms to hire more local talent.

Challenges persist for startups as local talent is more likely to be attracted to larger, more established firms and many applicants have unrealistic salary expectations.

The survey further reveals that many fintech businesses feel that the current situation is an opportune time to upskill their staff so resources and grants may be applied for in order to achieve this.

Despite a growing number of training partnerships and fintech qualifications, many fintech companies in Singapore are unaware of them and those that are aware remain generally neutral in their assessment on material coverage.

The majority of the 1,491 respondents agreed that increased dialogue between industry, academia, and regulators was beneficial in ensuring local talent could be developed to meet the needs of fintech firms.

The imminent launch of digital banks in Singapore is largely perceived to be a boon for the talent pipeline, with the combination of banking and fintech seen as offering the best of both worlds and driving interest in people to learn the necessary skills to work in such institutions, says the report.

Also Read: Why fintechs and banks have a bright future together

Such a result would likely have spill-over benefits to the wider fintech community, increasing the availability of local talent across the industry.

Patrick Tay, Assistant Secretary-General of the National Trades Union Congress (NTUC), said: “It is encouraging to note that Singapore’s fintech sector has stayed resilient despite the global impact of the COVID-19 pandemic, and hiring sentiment for local talent remains strong. With fintech companies looking to expand their workforce, workers must keep an open mind and explore picking up new skills to stay relevant or secure employment in this growing sector.”

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Image Credit: Unsplash

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gnômadic founder Jonathan Schiff

“Is this even real? Is everyone going to be talking about something else next year again?”

That was Jonathan Schiff’s response when a group of co-living firms approached him in late 2018 to seek investment and advisory opportunities.

Keen to find out more about the emerging vertical within the real estate industry, the industry veteran set out to travel across the world to experience it for himself. After speaking to several management teams, staying in co-living spaces and interacting with residents themselves, Schiff was won over.

“I was like wow! This does seem to be a secular shift in the way that people are looking at housing,” he shared in an interview with e27.

However, a problem arose. When sharing the idea of co-living with his acquaintances, a recurring theme emerged. “Isn’t that a bunch of 20-year-olds having keg parties on the rooftop every night?” he shared candidly of the encounter.

Thereafter, he realised he had to focus on a niche market to alter these perceptions and do well, especially in the rapidly expanding co-living market, where startups such as hmlet and Cove have emerged in Singapore recently.

Niche market

Seeking to dip his toes into what remains a nascent industry, Schiff founded gnômadic in January 2020. Based out of Singapore, the startup curates luxuriously furnished co-living homes with events to build a community for residents to unwind and connect. Prices start at S$2,500 (US$1,870) per month, with a strong focus on working professionals and expat community.

Also Read: How Rukita turned the pandemic into an opportunity to grow its co-living business

Schiff shares that while majority of gnômadic’s customers are in their mid-30s, it has a diverse range of clients residing in its four properties islandwide.

But the beginning of the company was not easy; within just months of starting, COVID-19 broke out and altered perceptions towards housing. There was a shift towards flexibility amidst the pandemic as uncertainty grew and locals started delaying big-ticket purchases, including property.

However, the movement restrictions imposed within the city-state did not result in an entirely negative outcome, he said.

“The pandemic was a great opportunity for us to learn more about our residents and how to serve them better,” he noted, as we settled in at gnômadic’s latest property Meadow, located conveniently off the bustling Orchard Road.

When quizzed on whether the increased rental demand would remain when the economy recovers, Schiff replied that demand would remain high within the professional community that gnômadic targets, as “highly qualified and compensated people” would continue coming into Singapore.

gnômadic seeks to target working professionals and the expat community

Community building

Throughout our hour-long chat, it was noticeable that building a community around co-living (through events) was important to Schiff.

Also Read: Why mixed-use is the future of real estate in a socially distanced world

Did the pandemic alter your plans? “Before the restrictions, we would have larger events such as rooftop parties with 20 to 30 people. During the lockdown, we were organising virtual events and that wasn’t a big challenge. The hard part was when physical events were reintroduced with restrictions on the size of the gatherings.”

“People wanted to get out of the house and physically interact with each other. However, there are restrictions still in place and residents are mindful of that,” he elaborated, adding that gnômadic is constantly innovating to come up with new solutions to bring residents together while adhering to the pandemic-induced restrictions.

Besides running gnômadic, Schiff is also Managing Director of a family office and a Director of a private equity (PE) fund. Having both founded and invested in startups across a variety of sectors, Schiff has a few words of advice for entrepreneurs.

“You have to focus on a particular niche. A lot of startups get into trouble because when you’re sitting down with a piece of paper, you can go any direction and could soon lose your direction,” he emphasised.

“Building a team is always important. At the moment, there’s an incredible pool of talent that’s out there in the hospitality sector looking for jobs right now. We are in the process of recruiting and the quality of people coming in is amazing,” he revealed.

Sharing his personal experience as he faced restrictions in purchasing property due to his non-citizen status, Schiff encouraged founders to be adaptable and resourceful to overcome any obstacles when starting up.

Also Read: Why startup founders should be open to pivoting anytime

Future plans

The co-living venture is currently looking to expand its operations into Bangkok and Ho Chi Minh City.

Schiff hopes gnômadic can help foreign professionals acclimatise into the local culture to ease their transition into a foreign land.

Revealing his thoughts on what the future entails for the co-living industry, Schiff remarked while it is still early days and co-living firms are in “unchartered territory”, he believes there would be an increased focus on community building in the years to come.

“The whole community aspect is very fascinating. And it is the thing that’s attracted a lot of people. People are asking ‘who am I going to live with?’ Therefore, we spend a lot of time curating our community,” he remarked.

“Before anybody moves in with us, we get to know their needs and desires so we can best serve those needs,” he said.

Schiff also shared that gnômadic, unlike conventional startups, has an asset-heavy model. Therefore, the business consists of a property management arm running alongside an operations one.

Though the firm has been self-funded till date, he shares it is seeking investments from real estate investment firms and private equity firms. However, he stressed funding remains a desire rather than a need.

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Image Credit: gnômadic

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2020 reflections are pouring. Thanks for sharing your perspectives on what the years meant for startups, tech and business in SEA.

This week our contributors throw some light on the emerging investment areas and nuances like how will investor actually go about due diligence ‘virtually’; the big talk on AirBnB’s highly subscribed IPO and how it compares to others like Uber, DoorDash etc.; seeking help in the infamous Maslow’s theory (bring out those textbooks) for remote team management (this is here to stay) and much more.

Enjoy your weekend read and if any of these inspire you to share your thoughts, just go ahead and submit it.

How content platforms can work with the community to make online spaces safer for all by Arjun Narayan, Director, Trust & Safety TikTok APAC

“In today’s world, there’s no question that digital platforms play an extremely influential role when it comes to inspiring creativity, enabling freedom of expression and building a strong community. While the internet provides us with many opportunities to freely exchange ideas and connect with others, the principle of freedom of expression is under intense scrutiny as platforms look to ensure they remain an inclusive and safe space for their users.

This industry faces an increasing responsibility to ensure the right voices and content is being spread and heard, and it’s not one that should fall on content platforms alone.

Leading digital platforms have begun creating third-party councils to develop forward-looking policies that not only address the challenges of today but also help plan ahead for the next set of issues the industry will face.”

From IPOs to VC funding

How investors are adapting to effective due diligence practices in the new normal by founder of Capria and Unitus Ventures, Dave Richards

“The financial sector has stumbled upon a hitch, as fund managers find it difficult to raise money for a first or final fund close. For those with dry powder, the challenge to wisely allocate funds, appoint a new team or go with an existing team is seen rising.

Investors across the globe share the belief that due diligence (DD) forms the most critical component of an investment process. Agnostic of the type of financial organisation– VC or PE fund managers, family offices or institutional ones, DD is a key process followed before investing in a fund or company.”

A tale of two IPOs: How DoorDash’s IPO makes Uber and Airbnb’s look better by Duckju Kang, CEO of ValueChampion

“DoorDash’s tremendous growth and market share gains, particularly during the COVID-19 pandemic, don’t seem defensible in the long run.

A closer look at the facts and similar industries around the globe actually just makes Uber look more attractive as an investment since there’s nothing structurally that prevents Uber from making DoorDash into a Lyft of food delivery industry.”

Why the VCs in Southeast Asia should shift their attention to niche sectors and supporting industries by VC at HH Investments, Maarten Hemmes

“SEA is now in a golden era for tech startup growth as people’s livelihoods improve. In 2018, the average per capita income of SEA countries reached US$4,600, similar to that of China in 2007 when the country started its tech boom.

New venture capital has to be smarter, carve out niche sectors and identify supporting industries where they can find value and success.”

Managing your team

How to use Maslow’s hierarchy of needs to drive resilient leadership in 2021 by Chuan Zhen Ko, CEO and cofounder of Plus Solar Systems

“How does a leader focus on staying afloat whilst keeping the team motivated under such extreme pressure? Here are four lessons that I have learned in reflection from the pandemic and each other which we hope will also see us through as we brave through uncertainties leading into 2021.”

Why the future of work in Singapore is remote by Yuying Deng, founder and CEO at Esevel

“While there will be a shift towards remote, we believe the office will not disappear completely. Not every job is suitable for remote work. And physical meetings are still ideal for tasks like creative brainstorming, on-boarding new joiners and relationship-building between colleagues.

However, what these past six months have shown us is that a strict 9-to-5 work arrangement in a single physical premise is irrelevant and unnecessary. In the future, companies will have to be more thoughtful on what they want their employees to achieve and the best ways to achieve that.”

Don’t break the bank: Enabling financial inclusion and equity through tech by Phil Davis, Managing Director APJ, Amazon Web Services

“The good news is that technology has been a driving force behind significant changes in the financial services industry. One instance of such change is in how banks and fintech startups are now empowered to service these previously excluded groups of people, while maintaining industry-leading standards of security and regulatory compliance.

With large investments being made in the region, a figure KPMG estimates at US$8.1 billion in the first half of 2020 alone, there are more opportunities and possibilities than ever before to ensure financial inclusion. All this bodes well for the region: empowering wider swathes of the population to participate in greater levels of economic activity will bring about long-term benefits for economies.”

Emerging sectors to watch for

How smart technology can improve the post-pandemic public life by founder and CEO at Habitap, Franklin Tang

“Smart technology promises greater peace of mind and autonomy for users. Not only will it provide greater convenience, it also facilitates better connectivity and control of their home and office environments and through automation allows people to spend more time and energy on the things that matter to them.

When I started Habitap in 2016, I built it on the premise of bringing technology seamlessly into our homes to empower our vision of a smart nation. We created a seamless user experience around three key pillars: Smart controls, smart community and as a lifestyle gateway, into an integrated mobile app.”

It’s about time: Why global trade will sink without maritime innovation by Shaun Hon, Director at Rainmaking, a corporate innovation venture studio

“Singapore’s port and maritime industry was once the beating heart of its economic progress. But in recent years this has slowed down significantly. Over the last decade, the maritime industry turnover has seen a drop of S$7 billion (US$5.2 billion) from its peak in 2014; a decrease of more than 40 per cent.

Just as the ocean was once the frontier of discovering new continents, so too can it be a site for innovation in supply chains.

Maritime logistics could be the most exciting new innovation opportunity – backed by a trusted legacy. To get there, we must first overcome three major hurdles.”

Legaltech on blockchain is set to be the next hot investment sector. Here’s why by Nikos Kostopoulos, blockchain advisor

“Legaltechs leverage technology to deliver more efficient and lower-cost legal services to lawyers, businesses, and consumers. Their goal is to make legal services accessible to everyone.

The legal and judiciary systems have well-earned their reputations as stodgy. They have traditionally been complex and expensive to use. Facing these barriers, many businesses and individuals have not had fair access to the legal system. Large enterprises pay through the wallet for legal services, while smaller businesses often have no legal recourse if a business partner fails to fulfill their half of the contract.”

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Editor’s note: e27 aims to foster thought leadership by publishing contributions from the community. Become a thought leader in the community and share your opinions or ideas and earn a byline by submitting a post.

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