Day: February 3, 2021

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ASEAN policies and developments that encourage blockchain investments

The ASEAN Investment Opportunities 2021 report forecasts investment opportunities in the fields of fintech and digital innovation. These are spaces where blockchain technology is expected to thrive. Incidentally, the ASEAN bloc is viewed as a potential blockchain frontrunner given the growing number of blockchain startups in the region.

Investor interest is an important factor, but it is not going to be enough without counterpart actions from governments or regulatory bodies. In the absence of legislation or regulations that clarify the treatment of digital assets and blockchain-based transactions, tech startups that pursue blockchain applications in their business models cannot attract investors.

Investors will likely find it too risky to extend financial backing to companies that operate in markets where their businesses can face legal challenges.

ASEAN as a whole does not have specific policies related to blockchain and digital asset adoption. However, some member countries have introduced legislation or changes in their policies over the years in support of blockchain-based business models and innovations.

Singapore’s active support

The Monetary Authority of Singapore (MAS) has programmes or policies that are deemed supportive of digital currency use and blockchain applications. With these, the city-state has been dubbed as Asia’s cryptocurrency and blockchain hub. Singapore has a notably welcoming attitude towards these technologies.

As early as 2014, MAS has indicated its inclination to avoid actions that would lead to illegalising digital currency use. Also, since 2016, MAS has been exploring the use of distributed ledger technology or blockchain for payment and securities clearing and settlement. Singapore is also known for helping blockchain startups that are planning to launch initial coin offerings (ICO).

Also Read: 3 trends that defined Taiwan’s blockchain industry last year

A joint project by MAS and Temasek, a government investment firm, was initiated in 2016 to establish a blockchain-based payment system prototype that supports multiple currencies. Also, Singapore’s Infocomm Media Development Authority (IMDA) launched a Blockchain Challenges series designed to promote and improve blockchain adoption in Singapore. This initiative aims to nurture the blockchain ecosystem in the country.

It’s not surprising why Singapore has a good number of blockchain startups. Companies such as Electrify and Bluzelle are gaining recognition for their innovative applications of blockchain technology. Of note, Electrify, a startup that decentralises the energy marketplace, attracted a US$30 million investment in 2018 to support its international expansion.

Bluzelle, a “serverless” data delivery network provider, closed a US$19.5 million ICO in 2018 after securing US$22.3 million in seven funding rounds. The company is set to launch its mainnet on February 3 this year. Bluzelle also launched its Developer Grant Program for censorship-resistant applications, with focus on increasing transparency, enhancing security and preventing censorship. The company will support innovative use-cases with its US$500,000 fund.

IMDA’s Future of Services report predicts that Singapore’s blockchain market spending can reach up to US$272 million in 2022 and up to US$2.6 billion by 2030, with a compounded annual growth rate of 32.5 per cent.

Indonesia’s change of heart

Indonesia was initially against digital currency and blockchain. It issued an outright ban against cryptocurrency in 2018. However, the government eventually changed its stance as the government decided to create legal frameworks to govern the operation of digital currencies and blockchain-based assets.

Indonesia still prohibits the use of cryptocurrency as a medium of exchange, but the country’s Commodity Futures Trading Regulatory Agency classifies cryptocurrencies as trading commodities. This gives legitimacy to crypto exchanges and other businesses involved in digital asset transactions except for the use of crypto to pay for purchases.

The government also acknowledges other applications of blockchain technology, particularly the idea of smart contracts. There is growing attention to this concept in the context of fintech regulation. Indonesia allows local companies to employ and implement blockchain-based solutions as they are viewed as essential in driving innovations in financial technology.

Also Read: How ASEAN is shaping up to be a blockchain frontrunner

The Indonesian government further demonstrated its openness to blockchain as it used the technology to verify nearly 13 per cent of the country’s votes during the last presidential election. Additionally, the government forged a partnership with PLMP FinTech, a Singaporean blockchain company, to develop new solutions and strategies for Indonesia’s logistics industry.

Indonesia has a formal blockchain organisation called the Indonesia Blockchain Association, which was created to educate and engage local regulators about blockchain. It has had considerable success as it helped government entities such as the Indonesian Customs adopt blockchain-based solutions to enhance supply chain data management. Indonesia’s biggest bank, Bank Central Asia, is also contributing to blockchain promotion with its local hack-a-thons that promote and support the development of blockchain tech for FinTech businesses.

Malaysia’s tolerance

Just like Indonesia, Malaysia was not as welcoming to blockchain adoption. However, it did not impose regulations that clearly made blockchain and cryptocurrency use in the country illegal. As such, Malaysia’s local blockchain industry gradually made progress.

Instead of shutting down businesses involved in virtual currency exchanges, what Malaysia’s authorities did was to mandate compliance to KYC requirements.

It was in 2019 when Malaysia made a significant stride towards blockchain adoption with the country’s finance minister issuing an order to recognise crypto assets and digital currencies as securities. Similar to what happened in Indonesia, this resulted in the legitimisation of crypto exchanges, initial coin offerings, and related business transactions.

In a statement, Malaysia’s Ministry of Finance recognised blockchain’s potential in ushering innovations not only in new sectors but also in traditional industries.

The Malaysian government has already approved several crypto exchanges and is moving closer towards institutionalising the buying and selling of crypto assets. In early 2020, the country’s Securities Commission introduced regulations for initial exchange offerings (IEO), which enable registered platform operators to carry out digital token offerings.

Also Read: How blockchain can help combat ongoing fraud in the Halal food industry in SEA

There are also reports that Malaysia’s national stock exchange is already considering the possible digitalisation of the bond market with the development of a proof-of-concept blockchain project.

Just like Indonesia, the move to consider cryptocurrencies as legal tender still has a long way to go. There have been no plans for a government-backed cryptocurrency similar to China’s. However, blockchain technology and digital assets are steadily gaining user adoption. Industry observers also see growing demand for crypto assets in the country partly driven by the lingering pandemic.

The takeaway

Blockchain is not just about digital currency or FinTech. It also has use cases in a variety of other settings as demonstrated by the successful startups mentioned above. However, government actions that are largely about cryptocurrency adoption and regulation are the ones that have the biggest impact in advancing the blockchain market across Southeast Asia.

Singapore, Indonesia, and Malaysia are not the only countries that have policies that help foster blockchain use. Thailand, Vietnam, and the Philippines have also made some progress towards crypto and blockchain adoption. However, the actions of the three largest economies in the ASEAN bloc somewhat summarise the developments that allowed blockchain technology to advance in the region.

One has a proactive policy that welcomes the new technology while others initially reject, then tolerate, and later on regulate.

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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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What metrics to monitor as a B2B SaaS company?

metrics SaaS startups

The purpose of this short article is to provide a common ground of notions and knowledge on SaaS metrics, based on the hundreds of SaaS companies we see and evaluate on a yearly basis at Qualgro.

We hope that this will help everyone in the ecosystem (founders, advisors, VC friends) to speak the same language and normalise expectations and understanding when tackling SaaS businesses.

Let’s take a simplified example to illustrate: you are a SaaS company with one product and two price tiers at US$100 and US$50 a month, respectively (for example premium and basic plan). We are in January 2021 and as of December 2020, you have 10 customers paying each US$100 monthly subscription fees, thus generating US$1,000 in subscription revenue.

What are the key metrics you should be tracking to ensure right understanding of your business and sustained longevity of your company?

The following are definitions of the main B2B SaaS metrics you should be monitoring for your company in the context given above. Note that all these metrics can, and should, be tracked across various different levels: company level, product level, cohort level, customer group level, etc.

Level 1 metrics

GM= Gross margin
This might sound obvious, and while GMs are not specific to SaaS businesses, one of the key reasons why SaaS has been so popular in the recent years as a business model and has also received so many investments, is partially due to the very attractive GMs SaaS businesses are able to generate — at least 80 per cent.

Net MRR= Monthly recurring revenues
This metric is always linked to a particular month (e.g. MRR of January 2021) or a period (e.g. average MRR for Q1 2021). The word ‘recurring’ is extremely important here: MRR is what customers are paying on a monthly— hence recurring — basis. This is basically the subscription fee to your service (think Netflix at US$8.99) and excludes any one-time fee such as POC, setup, maintenance etc.

Some of these revenues might be recurring (e.g. maintenance fees), but they do not bear the same economics and stability as your subscription revenues. These costs will still add up to your total monthly revenues. If your customers pay upfront for a given duration of usage (e.g.: 12 months in advance) then your MRR is the total revenues divided by the duration of usage.

Also Read: 4 Simple ways to cut your customer acquisition costs

Depending on how quickly you onboard your customers or how long they take to pay, you might want to track actual cash MRR vs. other MRR (e.g. contracted MRR, invoiced MRR, etc.).

(Gross) MRR $ churn= percentage of loss of MRR in $ from existing customers compared to last month

For instance, in December 2020, you had 10 customers each paying US$100. If one customer stopped paying in January 2021 and another one downgraded to your US$50 tier, your MRR churn is -15 per cent (-US$150/ US$1000).

A quick point to note: some people would rather use net $ MRR churn = $ churn — expansion (i.e. existing customers increasing their spend). In our opinion, one of the issues with looking only at net $ churn is that it hides some information. For example, you could think all is well by just looking at a negative net $ churn (basically your revenues are increasing).

In this scenario, while some customers increase their spend, you are still losing other customers and you might not be focusing enough resources on how to retain them.

Logo churn = percentage of loss of MRR in number of paying customers compared to last month
In the same example as for MRR churn, your logo churn is -10 per cent (one lost customer/10 existing).

ARR = Annual recurring revenue
This is simply 12 times the MRR of the month you are looking at (e.g ARR as of January 2021 = Jan 2021 MRR x 12) — nothing more, nothing less. Again, don’t forget to exclude any one-time fees/non-subscription revenues.

CAC = Customers’ Acquisition Cost

This is where you add all the costs incurred to acquire new customers: marketing ad spend, discounts, marketing and sales staff salaries etc. There is no absolute value of “good” or “bad” CAC but there are ratios that are useful to track (see Level 2 metrics).

LTV = Lifetime value (of a customer)
This is how much revenue a given customer will generate before churning. In our example, if a customer churns after 18 months (without changing price-tier) then his/her LTV is US$1,800.

Level 2 Metrics

Now that we have defined the main metrics to track as KPIs for your business, here are some level 2 metrics that are more reflective of your company’s health and (growth) trajectory. These are also the very metrics that potential investors will normally look at in detail, while considering an investment in your company.

Growth rate
Usually measured on the net MRR or ARR, the growth rate indicates how fast you are expanding your business. In early-stage startups in SaaS (e.g. from Pre-Series A to Series B), we usually expect companies to grow at least two–three times year-on-year— and even more for seed stage companies.

CAC payback period = CAC / cash in for a given customer or group of customers
This basically indicates how much time a given customer takes to pay back their cost to be acquired. In our example, if your average CAC is around US$300 and your gross margin around 90 per cent then the payback period is US$300 / (US$100*90 per cent) = 3.3 months for a customer to “repay” its acquisition cost.

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Usually, you would like your payback period to be less than the duration it takes to acquire customers on average. However, sales cycles tend to be longer for B2B sales than compared to B2C products, so payback periods of six months or more are not uncommon.

LTV/CAC ratio: this ratio is used to assess the efficiency of your acquisition efforts
A high ratio means you’ve found effective ways to acquire customers without spending too much. However, if it’s too high, it could mean you might not be spending enough money on acquiring customers. If your ratio is too low, it could mean that you’ve spent too much on a customer that doesn’t bring much to the company in the long run.

There is no “ideal” LTV/CAC ratio (although 3:1 is usually a good start) but by all means this should be higher than 1:1.

Also Read: Customer churn can kill your startup

Cost base: this is basically what your company is spending to operate and grow
While some people might look at the so-called burn rate = cash need “after revenues” (= revenues — costs), at Qualgro we usually look at your full cost base. For example, if we assume that your only costs are your salaries and they amount to $1,200 a month, we would assess your cash needs for year 2021 as US$1,200 x 12 = US$14,400.

Some others could say that your burn is $1,000 (revenue)— US$1,200 (cost) = US$200 on a monthly basis and you would need only US$200 x 12 = US$2,400 for year 2021.

The rationale for us to look at the full cost base without revenues is that early-stage companies have quite unpredictable revenue streams by design — even in SaaS— and knowing the real cost base of the company enables everyone to anticipate better the full cash needs to sustain in the medium term, even if revenues drop to 0.

As a matter of fact, 2020 was a good example of basing your cash needs on your full cost base and not just your “burn” (and provisioning cash closer to US$14,400 than US$2,400 in our example).

Putting things into perspective: Valuation of SaaS businesses in Southeast Asia

No article on SaaS metrics can go without a word on valuation. While some people would argue that valuing a business is more art than science, and without providing a “magic number” (hint: there is none and each company is different), we think that some common guidelines should be followed by the ecosystem to normalise everyone’s perspective on SaaS valuations in the region.

As Southeast Asia is a region and market on its own, with limited comparison possible with US, Europe or China, it is important for every stakeholders (founders, advisors, investors) to understand the intrinsic value of each business with its own characteristics and KPIs (hopefully with the help of the lists above), and not to try to copy-paste valuation multiples from other geographies as “market standard”.

On using public SaaS companies as benchmark
Valuing a private company is different from valuing a public company and using public companies’ multiples (whether revenue multiple, P/E, etc.) while providing some data points, cannot and should not be used as-is to price a private company, especially a startup in its early years. The list would be very long but the range of metrics are altogether very different: size of the customer base, consistent growth over time, product breadth and depth, etc.

On using forward multiples
These have in our opinion no business reality— valuing a business based on a multiple of one of its metrics (MRR, ARR, EBITDA, etc.) is already taking into account upcoming growth. Applying a multiple of “expected ARR’’ for the year to come is basically counting twice the effect of planned growth into the valuation.

On using US multiples for Southeast Asian companies
The US market is very different compared to SEA: maturity of the companies and customers, willingness to pay for SaaS products, size of the market, talent pool, etc. Keep in mind that the multiples used to value US companies are intrinsically tied to the local context of the market and the size of the opportunity, which is starkly different in SEA compared to the US.

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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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The SEA startup ecosystem kicks off the new year with a flood of fintech investment

After everything that has happened in 2020, naturally, we are kicking off the new year with fresh hope for a much brighter day. In the context of Southeast Asian (SEA) tech startup ecosystem, the fintech sector seemed to have the most reasons to be optimistic about.

In January, we published funding announcements from at least 15 companies in various locations in SEA. Of all these companies, one of the most notable funding rounds was secured by Philippine-based Mynt, which was closing into unicorn status with it.

Lending platforms also continued to become popular among investors with funding announcements by Lendela (US$2 million in pre-Series A), Pintek (US$21 million in debt financing), Alami (US$20 million in debt, equity), MicroLeap (US$3.3 million) as well as payments with Gpay (undisclosed Series A) and Momo (Series D).

In addition to these companies, we also saw movements in the buy-now-pay-later (BNPL) segment with a seed funding round for Pace, the latest newcomer in the scene.

Among the unicorns of SEA, Grab’s fintech arm GFG also secured a US$300 million Series A funding round as part of its further expansion into the scene. The funding round came amidst reports of the company’s plan for a US IPO.

The popularity of fintech investment at the end of 2020 and the beginning of 2021 might be directly related to the ongoing COVID-19 pandemic, which had encouraged digital transformation across many aspects of life. This is one of the trends that e27 believes will continue even after the pandemic has lessened, as it enables a new level of practicality and inclusion for the users.

Also Read: Eco-business raises funding from Tembusu Partners to grow its sustainability-focused news platform

What the rest did

Outside of the fintech scene, we also covered funding rounds by companies in the foodtech scene. But what makes January’s foodtech investment unique is the focus on improving the food production process, as opposed to the focus on finding the alternative to meat protein –which was a big theme in 2020.

For example, we had Advantir which builds capsule dessert machine Swirl.GO and Crown Tech which builds AI-powered robot baristas.

Every month, there are always some verticals that seem to stand out among the rest, that work in areas other than fintech or e-commerce. In January, those verticals included multimedia and content creation.

LottieFiles, a community platform for designers and developers, who create motion graphics using the Lottie file format, secured a US$9 million Series A.

Meanwhile, Podcast Network Asia secures a US$750,000 funding to support its expansion plan and live streaming platform GoStream announced that VinaCapital Ventures has invested a “seven-digit figure” into the company.

A different way to get funded

Following up the hype that had begun in 2020, in January, we also saw more reasons to be certain of the popularity of SPAC as an alternative route for tech companies to raise funds.

Joining the bandwagon is Catcha with its blank cheque company Catcha Investment. It has filed to raise up to US$250 million in an initial public offering and aimed to “focus on a target with operations or prospective operations in the technology, digital media, financial technology, or digital services sectors (new economy sectors) across Asia Pacific, particularly Southeast Asia and Australia.”

Also Read: MDEC joins hands with 11 ECF platforms to provide funding to Malaysia’s micro companies with cash-flow problems

Before this, there was also Poema Global Holdings, a SPAC focusing on tech firms in Asia and Europe, with its US$300 million IPO on the NASDAQ stock exchange.

e27 predicts that this trend will continue throughout 2021, especially as leading tech companies such as Tokopedia has even begun considering it as an alternative.

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Beenext promotes Faiz Rahman as Partner for Indonesia, Hero Choudhary as Managing Partner

faiz

Faiz Rahman

Singapore-based VC firm Beenext has announced today it has promoted Faiz Rahman as Partner for Indonesia investments.

In the new role, Rahman will be heading tech investments in the archipelago, where the VC firm will largely focus on early-stage (pre-seed to Series A) startups. Besides, he will also be leading the expansion of the network in the region.

A graduate of the University of Indonesia, Rahman brings with him eight years of experience in a variety of fields spread across investment, growth, strategy and entrepreneurship.

In his previous role at Beenext, he built its community for founders/partners in the archipelago. Prior to joining the VC firm, he held the growth and product strategy roles at Lepaya and gojek. He also had a stint with Convergence Ventures.

In the past, Rahman has founded a company called GoodJobs.

“We are fortunate to have Faiz as a new partner and look for more opportunities of collaboration with fellow founders, co-investors and the experts in the local ecosystem and contribute to the growth of the digital economy to the Golden Age in Indonesia,” said Teruhide Sato, founder of Beenext.

Additionally, Beenext also announced that it has elevated its current partner Hero Choudhary to the position of managing partner. In this position, he will be supporting founders of its portfolio companies to scale their business toward the growth stage of their startup journey, including potential IPOs.

Also Read: 500 Startups promotes Ee Ling as Regional Director to spearhead innovation programmes in APAC

Launched in 2015, Beenext has invested in more than 80 startups in India and 51 across Southeast Asia so far. Among its notable investments in Southeast Asia and Japan are Zilingo, Sendo, Trusting Social, Ralali, Amartha, Dekoruma, Mekari, Zenius, Sentient, and Japan’s largest HR SaaS company, and SmartHR.

In total, it has invested in more than 200 startups, globally.

In 2019, Beenext launched a new early-stage focused fund worth US$110 million, which has invested in TrustMedis and Akseleran.

Indonesia is the most-populated country in Southeast Asia and has been a favourite of local and foreign VC firms. Prominent local VCs in Indonesia include East Ventures, Alpha JWC Ventures, Prasetia Dwidharma, and Convergence Ventures.

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Image Credit: BEENEXT

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Bot MD snags US$5M Series A to expand its AI clinical assistant platform into Indonesia, Philippines, Malaysia, India

Bot MD

Bot MD, a Singapore-based Artificial Intelligence (AI) clinical assistant platform, announced today it has closed a US$5 million Series A funding round led by Monk’s Hill Ventures.

Also participated in the round were existing and new investors SeaX, XA Network and SGInnovate, besides angels such as healthcare professionals Yoh-Chie Lu and Jean-Luc Butel and Silicon Valley entrepreneur Steve Blank.

As per a press note, the fresh funds will bankroll Bot MD’s growth within the Asia Pacific region with the expansion of its platform into Indonesia, the Philippines, Malaysia, and India.

Besides, the healthtech startup will expand its design and engineering teams to develop new clinical applications and integrations for its platform

Launched in 2018, Bot MD is a clinical assistant which provided doctors with answers to their clinical questions. It allows hospitals and healthcare organisations to integrate their electronic medical records and hospital information systems within their platform for doctors to access.

Also Read: The changing face of healthcare in a post-pandemic world

Bot MD said its proprietary Natural Language Processing (NLP) technology has been used by over 13,000 doctors globally, including notable local medical institutions such as the Singapore General Hospital and National University Health System.

The company claims it grew its user base in Singapore from 20 doctors in January 2020 to over 5,200 clinical users by the end of 2020.

“We believe that we can help every doctor in the world save time and improve the quality of patient care by making it more convenient to access the clinical information that they need, wherever they are,” said Dorothea Koh, CEO and co-founder of Bot MD.

“The global pandemic has added tremendous pressure on healthcare systems around the world and reinforced the need for efficient operations and productive healthcare professionals. Unlike other pure SaaS enterprise players, the team’s extensive experience in the healthcare industry have given them deeper insights into the real pain points of doctors and hospitals,” said Michele Daoud, Partner of Monk’s Hill Ventures.

In January, the company launched a pilot with Parkway Radiology to enable its affiliate network doctors to use its AI assistant platform for clinical ordering and scheduling of radiology exams, as well as to view patient radiology reports and scans through integration with Parkway’s existing systems.

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Image Credit: Bot MD

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