The “chilling” funding winter has already wreaked havoc across the startup world. With no hopes left to raise the much-needed capital to survive the onslaught of the winter, many companies winded down, and many have reduced their workforce. There are no hints that the winter will recede in the foreseeable future, as the factors that led to this situation still persist.

How long will this recession and funding winter last?

In this interview, Dusan Stojanovic, Founding Partner and Director at Singapore-based VC firm True Global Ventures, discusses the funding winter, its impact, exit opportunities, and how it plays out in Southeast Asia.

Excerpts:

How long do you think this tumultuous period will last?

Dusan Stojanovic: We believe the funding winter will last in the US till Q4 2023. However, we will see recovery earlier in regions such as the Middle East (Dubai) and Southeast Asia (Singapore) and later in most European countries, which are still very much affected by inflationary pressures caused by the Russia-Ukraine war.

Also Read: Next blockchain unicorn will be from gaming: Dusan Stojanovic of True Global Ventures

The funding winter is mainly driven by the non-profitable public tech market in 2022, with some companies’ valuations falling 90 per cent. We saw similar patterns in the private market during Q3 and Q4 2022.

There is always a delay between the public and private markets based on trading data on our portfolio company Forge Global (a global marketplace for private transactions). This fall is mainly driven by high inflation reflected in high-interest rates, which results in the dip of especially non-profitable public tech stock when doing discounted cash flow valuations.

On the positive front, we expect inflation to decrease to around 5 per cent as interest rates continue to drop and potentially even loosen monetary policy by Q4 2023. The last increase of interest rates in the US was 0.5 per cent and is expected to be a 0.25 per cent forecast in February 2023). This is a very US-centric view, but it is still where we have a majority of tech companies.

We also see considerable differences in inflation rates and macroenvironment and growth globally. The inflation rate is 17.6 per cent in Poland, where there is a lot of engineering talent. In Germany, it is 8.6 per cent; in Singapore, 6.7 per cent; and in Hong Kong, 1.8 per cent. This also reflects where the funding will be.

Generally speaking, we believe that the US funding will recover in Q4 2023. However, today, the funds are in the Middle East and many parts of Southeast Asia (due to strong capital inflow from mainland China).

When the funding winter stops depends on which geography we are talking about. We recommend founders take into consideration these geographical differences. For instance, the Middle East (Dubai), SEA (Singapore) and certain extent, Japan and South Korea as exceptions.

One reason for optimism in the UAE is because of the forecast GDP growth of 5.4 per cent, which is broken down into oil GDP growth of 8 per cent and non-oil GDP growth at 4.3 per cent compared to forecast global GDP growth in 2023 of 2.7 per cent (IMF, Q4 2022).

What does this mean for VCs in general and SEA VCs in particular?

Dusan Stojanovic: If VCs want to fundraise in general, the likelihood of getting LP traction is higher in SEA (Singapore), the Middle East (Dubai) and, to a certain extent, in the US. On the other hand, VCs should completely avoid European LPs from a fundraising point of view.

VCs should also let all their portfolio companies know they should have a runway for at least two years, which is the same answer as before when we started to see a downturn in Q2 2022. The two-year runway depends on geography, as mentioned above. The market can be more favourable in some geographies.

Also Read: True Global Ventures’s Web3-focused follow-on fund TGV4 Plus hits US$146M first close

You can get LPs to invest in you as VCs if you can prove that you can invest in cash-flow-positive companies. Many high-growth tech companies can turn around to be cash flow-positive with slightly lower growth in 12 months if they keep the same staffing/halt recruiting. Such companies can get funding from LPs in around 12 months.

How does the exit landscape look in SEA during the slowdown?

Dusan Stojanovic: We think most exit opportunities would be linked to consolidation, especially in tech, as opposed to IPOs for the first six months, as many companies may choose to delay IPO to focus on value creation while awaiting more favourable valuations.

Meanwhile, M&As will probably be the major form of exit for smaller companies as larger companies with strong balance sheets will continue to acquire for growth at decent valuations.

However, as the economic conditions improve in H2 this year, companies may take advantage of favourable market conditions and strong investor interest in new offerings to go public.

The number of IPOs in Singapore and globally will decrease significantly compared to 2022. However, the island nation’s economy has been recovering relatively well and the market is no longer in free fall.

It’s possible that the memories of past crashes during market uncertainty will continue to make companies and investors cautious in the short term. It may lead to a decrease in the number of IPOs or a decrease in the overall performance of IPOs in Singapore in 2023.

Also Read: ‘The era of easy money is over’: VCs speak of funding winter and exit landscape in Southeast Asia

That being said, a robust tech stock exchange ecosystem is still missing in the region and, surprisingly, still in Singapore.

However, with the influx of capital from Hong Kong and mainland China, it could be an opportunity for the regional stock exchanges, particularly the Singapore stock exchange, to create a strong ecosystem for tech IPO.

We still think that the largest tech companies will still choose to IPO on Nasdaq in the US, especially those with Indonesia as a major target market, which still has the potential to create new unicorns in SEA.

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A lot of innovation happens within a span of a year and, in some cases, decades of innovation. In this case, we are talking about the incredible shifts AI tools have brought upon us in the way we work, market, and interact in the last year. It’s a challenge if you don’t adapt and an opportunity if you know how to quickly learn and apply it to your business.

We wanted to make it easier for organisations to navigate the ever-changing forces of marketing and consumer behaviour to get the most out of their ROI on every dollar spent.

To do this, we tapped into our very own think tank of the best brains in the industry from Wizly’s global community of marketing and product leaders to prepare the Marketing Predictions report for this year – where uncertainty and recession hang over us. 

We want you to be prepared, understand the why behind the latest trends in the industry, and give you access to our cerebral crystal ball of leaders who have worked with the likes of Google, Twitter, Canva, Wati, EY, Dentsu and are currently helping the next generation of growth companies move in the right direction.

Here are some top finds.

The force of AI

The biggest trend has been to find alternatives to data-driven strategies with the threat of a cookie-less world. The threat isn’t going away, and marketers will not only have to educate their stakeholders even more, but they will also have to foster more creativity to connect with customers.

Artificial Intelligence (AI) is rapidly transforming the way businesses operate and how marketing activities are being carried out. In 2023, AI is expected to have a major impact on the future of work and marketing. 

AI can be used to automate mundane tasks, analyse customer data, generate content ideas, and optimise campaigns for better results. We have already read, discussed, and also tried our hands on ChatGPT – the new craze. And there is absolutely nothing wrong with letting AI allow marketers to identify new trends quickly and respond faster to changes in the market. But experts warn of flaws that could result. 

Also Read: From paper to pixels: Juwai IQI’s transition to a digital workflow

“While we’re also experimenting with it, I think using ChatGPT for content needs guardrails, or we’re just going to have thousands of content pieces online – none of which ever really solves a problem. Use it as an enabler to simplify research and find frameworks but do not make it a means of going back to the times of ‘let’s just publish more content’ – that’s not how you win,” says Vanhishikha Bhargava, a B2B SasS Marketing Specialist.

The era of product-led community marketing

Product-led communities are a business already; they’re created as organisations with a purpose and culture. These communities also happen to be one of the most effective forms of marketing and help businesses achieve their goals. Therefore, product-led community managers approach community building with strategies to build this synergy.

In 2023, businesses will have to build a product-led community that advocates for their brand and interacts with other community members.

Companies need to sustain deep, focused relationships with their target group of customers now more than ever. The future of work is collaborative and online communities are building blocks for it. 

Wizly is one such organisation that helps companies solve crucial problems by enabling them to find, connect and engage with an invite-only global community of leading independent professionals on a unified platform. Wizly truly embodies the future of work using a product-led community approach to give companies access to hire, learn and work with a global pool of high-skilled talent for business growth.

TikTok enters B2B in full force, and marketers should double down

Once you understand who your audience is, where they are, and what they think and do when they are on the platform, use Tiktok to find a connection with your audience and create value using a short-form video. B2B companies like Shopify and Grammarly have been using Tiktok to their advantage to make their brands known and define themselves.

“Throughout the pandemic, TikTok managed to attract a larger audience and is not only used for the younger generation anymore. It is an effective marketing tool to sell your products or services through short videos,” says Marina Masisca, an independent marketing consultant.

The urgency for product-led strategy

Companies need to build winning product experiences using product-led growth (PLG). If you are able to make your product do the talking and become the primary driver of its own growth, you’ve won half the battle. 

Also Read: 3 of the strangest uses of artificial intelligence that could make sense in the future

Address the product and its need by using the three key elements of a product-led strategy for a successful PLG strategy. If you are not actively considering how to minimise friction at each customer interaction, maximise product adoption by making it easier for users to adopt, and drive customer loyalty and advocacy through your product, it is time to be highly concerned about your product-led competitors.

“Asian businesses, including B2B businesses, will need to explore additional customer acquisition and customer nurture models to thrive as customer expectations of value and immediacy grow.  David Isaac, Corporate Venture Building, Casuality.

Focus on hi-touch point customer experiences

Customers will most likely be facing tight budgets, so keeping them satisfied and loyal will be critical. Carrying out your customer’s best experience while using the product plays a significant factor in your success. To do this, start with a clear mission and think seriously about the experience you want to create. 

“Instead of focusing on growth or market share, companies will need to focus on experience and loyalty. Customers will be more aware of their spending and have high expectations from companies.” Alicia Crowther, Three Digital Consulting.

Consumer-centric content marketing

Brands must provide high-value information, answer consumer questions, and guide them toward making the best purchase decision. It helps brands move beyond transactional messaging and tell a story.

On the other hand, finding the right ebook, social sharing platform, success stories, or influencers helps brands engage and bond with their target consumers by relating to their real lives- that approach will be more successful if branded content is more organic and authentic.

The full report, Marketing Predictions 2023, dives into how organisations can effectively market in the coming decade of product-led communities using AI, strong brand narratives, and consumer-centric messaging to yield the best ROI for every marketing dollar spent. You can download it here. 

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Malaysian fintech startup HelloGold shutters its consumer business
The app made use of blockchain innovation to enable customers to save money using gold for as low as RM 1; Users are given until 2nd February 2023 to withdraw their funds.

Sea Group mulls selling game maker Phoenix Labs
The plan is part of Sea’s efforts to cut costs and focus on its core business; The sale process has not yet started. Sea is reportedly in discussions with an adviser regarding the plan.

ComfortDelGro pumps US$4.3M into mobility-focused impact fund
The transport firm said it will look at the startups targeted by Shift4Good and make investments either on its own or through the fund.

Indonesian POS startup iSeller bags US$12M Series B
The investors are Intudo Ventures, KVision, Mandiri Capital Indonesia, and Openspace Ventures; With the deal, iSeller also completed its acquisition of local payment gateway Yukk.

Locad rakes in US$11M to build supply chain network across APAC
The investors include Reefknot Investments, Access Ventures, JG Summit, Sequoia Surge, and Febe Ventures; Locad organises end-to-end e-commerce fulfilment through its network of warehouses and shipping carriers across SEA.

Farquhar VC to help Korean university-affiliated startups to go global
Hanyang University and Farquhar VC will also explore joint funding initiatives to invest and scale HYUH startups globally; To date, Hanyang University Holdings has invested in more than 50 startups.

Sinar Mas unit leads pre-series A of Indonesia’s DCT Agency
DCT Agency connects companies and brands to influencers for marketing campaigns and live commerce sessions on TikTok; The startup currently has more than 500 online personalities on its network.

YC-backed Filipino fintech startup PayMongo names Jojo Malolos new CEO
Malolos is co-founder of GoTyme Bank, one of the digital banks licensed by the country’s central bank; PayMongo has been under public scrutiny for the past several months after a news report emerged of many scandals.

WhyQ adds US$1.1M to Series A1 to enable hawkers to go, sell online
The lead investor is Kairos FoodTech Fund of Kairos Capital; WhyQ plans to use the money to expand its digitalisation platform and support the growth of small businesses in Singapore and Malaysia.

Imajin announces seed funding from East Ventures, 500, Init 6
The firm will use the money for hiring, expanding, and developing products; Imajin connects local manufacturers with potential customers; it has so far partnered with over 500 SME manufacturers.

‘The era of easy money is over’: Southeast Asian VCs speak
While the funding winter will continue into H1 2024, SEA remains a bright spot due to its favourable demographics and supply chains shifting to the region.

Being a first-class listener will serve you best: PR expert Jon Howard
The Strategy Director at Bud Communications says to be curious about the other person’s perspective and no to worry about whether or not you’re the smartest person in the room.

How Perfect Day aims to win over Singapore’s alternative dairy market
Founded in 2014, Perfect Day works on the intersection of biological engineering, food innovation, and consumer products.

Malaysia can be a global SaaS leader, says Indelible Ventures
‘Because of the low cost base, we can actually leverage the growth that we get here and then turn into creating globally competitive products that can then penetrate other markets across the globe’, says Managing Partner Kevin Brockland.

Mark Cuban-backed blockchain firm Injective launches US$150M Web3 initiative
Injective aims to support developments in the interoperability, DeFi, and PoS infra sectors, among others; Investors in the initiative will provide token and equity investments as well as mentorship.

Demand for Web3 talent remains amid downturn, BNB Chain says
Amid mass tech layoffs, the firm currently lists 173 roles on its own platform; BNB Chain also pointed to the nearly 30,000 opportunities in the global Web3 space listed online.

How Rebase is leveraging Web3 to enhance real-world interactions
NFTs are often associated with digital art and profile pictures; however, their use cases are more than that; They have the potential to be a valuable addition to people’s day-to-day activities and hobbies.

8 billion people milestone: Reaching new heights for humanity
The world’s population is currently increasing at 0.83 per cent per year while some countries have a dramatically higher population growth rate than others.

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If we don’t drastically reduce our emissions – and tackle the climate crisis now – we’ll run out of time. To have productive conversations, to take impactful action, to rewind the effects of climate change, all of it.

It’s a statement most of us already know is true, but few want to hear. Let alone say.

Climate change is the most prevalent issue we face, and it could be the most significant hurdle in human history. Extreme droughts, flooding, ocean acidification, and biodiversity loss aren’t scenes written for a movie set in a post-apocalyptic society. They’re disasters we’re already facing and at an alarming rate.

Keeping global temperatures within 1.5 or two degrees Celsius of pre-industrial levels means redirecting our attention towards the hard-to-abate industries – the ones that need the most drastic, revolutionary change.

Shipping is one of the largest emitters of greenhouse gasses, far surpassing aviation, agriculture, you name it. But as an industry, it presents historical challenges. Yes, its negative impact on the planet is practically unsurpassable, but it’s simultaneously responsible for the highest levels of global trade.

Currently, around 11 billion tons of goods are transported via ship each year. Reducing shipping trade may reduce GHG emissions, but there’s no saying its replacement (say, aviation taking up the global trade mantel) will serve our planet any better. Reduce trade, and you reduce supply, not to mention the world economy.

Also Read: How to navigate the investment opportunity in climate tech sector

Suddenly, we’re presented with new but equally as challenging considerations. The pieces of the puzzle may fit, but it doesn’t make for an attractive picture.

The only real answer? Change the picture

If we’re going to reach net zero by our targeted 2050, the shipping industry has no choice but to electrify its operations. More specifically, adopt advanced battery technology.

Electric vehicles and modes of transport have been a hot topic for a while now. In October 2022, US President Joe Biden pledged to award US$2.8 billion in grants for projects that expand the manufacturing of electric vehicle batteries. But the emerging benefits of battery-powered vessels are taking the shipping industry by storm, and the market value is set to grow exponentially.

The United Nations (UN) has listed a number of alternative energy sources as potential solutions – wind, solar, green hydrogen, geothermal, hydropower, ocean energy, and bioenergy. There’s the pros and cons, the fors and againsts for every energy type (you only need to look at Lloyd’s List or The Economist to read more Op.Eds. on that), but each of these solutions has one common denominator: it needs energy storage systems to power.

From delivering voltage and frequency balancing to providing black start continuity to taking on the role of first response dynamic power — these factors are all crucial to electrifying ocean vessels. Not only do batteries propel ships, but they’re also integral to propelling the marine industry into a net zero future. Now, the demand for batteries is rapidly increasing as the benefits — environmental, cost, energy saving, etc. — become much more slap-in-the-face-obvious.

So what’s standing in the way?

In one short word: infrastructure.

We began to see battery-powered vessels emerge 12 years ago, but at the time, their application would peak with short-haul and small-to-medium-sized ferries. A decade ago, shipowners were hesitant to implement energy storage systems due to factors such as space, weight, costs, and infrastructure constraints.

You could argue it’s reductive, but the infrastructure is the big player and the final word in battery-powered vessels going the distance – figuratively and literally. But there are alternatives. Shift’s PWRSwäp is derived from the need to combat firstly the short-term cost of establishing the infrastructure we need and secondly the long-term uncertainty that’s often the prohibitor to technology advances.

PWRSwäp removes the roadblocks that come with purchasing a battery and investing in the infrastructure requirements. It’s the first of its kind, a pay-as-you-go energy-subscription service which allows ships to use and pay for only the energy they need, and vessels can ‘trade’ energy, swapping used battery cells for charged cells. This technology allows vessels to transition seamlessly to hybrid or full electric. Importantly, it also ensures that the size and weight of the battery are a fraction of what a traditional energy storage system would be.

Win-win-win – and so on

As these conversations and talking points may be (and the reality of the tech matches), it’s equally as important to address the concerns face-on. Not just the obvious commercial consideration, something we’re largely steered by at Shift, but things like safety standards.

Also Read: Preference for green jobs is the “most exciting” climate tech development: Lightspeed

Battery fires are a prominent hazard in the shipping industry. The concern isn’t exactly helped by historic news of batteries going awry and their suppliers making the same mistakes over and over. But lithium is extremely flammable, and fires can occur onboard vessels with marine batteries igniting from damage, overcharging, or overheating.

To make it worse, battery fires can be difficult to extinguish and can reignite days or even weeks later if not handled correctly or without the proper technology in place. Regulations for the safe storage and use of lithium-ion batteries and fire testing varies between countries and projects, meaning there’s very little drive to create uniformity and reliability in how we classify ‘safe’ ESS.

Safety and reliability were woven into the fabric of Shift from the outset. Observing the same mistakes made by other manufacturers over the years only motivated our own extremely stringent safety standards to increase. And with that, we created fire-resistant marine batteries. Our CellCool© system encases each cell in its own cooling liquid, which reverses a thermal runaway incident within a cell or block of cells. This allows the batteries to operate at their optimum temperature without the risk of overheating or catching fire.

Prioritising safety – and striving towards the industry’s most stringent regulations time and time again – underpins decarbonisation. It emphasises the well-being of crews, passengers, communities and the public and reinforces the longevity and untapped potential of battery technology in the climate crisis.

Our road to decarbonisation needs to be easy and accessible for business if we are going to succeed. This technology is not an idea for ‘five to ten years in the future’; it’s a tangible reality that is available today.

PWRSwäp’s capabilities are unique, sure, but its trajectory is equally unparalleled. The rapid uptake of battery technology that we see in the industry and interest from the market is something we’re ready to support. At Shift, we’re building charging stations along shipping routes to make the transition to hybrid or fully electric much more straightforward. Unlike refuelling with diesel or using other fuel-driven propulsion systems, the process of deploying, recharging and adopting PWRSwäp is rapid and simple.

At the end of the day, reaching our climate change goals will not be the result of one initiative, one policy, one company or one solution. At Shift, we’re constantly elevating our technology, focusing on partnerships with industry innovators and forward-thinking organisations. Proactively moving the needle on climate change.

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