Market cycles are a certainty and can alternate between favourable and challenging times. During a bear market, businesses may encounter difficulties in sustaining their revenue streams, and some may have to shut down altogether.

However, targeting a super niche can offer a sustainable business model that can help businesses not only survive but also thrive during a downturn.

Super niche is the new niche

First, let’s define what a super niche is. A super-niche is a small, specialised market segment that has specific needs and preferences that are not being met by larger players in the market. It is a subset of a larger market that is underserved and overlooked. The key to success is to understand your customers deeply, to provide tailored solutions to their unique problems, and to build a loyal following around your brand.

Super niche marketing is not a new concept, but it is becoming more important than ever in today’s business landscape. In a world where technology has made it easy for anyone to start a business, competition is fierce, and traditional marketing strategies are becoming less effective. To stand out in a crowded market, you need to differentiate yourself by focusing on a niche that you can dominate. 

Also Read: How does marketing agility fuel disruptive innovation?

Take an example like Peloton, the exercise equipment and media company that has grown to over six million users. They started by targeting a super niche of customers who are willing to pay a premium for a high-quality home workout experience. During a bear market, this strategy becomes even more critical. Consumers become more selective with their spending, and businesses need to be more targeted with their marketing efforts.

Launch strategically

By targeting a super niche, you can maximise your marketing budget and generate a higher return on investment. You can also create a community of loyal customers who will stick with you through tough times.

Bluutopia is a new social platform that has caught the attention of a niche segment of users who come from cross-cultural backgrounds and are interested in Web3. By focusing on empowering others to voice our social issues, Bluutopia has differentiated itself from larger social platforms and created a community of users who share their interests and values. Their latest roadmap (Bluumap) features five functions across the community, art, live activities, and digital events – bringing together a tight group of early adopters.

Another example is Elemental Raiders by Games for a living, a new entrant in the gaming space that’s been able to differentiate itself from its competitors by targeting a super niche market of blockchain gaming enthusiasts. While traditional gaming companies focus on eSports and Web2 communities, Elemental Raiders has identified a subset of the gaming market that is underserved and overlooked.

Also Read: The future of Web3 communities: What’s next after the NFT community craze?

By creating a game that leverages blockchain technology, Elemental Raiders has tapped into a growing trend of decentralised gaming platforms that prioritise user ownership and control. This strategy has resonated with a community of gamers who value privacy, security, and transparency in their gaming experiences.

The key takeaway from these Web3 examples is that by focusing on a super niche, you can create a sustainable business model that can weather any storm. During a bear market, your customers may have less money to spend, but they will still have specific needs that are not being met. By understanding those needs and providing tailored solutions, you can create a loyal customer base that will stick with you through thick and thin.

Final thoughts

By focusing on a small, specialised market segment, you can differentiate yourself from your competitors and create a loyal following around your brand.

During a bear market, this strategy becomes even more important, as you need to be more targeted with your marketing efforts to generate a higher return on investment.

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The crypto market cap jumped by at least US$250 billion in January, with Bitcoin prices increasing approximately 40 per cent since its low in November. It’s no wonder many investors are more optimistic and bullish in crypto in the new year, especially after the touted long winter and the fiascos that happened in 2022.

However, cryptocurrency, as a relatively new asset class despite it being around and trading for more than a decade, has no unifying regulatory framework internationally. This only means that investors could potentially be exposed to unchecked risks and many other unidentified challenges with such regulation uncertainties.

Hence, crypto regulations are needed now more than ever and even more so after FTX’s collapse last year.

Crypto regulation: An ongoing challenge

One prominent example of the ongoing challenges of regulating crypto is the SEC’s lawsuit against Ripple Labs, which has dragged on for years. The US Security and Exchange Commission (SEC) alleges that Ripple’s XRP token is unregistered security and that the company has been illegally selling it to investors. The lawsuit has been ongoing since December 2020. and has created uncertainty for many XRP investors’ price volatility.

This case shows the need for clear guidelines on what constitutes security in the context of cryptocurrencies and even for crypto-stablecoins. More recently, on February 13th, the SEC made headlines for going after unregistered securities. The SEC issued a Wells Notice to Paxos Trust Company, the issuer of the stablecoin Binance USD (BUSD), labelling the stablecoin as an unregistered security. On the same day, the New York Department of Financial Services ordered Paxos to stop issuing BUSD.

Also Read: Why is the cryptocurrency market growth in Eastern Asia slowing down

Some dismissed the issue as “FUD”, a crypto abbreviation for fear, uncertainty and doubt, while others claimed it was an attack on the Binance exchange. These theories on the allegations that BUSD is unregistered security were examined, alongside some additional ones.

CZ, CEO of Binance, wrote a thread on his Twitter summarising the issue and assured investors that the funds are “SAFU” (safe in layman’s terms). He further commented that Binance does not issue BUSD and is not in any way an owner of the stablecoin and will allow users to trade with USDT on their platform instead. Furthermore, Binance will also be reviewing other projects to ensure their users are insulated from any undue harm given the ongoing regulatory uncertainty.

The potential challenges with cryptocurrency regulations are reminiscent of the early days of the internet when governments struggled to keep up with the rapid pace of technological change. In the 1990s, many governments attempted to regulate the internet, but ultimately, the decentralised nature of the technology made it difficult to control.

This lack of regulation created a fertile ground for criminal activities like identity theft and online fraud. These regulations were often slow to develop and enforce, leading to a patchwork of rules and regulations that varied widely across different jurisdictions.

Likewise, the decentralised nature of cryptocurrencies makes it challenging for governments to regulate them effectively. Cryptocurrencies operate independently of national borders and are not subject to the same regulations as traditional financial assets.

This lack of oversight creates opportunities for money laundering, tax evasion, and other illegal activities and potentially affects the ecosystem and highly regulated nations. In an interview with CoinDesk, European Commissioner Mairead McGuiness commented that crypto regulations are pointless without global coordination.

Different approaches adopted by countries

With the many new developments in crypto regulations from various nations, governments around the world are still figuring out the best practices to regulate and streamline them. Some countries have embraced cryptocurrencies and have created clear regulatory frameworks, while others, such as China and Bangladesh, have banned them outright.

A law was passed in Russia in 2022 which effectively prohibits the use of cryptocurrencies and NFTs as payment for goods and services within the country. However, it is still possible to trade and pledge these assets.

Since the implosion of Terra, lawmakers in South Korea have started working on Digital Assets Basic Act (DABA), a comprehensive legal framework that will provide guidelines for the country’s crypto industry.

In the United States, the regulatory environment is still evolving, as seen in the two prime cases above, calling for the need for clear regulation guidelines, with different states adopting varying approaches to regulating cryptocurrencies.

Also Read: IMF calls for cryptocurrency regulation to ensure financial stability

Dubai established Virtual Assets Regulatory Authority (VARA), the world’s first specialised regulator for the Virtual Assets sector, in March 2022. Just last month, VARA published the Full Market Product Regulations (FMP Regulations) consisting of virtual asset licensing regulations.

The regulatory authority plays a central role in the creation of Dubai’s advanced legal framework to protect investors and establish international standards for the Virtual Asset industry governance.

Singapore has been proactive in its approach to regulating cryptocurrencies. In 2019, the Monetary Authority of Singapore (MAS) introduced a regulatory framework for cryptocurrency trading platforms. Under this framework, cryptocurrency exchanges must comply with anti-money laundering and counter-terrorism financing measures. Additionally, exchanges must be licensed by the MAS and meet stringent cybersecurity standards.

Controversies surrounding cryptocurrencies have later on prompted the MAS to re-examine its regulations. In December 2020, MAS announced that it would be imposing new requirements on cryptocurrency exchanges to combat money laundering and terrorism financing.

These requirements include enhanced customer due diligence measures and transaction monitoring, notably, users had to submit non-custodial wallets to the exchanges as exchanges increased their efforts to link users to their respective crypto wallet addresses.

In January 2022, the MAS introduced measures to restrict the marketing and advertising of cryptocurrency services in public areas and disallow cryptocurrency trading from being portrayed in a manner that trivialises its risks. Moreover, the lack of clear regulations in other countries makes it difficult to monitor cross-border transactions, and Singapore is vulnerable to the same risks as other financial centres.

Regulatory uncertainties: What’s next?

Undoubtedly, when more countries start to accept and embrace cryptocurrencies, crypto regulations will have to be streamlined worldwide. After the 2022 crypto downturn, we can expect regulators to step up their game in a greater way, particularly to protect retail investors.

How do professional investors then procure investments into cryptocurrency, such as Bitcoin, while not having to worry about regulatory risk?

The emergence of properly licensed entities is becoming increasingly critical in the ecosystem. Regulations are essential in an environment where assets like cryptocurrencies are not physical, unlike fiat, gold, and realty property. As such, being licensed in a major financial jurisdiction means high standards and checks are met, signalling the trust and credibility of the institution.

One possible solution is to invest through licensed fund managers like Fintonia Group, who are subjected to strict regulations and oversight. This ensures that all cryptocurrency transactions are conducted in compliance with relevant laws and regulations, giving professional investors peace of mind knowing that their investments are safe and secure.

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Photo: Taken during a panel event in Jakarta, where the author discussed the current fundraising winter with industry peers.

In the ever-evolving world of technology, artificial intelligence (AI) has emerged as a beacon of innovation, attracting significant capital and propelling startups to unprecedented heights. However, this blossoming AI spring season starkly contrasts with the chilly atmosphere pervading the rest of the tech landscape.

Amidst slashed valuations and the recent bankruptcy of banking giants like SVB and Credit Suisse, it is evident that we are in the midst of a capital winter that shows no signs of abating anytime soon. The situation is particularly challenging for startups in Southeast Asia, where many are grappling with unfavourable market conditions for the first time.

In this article, we will delve into practical strategies and tips for founders to navigate this capital winter, ensuring their ventures not only survive but also thrive in these trying times.

What does a capital winter mean for VC investment?

It’s an era of less FOMO but more SLOJI

The effects of the capital winter have reached all corners of the investment world, from the icy cold public equity market to growth equity and finally early-stage investment. With the exit forecast clouded by higher risk and uncertainties, VC investors are inevitably adjusting their investment approach.

Most VC investors in this region have become more patient and disciplined (with valuation). It is no longer a market driven by FOMO but rather a time to be SLOJI, “slow to join in.”

Also Read: Can Chinese VCs be a potential wild card for SEA during funding winter?

Traditionally, VC investors were driven by a fear of being late to the game and sought to invest early and cheaply. Now VC investors are more comfortable waiting slightly longer and even committing to higher valuations when founders demonstrate a stronger set of metrics or evidence of product-market fit (PMF). This also means a greater emphasis on due diligence and the importance for a startup to show solid fundamentals for long-term success.

Path to profitability is almost a must, on top of all other necessary metrics

Investors are currently placing a greater emphasis on profitability because they need to be more patient and disciplined, as well as consider the challenging macro environment. This does not necessarily mean that profitability is the sole metric used to evaluate a startup, but rather that a founder’s understanding and commitment to profitability is an important factor in investors’ assessments.

Here is some general advice for startups at different stages of development: If your startup is in the Series B or later stage, it should already have improving or excellent profitability metrics. At the Series A stage, it is important to demonstrate thoughts and plans for future profitability. For seed-stage startups, the focus should still be on product-market-fit (PMF), and if anything else, don’t pursue a cash-burning business model.

Balanced growth is even more important

The path to profitability is more like a check box. What investors are really eager to see is balanced growth. Growth is how a startup could eventually prove its PMF and disrupt the status quo. Balanced growth means growth plus a path to profitability, growth with at least steadily improving margins.

What does a capital winter mean to a founder and their startup?

Money is more expensive tomorrow

The capital winter started because we are now in a rising interest rate environment, where money is more expensive tomorrow. It also means every dollar you save/earn today is more valuable. That is why no investor will support cash-burning business models right now.

Cut, burn and survive

As the capital winter could be prolonged, it is time for a founder needs to know how to survive and sustain longer and wisely. Since money tomorrow is more expensive, cutting burn can already help you save more valuable money today.

Focus on your best PMF

There could be many directions/options for you and your startup. It is time to focus on your best PMF, where there is demand, paid users, or recurring cash flow. It is time to focus the resources on your best shot.

It is time to think like a camel rather than a unicorn

I really like this concept borrowed from this article in the Harvard Business Review, which was written in 2020 but seems only more relevant now.

Under a tough capital market like right now, many startups may die. The implication is that your competitors may die too. That’s why it is time for intelligent founders to prioritise survival over the blind pursuit of market share. Surviving and sustaining your startup with healthy growth and margin is already a victory.

Also Read: How to support startups to survive the ‘tech-winter’

VCs, among all types of investors, are the ones that stand the closest to founders. We are essentially on the same side because the success of VCs is entirely dependent on a startup’s success. Since we’re on the same side, when VC investors are now acting more patient and disciplined, founders should do the same together. It’s time to be a camel together.

What does a capital winter mean to a founder when it comes to fundraising?

For founders’ preparation, I’d say fundraising 101 is the eternal guideline and even works more effectively at a time like this: Know your investors, engage with them early, be transparent, know your stage, and so on. These are all critical factors.

I’ll pick two that were highlighted during the panel:

Engage with investors early, and build long-term trust

Investors will take longer to assess a startup. I’d encourage startup founders to engage with prospective investors early because trust takes time to build. Most investors appreciate receiving regular or occasional updates from founders, demonstrating their commitment and discipline.

Many alumni from our AppWorks Accelerator regularly send us updates from time to time. Those who continue to show progress and dedication usually have pretty successful fundraising results – because most investors on the list get to observe them long enough before they actually need funding.

PMF, PMF, PMF

Founders often ask what investors look for when evaluating potential investments. While founders are the experts on their own businesses, it is important to highlight key metrics that demonstrate strong PMF. In today’s business environment, PMF also requires a clear path to profitability.

This does not necessarily mean that early-stage startups need to immediately prove profitability, but rather that they should be able to demonstrate a vision for how their business can eventually monetise and become profitable. By focusing on these key metrics and showing a roadmap for profitability, founders can better position their businesses for success in the fundraising process.

How long will this capital winter last?

Founders should be aware that the current emphasis on profitability is not just a temporary trend but a fundamental shift in the way businesses operate. This shift is not limited to a few companies – tech giants such as Grab and GoTo have already adjusted their profitability targets to accelerated timelines to reflect this change.

Also Read: Startups that can reflect and pivot in time will thrive during funding winter: Ivan Ong of AFG Partners

While Vietnam may have experienced record-high GDP growth in the third quarter of 2022, the fourth quarter saw a decline in global demand that is expected to persist in the coming months. As a supply market, Southeast Asia may feel the effects of the global recession later on, which means that the “capital winter” may also last longer.

To prepare for these challenges, founders should prioritise profitability and survival for the next two-three years (at least) and adopt a long-term, sustainable mindset for their businesses.

Remember, it’s time to think like a camel. Other unicorn-wannabes will die in the desert.

For founders, why should now be a promising time rather than a discouraging time?

Many founders may feel discouraged thinking about a capital winter and global recession. I’d instead encourage founders that it is the best time. It is the best time for founders to care about users, solve real pain points, and set a healthy goal for the company to survive. It is the best time for investors to stop chasing FOMO and pay attention to fundamentals and holistic vision.

The truth is that VC investors can’t sit on a pile of cash even if they become more disciplined with investment; they are expected by their investors to deploy according to market opportunities even in the winter. We still are on the lookout for amazing founders to allow us to join them on their journey to disrupt this world and create abundance and a better future.

So I think this article should end on a positive note for you. Again, VC investors and founders are meant to always stand on the same side. The goal of AppWorks as a VC is to fund the most-talented founders and help you make the biggest impact on this world – that’s something that will never change. We are always here for you.

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Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic

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Mobee Co-Founders Jeff Pradana and Andrew Tjahyadikarta (R)

Mobee has launched its newly registered digital asset exchange in Indonesia after obtaining a license from the market regulator BAPPEBTI.

The startup has also raised an undisclosed sum in a funding round led by 1982 Ventures, with participation from strategic family offices and individuals.

The funds will be used to expand operations, launch new products, and hire more financial services and digital asset industry veterans.

Also Read: The regulatory war on cryptocurrency

Mobee was founded in 2022 by Andrew Tjahyadikarta and Jeff Pradana, an experienced banking and trading executive. Tjahyadikarta is the co-founder and former CEO of Kaja Group, an ultra-luxury hospitality and lifestyle entertainment group in Southeast Asia.

The digital assets exchange focuses on qualified investors, family offices, and institutional-grade clients. It offers a range of financial products for investors seeking passive income and more sophisticated wealth management products designed for active investors.

“Mobee will allow Indonesian investors to effortlessly access a wide range of institutional-grade investment products in digital assets and securities,” said Tjahyadikarta. “Our focus is to bring key players and businesses in Indonesia on-chain and provide them the level of service, trust, and security they are accustomed to as they begin to allocate more capital to digital assets.”

Also Read: IMF calls for cryptocurrency regulation to ensure financial stability

The Indonesian cryptocurrency market surged 50 per cent in 2022, reaching nearly 17 million registered users. There is significant room for growth as more qualified and institutional-grade investors enter the market. Mobee projects Indonesian crypto annual trading volume to reach over US$100 billion by the end of 2024.

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Echelon Asia Summit 2023 brings together APAC’s leading startups, corporates, policymakers, industry leaders, and investors to Singapore this June 14-15. Learn more and get tickets here. Echelon also features the TOP100 stage, where startups can pitch to 5000+ delegates, among other benefits like connecting with investors, visibility through the e27platform, and other prizes. Join TOP100 here.

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(L-R) AC Ventures’s Jeremy Sianto and Helen Wong, KoinWorks’s Jonathan Bryan, ALAMI’s Dima Djani, and BCG’s Sumit Kumar at a roundtable event in Jakarta

Over the last decade, Indonesia has witnessed a 6x increase in fintech players, rising from 51 in 2011 to 334 in 2022, says a new report jointly released by AC Ventures and Boston Consulting Group (BCG).

Initially, the growth was mainly driven by the payments segment. However, the fintech landscape in Indonesia is now diverse and dynamic, with lending, payments, and wealthtech becoming clear industries of the future.

The AC Ventures-BCG report Indonesia’s Fintech Industry is Ready to Rise charts the progress of fintech in the country across multiple sub-verticals, starting from the inception of fintech startups and the local digital economy in 2011 up until 2022.

Also Read: ‘Resistance to digital wealth management has almost disappeared in SEA’: Bambu CEO Ned Phillips

According to the report, fintech offerings are also experiencing a surge in customer engagement in Indonesia. The payments segment, which boasted over 60 million active users in 2020, is expected to have a compound annual growth rate (CAGR) of over 20 per cent until 2025.

More than 30 million active peer-to-peer borrower accounts were in the lending space in 2021. Meanwhile, the wealth segment had over nine million retail investors as of 2022, the VC Ventures-BCG reports notes.

The adoption of SaaS platforms is also growing, with six million SMEs currently using them, representing a 26x expansion over the preceding three years.

Investment trends also echo the diversification of Indonesia’s fintech market, with lending and payments no longer being the primary areas of interest. While lending and payments remain important, there is increasing investment into wealthtech, insurtech, and fintech SaaS.

The fintech market is expanding rapidly, with emerging players alongside established ones. Equity is targeted based on an operator’s or vertical’s maturity.

Early-stage funding deals receive over 80 per cent of the total invested capital. Funding from 2020 to 2022 reached US$5.4 billion, 2.7x more than in 2017-2019, adds the AC Ventures-BCG report. Growth and monetisation are the main focus in series D+ funding rounds.

In light of the current economic climate, investors are now looking for clear paths to profitability before a Series D. More than 80 per cent of fintech deals from 2020 to 2022 were for pre-Series C funding rounds, indicating strong support for early innovation. These trends will likely continue driving innovation and disrupting the existing financial services landscape.

Also Read: ‘Indonesia will soon see a proper credit boom for businesses, consumers’: AC Ventures

Additionally, new players in segments such as SaaS and insurance activities are emerging, indicating that fintech in Indonesia is maturing and moving toward more sophisticated products and services.

AC Ventures Founder and Managing Partner Adrian Li said: “The exponential rise in fintech players, burgeoning customer engagement, and escalating equity funding all indicate the sector’s vast potential. Our investment strategy aligns with this space’s most impactful and innovative enterprises.”

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Echelon Asia Summit 2023 brings together APAC’s leading startups, corporates, policymakers, industry leaders, and investors to Singapore this June 14-15. Learn more and get tickets here. Echelon also features the TOP100 stage, where startups can pitch to 5000+ delegates, among other benefits like connecting with investors, visibility through the platform, and other prizes. Join TOP100 here.

The post Wealthtech, insurtech, SaaS fintech are the new hot verticals in Indonesia: AC Ventures report appeared first on e27.