In the dynamic landscape of startup ventures, the importance of financial models cannot be overstated. While it’s no surprise that VCs, especially early-stage ones, seek these models during fundraising discussions, what might be less apparent is that a robust financial model serves a greater purpose beyond attracting investment. It is, in essence, a dynamic roadmap that founders can use to navigate the intricate journey of building a successful business.

Why bother with financial models?

Path to a big opportunity

A well-constructed financial model provides VCs with insights into whether a startup’s plan leads to a substantial opportunity. It serves as a compass, guiding both founders and investors through the intricacies of the market and helping them evaluate the potential scale of the venture.

Right plan

Does the startup’s strategy align with the identified opportunity? A financial model allows VCs to scrutinise the chosen plan, assessing its viability and coherence with the overarching business objectives. It becomes a tool to ensure that the startup’s strategic decisions are aligned with its growth goals.

Likelihood of success

Beyond the conceptualisation of an opportunity and the formulation of a plan, VCs use financial models to gauge the probability of successful plan execution. This involves assessing the startup’s ability to meet key milestones, adhere to timelines, and navigate potential challenges. A well-constructed financial model offers a glimpse into the startup’s operational and execution capabilities.

Also Read: Navigating the regulatory landscape: Malaysia’s startup outlook in 2024

The form matters

A financial model is not just a collection of numbers; its presentation and structure matter. A clean, well-structured model reflects the organised thinking of the founders. Messy models, on the other hand, can detract from the professionalism of the startup. The form of the financial model is, in essence, a reflection of the startup and its leadership.

The substance reveals

Opportunity sizing

One of the key aspects VCs scrutinise is opportunity sizing. Are the revenue projections consistent with the startup’s vision? A robust financial model should articulate a clear and realistic path towards revenue generation, ensuring that the projected numbers align with the identified market opportunity.

Growth drivers

The financial model is a litmus test for the startup’s industry knowledge and understanding of its business. Does the model validate the chosen growth drivers? VCs assess whether the growth strategies proposed by the startup align with industry trends and market dynamics, ensuring that the founders have a solid grasp of what will drive success.

Plausible plan

Founders often walk a tightrope between ambition and realism. Does the financial model strike the right balance? It should demonstrate a plausible plan that is ambitious enough to attract investment but grounded in a realistic understanding of the challenges and opportunities in the market.

Execution details

The ‘how long’ and ‘how much’ are critical questions for any startup. VCs use financial models to understand the startup’s timeline for achieving milestones and the financial resources required to execute the plan. A well-constructed financial model provides clarity on the execution details, offering a roadmap for both founders and investors.

Building a great model

Format: No templates

While templates can be useful starting points, building a financial model from scratch allows founders to tailor it to the specific needs and nuances of their business. This customisation ensures that the model accurately reflects the intricacies of the startup’s operations and growth strategies.

Also Read: How Asia Pacific startups propel the evolution of Generative AI

Assumptions: Drivers

Clearly identifying the critical levers of the business is essential. What are the assumptions driving the financial projections? Founders should focus on the factors that truly matter and have a significant impact on the success of the venture. VCs appreciate clarity in understanding the assumptions underlying the financial model.

Logic: Growth expectations

A financial model should not just present numbers; it should tell a story of how the business grows based on its assumptions. Highlighting the relationship between growth and costs and showcasing the logic behind the numbers adds depth to the model. This transparency enables VCs to understand the rationale behind the projected financial outcomes.

Outputs: Cash is king

In the startup world, cash is king. While profitability is crucial, VCs are particularly interested in the startup’s ability to generate and manage cash. Therefore, the financial model should focus on essential cash flow metrics. Beyond EBITDA, the model should provide insights into the cash dynamics of the business. A three-year horizon is often considered ideal, offering a balance between short-term visibility and long-term strategic planning.

Key takeaway

Financial models are not mere tools for fundraising; they are powerful instruments that convey a startup’s vision, strategy, and deep understanding of its business. Whether in the context of fundraising discussions or internal strategic planning, investing the time to build a comprehensive and insightful financial model is a strategic imperative for founders.

It not only attracts potential investors but also serves as a dynamic roadmap, guiding the startup through the complexities of the market and towards sustainable growth. Ultimately, a well-constructed financial model is a testament to the startup’s commitment to excellence and its readiness to navigate the unpredictable journey of entrepreneurship.

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OpenAI has been making waves across various industries for the last many years. However, since the announcement that the platform will no longer be constrained by the limitation of functioning on the data only prior to September 2021, the platform has opened up more use cases for search, enterprise solutions, advertising and brand marketing.

OpenAI can now leverage the current information available on the internet, including complete and direct links to the source. Thus expanding and powering its search capabilities even further. This announcement has had the adtech world pondering how this will propel feature enhancement, redefine search, and subsequently reverberate in the digital ad tech world. 

With direct, vast and extensive access to search data, OpenAI is opening the doors for the use of new and innovative technological solutions for advertisers and brand marketers across the world.

The introduction of browsing capabilities in ChatGPT is a significant evolution in how users interact with search engines universally. Unlike static keyword-based searching on traditional search engines, ChatGPT offers a more interactive, conversational approach to searching, which can potentially change user behaviour over time. Marketers are buzzing about this because it opens up new frontiers for advertising, and also challenges the existing paradigms of search advertising.

Also Read: Is ChatGPT taking over financial management?

From the very beginning, agencies and brand marketers have been looking at how they can use generative AI to handle everything from ad copywriting to chatbots. AI has had a major influence on out-of-home advertising, as well, with brands like McDonald’s and Burger King famously using the program to write content for billboards in South America in 2023.

Unlocking new avenues for advertisers

ChatGPT’s new search feature will extend those capabilities even further. However, it could also create headaches — at least initially — for brands and advertisers that are unwilling to adapt.

If ChatGPT’s browsing capability becomes popular and scales quickly, search-focused performance advertisers will face a crunch. Campaigns built for traditional search engines may lose traction as users shift towards more interactive, conversational search experiences. It’s a wake-up call for advertisers to adapt or risk obsolescence.

With this update, a new layer of competition and adaptation for search-focused advertisers is being introduced to the market. ChatGPT’s natural language processing capabilities enable it to understand user queries in a more conversational context, making search engines more intuitive and user-friendly.

Malek believes it’s likely that users who find conversational searches more engaging could migrate from traditional search engines to generative AI programs like ChatGPT or Google’s Bard, which would have an impact on the traffic and impressions that search campaigns see.

Advertisers will have a key role to play in any transition that takes place. 

Adapting strategies in the conversational search landscape

It will be best for the advertisers and brands to look at OpenAI’s announcement as an opportunity to innovate and diversify their strategies, first by understanding the conversational search landscape and possibly collaborating with platforms like ChatGPT to explore advertising opportunities and also by building strategies to create more interactive, conversational ad content that resonates with this new form of search.

Also Read: How ChatGPT and automation are revolutionising so-called ‘traditional’ industries

Advertisers  should also be willing to experiment, learn and iterate quickly to stay ahead in this evolving landscape. Continuous learning and adapting to how users are interacting with conversational platforms will be key to successful advertising campaigns in this new realm.

As companies continue to explore the potential, the ethical and societal implications of generative AI programs will undoubtedly become a critical point of discussion. However, it’s already become clear that ChatGPT and generative AI are here to stay, and they’re rapidly changing the way consumers across the globe search for content and interact with brands.

Observing the trajectory, it’s plausible that ChatGPT could further refine its browsing capability to provide even more precise, personalised search experiences. We might also see the integration of advertising solutions within the conversational search framework, creating new channels for brands and advertisers.

As AI and machine learning continue to evolve, the seamlessness and intelligence of conversational interactions will likely enhance, blurring the lines between human and machine interactions. This continuous evolution will only further entrench conversational search as a significant player in the digital landscape, urging advertisers to continually adapt to remain relevant and effective.

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In recent years, the financial landscape has undergone a profound transformation with the rise of digital banks. These innovative financial institutions have reshaped the way we manage our money, offering convenience, accessibility, and efficiency like never before.

However, with this technological evolution comes the imperative need for robust cybersecurity practices. As hackers become more sophisticated, the security of our digital finances becomes paramount. This article explores the burgeoning era of digital banking and emphasises the urgency for individuals and institutions to prioritise cybersecurity to protect against evolving cyber threats.

The digital banking revolution

Digital banks, also known as neobanks, have witnessed unprecedented growth, capitalising on the digital revolution to offer banking services without the need for traditional brick-and-mortar branches. These institutions leverage cutting-edge technology to provide seamless, user-friendly, and cost-effective financial solutions. From online account opening to instantaneous transactions and real-time budget tracking, digital banks have revolutionised the way we interact with our finances.

The advantages of digital banking

• Convenience: Digital banks enable users to perform various banking activities from the comfort of their homes or on the go, eliminating the need to visit physical branches.
• Cost-effectiveness: By eliminating the overhead costs associated with traditional banking infrastructure, digital banks can offer lower fees and higher interest rates on savings accounts.
• Innovation: These banks continually innovate by incorporating emerging technologies such as artificial intelligence and machine learning, providing users with personalised financial insights and services.
• Financial inclusion: Digital banks often target underserved populations, promoting financial inclusion by providing accessible banking services to individuals who may have been excluded from traditional banking systems.

Also Read: How cybersecurity teams can involve HR to optimise incident response

The cybersecurity imperative

While the benefits of digital banking are evident, the increasing prevalence of cyber threats poses a significant challenge. As hackers become more sophisticated and adept at exploiting vulnerabilities, the need for stringent cybersecurity practices cannot be overstated.

• Data protection: With digital banking, sensitive financial and personal information is stored and transmitted electronically. Implementing robust data protection measures, including encryption and secure authentication methods, is crucial to safeguard against data breaches.
• Multi-Factor Authentication (MFA): Digital banks should enforce MFA to add an extra layer of security. By requiring users to provide multiple forms of identification, the likelihood of unauthorised access is significantly reduced.
• Regular security audits: Conducting frequent security audits and vulnerability assessments is essential to identify and address potential weaknesses in the system. This proactive approach helps fortify the digital banking infrastructure against cyber threats.
• Customer education: Educating users about cybersecurity best practices is equally important. Digital bank customers should be aware of phishing attempts, the importance of strong passwords, and the potential risks associated with sharing sensitive information online.

Conclusion

The digital banking revolution presents an exciting opportunity for individuals and businesses to enhance financial efficiency and accessibility. However, this transformation also brings with it a heightened risk of cyber threats.

As we embrace the benefits of digital banking, it is crucial to prioritise cybersecurity practices to protect our financial well-being. By staying vigilant, implementing advanced security measures, and fostering a culture of cyber awareness, we can navigate the digital landscape securely and ensure a prosperous future for the world of digital finance.

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Dear reader,

BlackRock, a major asset manager, has further devalued its stake in Indian edtech startup Byju’s, reducing its implied valuation from US$22 billion in early 2022 to US$1 billion. This drastic adjustment follows BlackRock’s previous markdowns and reflects a broader trend of investors reevaluating Byju’s, once considered India’s most valuable startup at US$22 billion. Other investors, like Prosus, have also revised Byju’s valuation downward, with Prosus estimating it at “sub US$3 billion.”

The revaluation marks a significant reversal for Byju’s, previously hailed as the poster child of India’s startup ecosystem. The startup, known for its innovative teaching methods, had ambitious plans, including a potential IPO in early 2022 valued at up to US$40 billion. However, geopolitical events, such as Russia’s invasion of Ukraine, disrupted market conditions, prompting Byju’s to delay its IPO.

Currently, Byju’s faces a challenging landscape, struggling with capital raising, payroll, and a billion-plus debt burden. It fell short of its revenue target for the fiscal year ending March 2022, and key departures, including the CFO and board members, have added to the company’s woes. The situation underscores the volatility and uncertainties faced by once-prominent startups amid evolving market dynamics and geopolitical events.

Sainul,
Editor.
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BlackRock cuts Byju’s valuation by 95% to US$1B
BlackRock, which owns less than 1% of Byju’s, slashed the implied valuation of the Indian edutech startup to US$1B from US$22B in early 2022; Byju’s, which spent over US$2.5B in 2021 and 2022 acquiring over half a dozen firms globally, was once valued US$50B.

Fintech funding in Southeast Asia hits a five-year low in 2023
Fintech companies in the region raised just US$2B in 2023, a plunge of 65% from US$5.9B in 2022; The space saw the highest funding (US$8.6B) in 2021; The number of deals fell 50% in 2023 to just 142, according to a report by Tracxn.

Ex-Twitter CEO Parag Agrawal building AI startup to compete with ChatGPT
As per the Information, Agrawal has raised US$30M from one of the early investors of OpenAI; Agrawal’s new venture targets the development of specialized software for Large Language Model creators.

Lazada lays off 20% of its headcount in latest overhaul
Lazada is still in a loss-making status, order growth has slowed over the past year, and the company also faces tightened competition from regional rival Shopee; The latest overhaul is set to shift focus towards centralised decision-making at the headquarters.

Grab’s Vietnam rival Be Group secures US$30.3M to boost expansion
The investor is VPBank Securities; Be Group claims to hold a 35% share of the country’s ride-hailing market; The company has said it plans to achieve profitability with positive EBITDA in FY2024.

SCI Ecommerce doubles revenue to US$479M, turns profitable in 2022
The company also recorded US$3.5M in net profits after incurring US$2.5M in losses the previous year; Services and subscriptions drove a larger share of revenue (US$273.5M).

Report: BNPL remains popular amongst Indonesian fintech services users
25% of users use BNPL service in addition to e-wallet (75%) and mobile banking (45%); The rising popularity of BNPL is attributed to users’ ability to afford daily necessities and lifestyle needs, according to research firm Jakpat.

FlyORO secures US$1.6M in pre-Series A round to reduce flight emissions
Investors are Audacy Ventures, Investible and private investors; FlyORO, which provides last-mile sustainable aviation fuels blending technologies, plans to expand into Australia and the US.

Thai biotech firm UniFAHS raises US$1.4M for SEA expansion
Investors are A2D Ventures, ADB Ventures, and InnoSpace; UniFAHS utilises phage technology for sustainable and safe food production, specialising in meat alternatives; It contributes to combating antimicrobial resistance.

OKX Ventures backs Web3 interoperability infra firm Polyhedra
Polyhedra Network’s zkBridge protocol facilitates trustless cross-chain infrastructure for Layer 1 and Layer 2 interoperability; By utilising ZK proof technology, zkBridge enables the receiving chain to verify specific state transitions on the sending chain.

Infobank, Farquhar to help Korean startups seeking global expansion
iAccel, the investment department of Infobank, and Farquhar will collaborate on exchanging innovation and insights, mutually supporting each other’s portfolio companies and jointly participating in bids for global acceleration initiatives.

Discord lays off 170 people, blames growing too quickly
Discord saw massive growth during pandemic lockdowns, but still isn’t profitable, the Verge reports. Last August, Discord laid off 4% of its staff — nearly 40 employees — as part of a company-wide restructuring.

Asia Partners bullish on SEA’s tech potential despite global IPO challenges
Asia Partners, optimistic about Southeast Asia’s tech boom, discusses its investment strategy, emphasising untapped sectors.

Semaai looks to elevate agritech solutions, financial inclusion in Indonesia
CEO Muhammad Yoga Anindito shares insights into Semaai’s post-US$4.7M investment plans, focusing on enhancing user experiences and expanding services across Indonesian villages.

Long-term impacts of the Silicon Valley Bank collapse loom: experts
SEA’s investors and startups share insights on the SVB fallout and its potential effects on funding, valuations, and banking relationships.

Kampd intends to reshape professional networking with a unique approach
Kampd’s mission is to provide purposeful content, solve the challenge of fragmented business content, and differentiate from platforms like LinkedIn.

Navigating the gender divide in the Southeast Asia’s fintech landscape
Women hold just 13 per cent of management, board, and investor roles across early stage to public companies within the fintech ecosystem.

That time Sam Altman went to take a smoke break around the office building
Sam Altman’s reputation as a charismatic leader seemed to play a great role in how the situation progressed at Open AI last week.

The power of financial models for startups: A guide for founders and VCs
Financial models are powerful instruments that convey a startup’s vision, strategy, and deep understanding of its business.

Evolution of advertising industry with the rise of OpenAI’s ChatGPT
OpenAI can now leverage the current information available on the internet, including complete and direct links to the source.

2024 Hong Kong innovation scene: Where are we headed?
While the fundamentals of HK have shaken and shifted, 2023 was a year where much of the foundational work of building an innovation scene was done.

Navigating the digital transformation in BFSI amid cybersecurity challenges
Opting for a comprehensive WAAP solution ensures strong defence against key challenges faced by BFSI institutions.

Pay transparency, training, AI: Understanding HR’s emerging legal risks
HR professionals have tons of power to guide companies in the right direction; not just checkbox compliance, but real justice and engagement.

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The startup landscape in Southeast Asia is thriving as diverse companies secure significant funding in 2024, signalling sustained investor confidence in the region’s innovation.

Notable ventures include FlyORO in Singapore, pioneering sustainable aviation fuels, and Be Group in Vietnam, dominating the multi-service consumer platform sector. Thailand’s UniFAHS stands out with its focus on sustainable food production using patented phage technology, addressing issues like antimicrobial resistance. Polyhedra in Seychelles, securing a Series A investment, leads the charge in Web3 infrastructure development through the zkBridge protocol.

Indonesian startups Komunal and Semaai raise substantial amounts for their neo-rural banking and agritech solutions, respectively. Additionally, Japan’s Micoworks excels in optimizing communication for businesses.

The varied sectors and strong investor interest underscore the dynamic and promising nature of Southeast Asia’s entrepreneurial landscape.

Below are the details of the investments the companies in the region raised in January so far:

FlyORO (Singapore)

Amount raised: US$1.6M
Stage: pre-Series A
Investors: Audacy Ventures (lead), Investible, unnamed private investors
Company profile: FlyORO is a provider of last-mile sustainable aviation fuels (SAF) blending technologies. Founded by Jonathan Yeo, Joe Ng, and Genevieve Toh, FlyORO provides a modular, on-demand blending service of SAF and jet fuel to enable aviation on its emissions reduction journey. It enables flyers the flexibility to align their ESG targets per flight.

Be Group (Vietnam)

Amount raised: US$30.3M
Stage: Strategic
Investor: VPBank Securities Joint Stock Company 
Company profile: Be Group is the startup behind the multi-service consumer platform ‘Be’. Started around five years ago, Be Group has worked with over 300,000 drivers. In 2023 alone, the company facilitated over 120 million rides, maintaining a dominant 35 per cent market share in the ride-hailing sector across 40 cities and provinces in Vietnam. The platform currently offers more than 15 services, including multimodal transportation, express delivery, food delivery, insurance, and telecommunications.

UniFAHS (Thailand)

Amount raised: US$1.4M
Stage: seed
Investors: A2D Ventures (lead), ADB Ventures, InnoSpace
Company profile: Founded in 2020, UniFAHS utilises its patented phage technology for sustainable and safe food production, specialising in meat alternatives. The company actively contributes to combating antimicrobial resistance (AMR) and advocates for climate-friendly agriculture. UniFAHS adopts a ‘One Health’ approach, recognising the interconnectedness of human, animal, and environmental health to address challenges holistically.

Polyhedra (Seychelles)

Amount raised: Undisclosed
Stage: Series A
Investor: OKX Ventures
Company profile: Polyhedra Network builds the next generation of infrastructure for Web3, focusing on interoperability, scalability and privacy, using advanced zero-knowledge (ZK) proof technology. Polyhedra Network is the company behind zkBridge protocol, which facilitates trustless cross-chain infrastructure for Layer 1 and Layer 2 interoperability. By utilizing ZK proof technology, zkBridge enables the receiving chain to verify specific state transitions on the sending chain. This approach ensures better security without relying on external assumptions and reduces the costs associated with on-chain verification.

Komunal (Indonesia)

Amount raised: US$5.5M 
Stage:  Series A+
Investors: Sumitomo Corporation Equity Asia (lead), Jafco Asia, Skystar Capital, Sovereign Capital, Gobi Partners.
Company profile: Komunal is a fintech company offering neo-rural bank services in Indonesia. Launched in 2019, Komunal digitises rural banks by combining funding access and hyperlocal lending to support economic growth in Indonesia. It provides financial services to the underbanked population through its unique partnership with the rural banks in Indonesia. The firm’s vision is to elevate rural banks and SMEs in the archipelago to serve their local community better.

Micoworks (Japan)

Amount raised: US$24.5M
Stage: Series B
Investors: Vertex Growth (lead), JAFCO Group, Mitsubishi UFJ Capital, SMBC Venture Capital, Mizuho Capital, ALL STAR SAAS FUND, Eight Roads Ventures.
Company profile: Micoworks is a marketing company that optimises communication between companies and their customers. Headquartered in Kita-ku and led by CEO Osamu Yamada, Micoworks develops and provides marketing platforms MicoCloud and Micomii. MicoCloud is a marketing platform that optimises communication between companies and their customers. In addition to offering highly extended functions for the official LINE account, it collects data across multiple channels. This data collection enables optimal communication tailored to customer needs. Furthermore, MicoCloud creates tangible business results for clients by providing a one-stop service that includes consulting and operational support.

Funding Societies (Singapore, Indonesia)

Amount raised: Not disclosed
Stage: Strategic
Investors: Khazanah, CGC Digital
Company profile: Established in 2015, Funding Societies provides financing to micro, small and medium enterprises (MSMEs), especially micro and small businesses currently unserved by existing financial institutions. Since its inception, it claims to have disbursed over US$3.5 billion in business financing through five million transactions, positively impacting over 100,000 businesses across Malaysia, Singapore, Indonesia, Thailand, and Vietnam.

Semaai (Indonesia)

Amount raised: US$4.7M
Stage: Debt and equity
Investors: CyberAgent Capital (Japan), Sumitomo Corporation Equity Asia, Ruvento, MyAsiaVC, Heracles Ventures, Surge, Accion Venture Lab, Beenext
Company profile: Semaai is a ‘farmer-first’ company building full-stack agritech solutions to help farmers and rural MSMEs such as toko tanis in Indonesia maximise their earning potential and access better financing, services and new markets.

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