We’re all inside a giant pressure cooker. With everyone impacted by the global virus, and by measures to combat it, my Singapore-based venture capital firm hosted a virtual “cloud panel” of founders and CEOs powering the backbone of the online consumer economy, with companies active in areas from logistics to payments to global analytics.
Our purpose: to dissect the challenge-and-opportunity picture for young tech firms and their investors in Southeast Asia.
CEOs sharing stories from the battlefront
An executive from App Annie chipped in data-driven insights. We got key takes from the investor side. And all agreed on some basic principles for coming through the crisis as a strong contributor, not a business casualty. (E.g. a firm should run lean but never “hibernate.” Focus on fundamentals. Scan for spaces in which to grow or replace lost revenue, and when launching a new thing, “Nail it before you scale it.”)
Our 90-minute set of virtual panel sessions was live-streamed March 24 and had over 250 attendees tuned in live. It contains plenty that may apply anywhere in the days ahead. Here are the highlights.
Bird-eye overview of initial impact
Snapshot in time: As the online panel meets, no place in the 10-country ASEAN region has yet been swamped by coronavirus cases. But business as usual is over.
Preventive measures range from strict lockdown to scurrying-ahead-of-the-storm mode. Cindy Deng, regionwide managing director for the mobile analytics firm App Annie, speaks from the Philippines, a country in lockdown.
Not surprisingly, customer behaviour there has shifted to online ordering of goods for delivery. What’s striking is the scale of the shift. From the week before lockdown to the first week after, Cindy says, downloads of the Lalamove order and delivery app jumped by 100 per cent.
Cindy also notes that even in China—a country that was far more mobile-intensive beforehand—average time on-screen rose about 30 per cent over the previous year’s comp as the virus hit and spread.
Of course, this doesn’t mean flush times for all online and mobile firms. Several panel members tick off predictable, near-identical lists of impacts by sector.
Online gaming, delivery of food and essentials, fintech, edutech: all gainers. Travel and hospitality booking, live entertainment, rideshare: down.
Nor do prospective gains come easy.
Shaun Chong is CTO of NinjaVan, active in parcel delivery across six ASEAN countries. Although an app is the company’s nerve centre, “We are a physical business,” he says, and “It’s a challenge.”
Drivers play crucial pandemic roles like delivering personal protective gear—but what must NinjaVan do to protect the drivers? To keep warehouse workers safe? Chong, a true CTO, notes some ways that technology can help.
Also read: The global financial crisis gave birth to fintech. What will COVID-19 recession bring?
Singapore deploys the TraceTogether system to track infected persons, “and we can use this data to see if any of our drivers have been interacting with these people.” IT can be used to plan and manage safe-spacing in warehouses. Still, Chong estimates his firm is operating at “maybe 80 per cent normal productivity.”
Changing the company in crisis time
As the pandemic damps down some lines of business and drives up others, companies must respond. Firms represented on our panels were thrust into various situations, as follows.
Forced to regroup: Singapore-based Rovo has a highly focused app for players of tennis and other amateur sports. The app helps them book matches, organise tournaments, and so forth.
Tennis may seem an ideal social-distance sport, but India’s countrywide lockdown zeroed out a big growth market for the app’s main uses. Rovo’s response, per CEO Ritesh Angural: “We’re releasing new at-home training content while cutting costs [and] doing as much as possible to reduce the burn rate.”
Surprised by opportunity: Xendit, a B2B fintech firm, provides transaction processing and financing—typically to companies already using online infrastructure.
But since the pandemic began, says CEO Moses Lo, “We’re getting a ton of requests from traditional businesses in places like Indonesia and The Philippines, where cash is king: ‘Hey, how do I make payroll? Can you help me pay my vendors, move money across borders?’ We never thought these traditional players were the right market for us, but we have built some basic products around this market and we see massive opportunities there.”
Balancing the ups and downs: The online medical platform Alodokter (“Hello, doctor” in Indonesian) has a surge of demand from Indonesians using its app to get online consults from physicians—and a drop in O2O (online-to-offline) areas like booking in-person appointments.
Key goals, for now, says CEO Nathaneal Faibis: “Stable operations. Be sure we can meet the demand for online, while controlling costs. And staying healthy ourselves.”
Loship is a fast-rising Vietnamese firm caught with a mixed hand of hot and cold cards: food and small-package delivery, plus ride-hailing.
Recent plans to expand into new verticals are now being pursued “not as ambitiously,” CEO Huang Trung says, though his current priorities may look more ambitious. Trung wants to avoid cutting employees—”We’ve been through a lot of difficulties together,” he says—and to “continue raising investment” for the road ahead.
After the panel, I outlined five areas where our portfolio CEOs need to make changes in 2020, from cost-cutting to communicating with employees.
The investor-eye view
I shared a two-person investor panel with Chris Tran, Partner at North Ridge Partners. We believe well-managed firms can and should keep raising capital during the virus crisis.
My view of managing well is to forget, for the time being, typical VC-backed goals such as hypergrowth, or profitability within N months. What I (and many others) want to see, is mastery of unit economics: controlling cost and burn per unit of revenue-producing product or service delivered.
If your firm can do that, then be proactive in communicating with your investors. Ask where they stand in their fund lifecycle. Ask what it would take to have them write you a check.
Show them plans that justify your needs. And don’t sweat the heat you feel. Instead, light a fire under your investors!
Venture investing is a long-term play. As Chris Tran notes, the current rockiness comes from an “event-driven” bear market—the kind that can recover fairly quickly as the event winds down.
Deals, M&As, and even exits are still being done.
New investors are coming in, too, including the FOMO (fear of missing out) investors looking for plays that could leverage crisis-induced phenomena. Speaking of which, Chris has some ideas to float.
Less-obvious growth markets … and the light at the end
Every tech firm can’t jump into areas like gaming or food delivery that show immediate spikes in demand. Chris advises asking “What else is out there?” and suggests some markets worth thinking about.
“COVID, on top of the US-China trade war, has exacerbated the need to think about supply chain risk” in Southeast Asia, he says. “So, what is important around supply chain [and] minimising supply chain shock?”
Chris also notes that “unfortunately,” the pandemic shines a glaring spotlight on the costs and risks of using human labor: “We’re seeing an increase in demand for automation services. It’s increased the imperative to automate as many processes as possible.”
From the App Annie perspective, Cindy Deng urges using data analysis to scan for and evaluate new business areas. Also, she says, don’t just look at market data for your own region and the current time frame.
Also read: How can startups survive COVID-19?
Study what other firms have done in places where the crisis hit earlier; see how those moves are working and might translate.
Finally, from everyone’s perspective: Put aside the notion that investors and entrepreneurs are people out to profit from a tragedy. I don’t think or act that way.
Our panellists don’t and you shouldn’t, either. The solid firms and good deals are those that help people do what they need to do. When successful, they may well create more jobs than automation takes away.
And perhaps the greatest note of optimism is this. Our panellists say they see people, firms, and governments in Southeast Asia starting to communicate and collaborate more openly than ever. Let’s all stay healthy while we contribute to this spirit in our parts of the world.
The online panels were moderated by Mohan Belani of e27 and Mercedes Reuhl of the Financial Times.
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