The funding winter is all about the survival of the quickest. Startups that can reflect and pivot in time will thrive when the spring eventually returns to the startup ecosystem, according to Ivan Ong, Investment Principal at AFG Partners.

“Cash preservation should be top of mind for all founders, and extending the cash runway ahead of further market turns is key. All our portfolio companies have done scenario and contingency planning to prepare for macro events, i.e. supply shocks/further inflation,” Ong said in an interview with e27.

Instead of rapid growth, profitability and efficiency should be the focus for startups. Founders should focus on burn multiples, defined as the ratio between net burn and net new revenue. They should also constantly question whether the company is capital-efficient or can achieve sustainable revenue faster with a lower cash burn rate. That said, real leaders are forged in crisis, and adversity creates stronger businesses, as history has demonstrated, Ong added.

“We expect 2023 to be another choppy year in the markets, but we will continue to keep our discipline and focus. We continue to believe that B2B/enterprise fintech will be the future growth story for Asian Financial Services and expect more and more companies in the region and around the globe to look to expand their activities across Asia,” Ong went on.

Driving fintech growth in Asia

Founded in 2020, AFG Partners is an Asian-based specialised VC fund investing in the area of B2B and enterprise fintech. The fund invests in global pre-Series A to Series B companies with a proven track record in their home markets and are looking for value-added investors to help them expand across Asia.

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The fund focuses on investing across the areas of embedded finance, capital markets, insurtech, the CFO stack, and enabling technologies. It looks for businesses that currently operate/plan to operate in multiple countries across Asia for potential investments. These businesses should be built by entrepreneurs with years of specific domain expertise and a strong network in their area of focus. They also need to be reliable partners to financial institutions and corporates, addressing their critical needs.

“It is our thesis that the next generation of Asian fintech will be led by enterprise and B2B fintechs that will partner with incumbent financial institutions and emerging tech players that want to secure their place in a world where tech and finance are merging,” he noted.

So far, AFG Partners has invested in six fintech companies: Aspire, Osome, Brankas, Finsemble, Ignatica and Traydstream.

“We saw the dislocation in the markets in 2021 and the proliferation of unsustainable valuations. Rather than succumb to FOMO and deploy at unattractive valuations, we invested in well-run businesses with a path to profitability and at reasonable and sustainable valuations,” mentioned Ong.

Survival of the fittest

Venture capital and research firms predict the funding winter will last between 12-24 months. Startups are rationalising their business verticals and burn rates by cutting down their workforce and closing verticals, among other things.

In the past few months, startup layoffs are estimated to have impacted 10,000 people. This drier fundraising landscape is a litmus test revealing the true sustainability of business models and sector demands.

With the successful closing of its fund in 2022, AFG Partners finds itself in an advantageous position with more than 85 per cent of the fund’s capital still to be deployed.

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