The global economic environment continues to be volatile, significantly impacting the startup ecosystem. Companies struggle to stay afloat, and different companies, including startups and VCs, take different approaches to navigate this situation.
Although the impact has been relatively low in Southeast Asia, many startups still resorted to cost-cutting and workforce reduction to survive.
“How are the founder mindset and the overall cultural shift happening internally — given the high interest-rate environment and funding isn’t as easy as before?”
We asked some startup founders, venture capitalists, accelerators and PR agencies in Southeast Asia this question.
This is how they responded:
Amerson Lin, Co-Founder & CEO of Gigacover
The challenges posed by changes in the funding landscape are real. At Gigacover, we have always fostered a culture of agility and prudent financial efficiency. We actively explore new revenue streams and seek to increase our margins over time. That is how we have turned profitable and stay committed to powering digital affinity protection programmes.
Anu Gupta, Director of APRW
The current market conditions have been challenging for startups. However, we firmly believe that a robust founder mindset, good product fit, and an able team are vital in ensuring the survival and success of startups during these trying times. To face the challenges ahead, startups must cultivate resilience and foster an innovative mindset rather than succumbing to discouragement amid a turbulent market. More than that, workplace culture also has a large influence. Thus, companies fostering teamwork, creativity, and transparent communication will likely tide through storms and emerge victorious.
Binh Tran, Co-Founder, Ascend Vietnam Ventures
The high interest-rate environment is reshaping the founder’s mindset and internal cultures. It’s a shock to the system but also a wake-up call, like that first sip of strong Vietnamese coffee in the morning.
The era of pitching grand ideas and receiving immediate funding is fading. Now, the conversation is about tangible results, provable business models, and profitability. The focus is shifting from extravagant moonshots to reliable and sustainable business models.
This high interest-rate environment is forcing founders to rethink their strategies. It necessitates innovation, resilience, and a razor-sharp focus on delivering value. Despite the increased difficulty in fundraising, founders are developing more efficient, calculated, and value-driven solutions. This shift, while challenging, is beneficial because it underscores the importance of solid foundations in addition to a big vision.
Carman Chan, Founder and Managing Partner at Click Ventures
The current high interest-rate environment and funding challenges have forced founders to adopt a more conservative approach to business strategies, focusing on profitability and sustainability rather than rapid growth. To navigate this environment, startups are prioritising efficiency and cost savings, exploring alternative sources of financing such as venture debt or revenue-based financing and exploring partnerships.
Also Read: ‘The era of easy money is over’: VCs speak of funding winter and exit landscape in Southeast Asia
The cultural shift within organisations involves:
- Prioritising a more disciplined approach to resource allocation and decision-making, such as fewer perks or perks with lower cost.
- Fostering a culture of resilience.
- Communicating transparently with team members, especially when downsizing.
- Some founders are turning to AI to increase productivity and reduce costs, using it to automate repetitive tasks, personalise marketing content, and generate graphic designs.
Cha-Ly Koh, Founder and CEO of Urbanmetry
Bottom line, profit and unit economics have always been a priority for Urbanmetry as it reflects the value of the product we build for our clients. We also invest heavily in R&D and new products, which has driven our growth in the last few years. In the current funding landscape, founders are rebalancing focus on operational profits and R&D while confronting cultural debt.
During rapid growth, some startups aggressively hired top individual contributors, leading to isolated deliverables. However, these outstanding contributions often fell short when combined.
In this environment, founders must strengthen team bonds, enabling the company to exceed the sum of individual efforts. It’s challenging but vital for a startup to forge a healthy, sustainable bottom line.
Dave Ng, General Partner at Altara Ventures
Great founders are reemphasising the basics of building businesses. They adopt a survival mindset because funding doesn’t come by easily. That means taking a hard look at the model and ensuring it is profitable or shutting it down.
Servicing venture debt or business loans in a high-interest-rate environment could be painful and untenable.
Very quickly, many realise what used to allow them to kick the cans down the road — in a low interest-rate and easy money era – is no longer available. Many founders will become wiser, stronger and more mature after this episode of macro challenges.
Dorothea Koh, Founder & CEO of Bot MD
Honestly, I don’t think our mindset has changed much. We have always been focused on building products that delight our Doctors and figuring out how to scale Bot MD towards profitability.
I suppose the current funding climate has only served to amplify this sentiment. It has also made us more thoughtful about where we put our resources and the need to focus the company towards sustainable growth at scale.
Edward Tay, Associate Professor and Chairman of Infracrowd Capital
Founders are increasingly anxious over the bleak economic outlook and the scarcity of venture capital worldwide.
The better ones are reducing unnecessary expenditure and delaying talent recruitment as far as possible without sacrificing their growth trajectory; the rest are struggling to keep afloat and bootstrapping as much as possible without losing valuable talent.
Franco Varona, Managing Partner, Foxmont Capital
I think the Filipino founder mindset was never really “set” toward any specific direction since funding was quite hard to come by before this explosion of entrepreneurship and subsequent investor interest in the country.
It’s interesting to note that as the region begins to settle into the idea that funding will be more difficult than before, it’s specifically now that the Philippines is seeing more funding come to the country. In the last three years, the Philippines’ startup ecosystem has brought in 2 per cent, 5 per cent and 9 per cent of regional funding, respectively, and we don’t see that slowing down in 2023.
So we have founders working hard to get to profitability faster (since funding was so hard to come by) that are starting to attract regional investors looking for profitability metrics vs growth metrics. It’s a good balance currently.
Harmender Singh, VP (SUPER Project Management Office, Corporate Affairs & Special Projects) at Cradle
In today’s rapidly changing economic climate, founders must be resilient and adaptable. Successful businesses can often pivot and evolve their ideas or business models based on market feedback, changing consumer needs, and emerging trends.
This requires a willingness to listen, learn, and make necessary changes to the business strategy. Identifying new opportunities and acting on them quickly helps a business stay ahead of the competition.
Innovation is a constant process that should be integrated into a company’s culture. It involves developing new products or services, finding ways to improve existing ones, optimising business processes, and creating new business models.
Also Read: Startups that can reflect and pivot in time will thrive during funding winter: Ivan Ong of AFG Partners
Founders should strategise on their spending, be more effective in marketing their products, leverage a network of peers and experts and listen to customers’ needs.
Herston Powers, Founding Managing Partner, 1982 Ventures
The founders that will win shifted to war-time mode a long time ago. We’ve seen grit and resilience from the best founders growing revenue, managing costs and securing new funds. The fundraising environment appears to be improving for the Series A stage, as a few of our portfolio companies are closing larger rounds at higher valuations from new investors.
Southeast Asia fintech remains the bright spot, and the broader APAC region defied the global fintech funding decline.
Jeremy Au, VC and Chief of Staff at Monk’s Hill Ventures
The topline-growth-at-all-costs approach is now recognised to be over. Founders generally already understand the suddenly-popular advice to focus on contribution margins, prioritise lean operations and stay within the vision of a break-even contingency plan if future fundraising falls through.
Many founders are rightfully concerned about how long these tight funding conditions will continue. US interest rates are forecast to stop increasing but remain high for the next year. Observers believe that funding will thus be conservative for at least another year, maybe two.
I recommend that founders recognise this capital environment as the new base scenario and act accordingly to raise bridge capital proactively, cut costs and stack-rank high-ROI sales & product improvements.
By reorganising for fiscal resilience, brave founders can thus preserve the breathing room to run time-bound experiments on efficient growth and profitability levers. The team culture will also organically evolve towards maximising learnings (and returns) for every dollar spent.
In time to come, the market will adjust to the new normal and eventually reward the startup teams that have continued to grow, upgraded their economic engines and outlasted their competitors.
All that is gold does not glitter,
Not all those who wander are lost;
The old that is strong does not wither
Deep roots are not reached by the frost: J.R.R. Tolkien.
JJ Chai, Co-Founder and CEO of Rainforest
Given the market conditions, we’ve focused on bottom-line growth rather than topline growth at Rainforest. There’s definitely been more of a ‘batten-down-the-hatches’ mindset and a strong emphasis on margin expansion and cost controls.
As founders, we’ve openly communicated the overall situation with the team since early last year. I’m glad the team has rallied hard and worked with the resource constraints to deliver our first quarter of total profitability the previous quarter while still growing the topline significantly.
John Tan, Founder and CEO of Doyobi
At Doyobi, our mindset has shifted to the path to profitability. We are more metrics-driven. For example, internally, we are asking how many paying users we need to acquire to reach profitability. We are also taking a hard look at customer acquisition strategy, including CAC and retention, and LTV.
Kamarul A Muhamed, Founder and Group CEO, Aerodyne Group
Being prudent in spending should be at the heart of every management conversation. This environment is not an outlier but rather a revision to mean. The low-interest-rate environment, which many startups/growth stages have been comfortable with in recent years, was not meant to last. That being said, be it a low-interest-rate environment or otherwise, operational efficiency or having frameworks to continuously innovate to expand revenue lines and achieve better operational efficiency should be of utmost importance.
At Aerodyne, we consciously traded the profitability we achieved in the first five years of operations to fuel growth during the pandemic, coinciding with the commencement of rate cuts. Since then, the focus has been to turbocharge products and geographical expansion, which has borne fruit.
Kristine Claire Ongcangco, Founder & CEO at Parlon
This new environment just emphasised that founders should focus on building scalable businesses right from the beginning. There is less room for mistakes and trial and error. We should not be complacent and should always be laser-focused on our path to profitability.
While external funding can offer a significant firepower boost, founders must always consider the importance of optimising revenue streams and being prudent in managing costs. Founders should maintain a balanced perspective and avoid relying solely on external funding. Especially for early-stage startups, we must be creative and open to diverse financing options, like even investing our own capital.
Ming Chen, Founder and CEO of KKDay
The cost of capital has risen significantly in the current environment, underscoring the importance of developing a sustainable and profitable business model. At KKday, we take great pride in our commitment to the “make profits, sustain & grow” approach, which has been a fundamental principle since our inception.
Unlike succumbing to a growth-at-all-costs mindset driven by readily available capital, we have prioritised sustainable growth and exercised discipline in our sales and marketing strategies. This includes how we look at user acquisition, our strategy for discount subsidies, and targeting the suitable user base.
KKday’s previous fundraising rounds have brought substantial business improvements and well-positioned us for continued growth. This ranges from attracting industry talents to strategic acquisitions such as the prominent Japanese local travel experience OTA, Activity Japan.
Additionally, we have dedicated resources to developing our in-house proprietary SaaS booking system Rezio. This has helped us strengthen our resilience amid the challenges posed by the pandemic. We have increased our operational efficiency, deepened our footprint, and increased supplier loyalty.
Investor expectations have evolved beyond a singular focus on topline scale and growth. Sustainable growth that can lead to profitable growth has taken centre stage. So today, we must drive growth, scale, and profits.
Oswald Yeo, Co-Founder and CEO of Glints
Not unique to any startup, we’ve had to make hard decisions that impacted every team member. While we have always believed in persevering through challenges and being resourceful in the face of adversity, we are not immune to the current environment. We must find ways to adapt our business. In this process, we remained steadfast and understood the need to be as transparent and communicative to all of our Glintstars as possible on where the business stands, where we are going, and why we need to make certain decisions.
Sanjay Uppal, Founder and CEO of finbots.ai
Having held multiple CFO roles throughout my career, I am prioritising building business value over valuation through prudent spending and strategic investments in our products and capabilities. At finbots.ai, we remain steadfast on this path, ensuring our marketing, personnel, and R&D investment align with our ambition.
Recent changes in the macroeconomic environment and increased awareness of the potential of artificial intelligence (AI) have resulted in the rapid growth of our sales pipeline.
As a result, we have recently launched our next funding round to accelerate our go-to-market activities. The changes in the macro environment are also seeing enhanced rigour in investment decisions, which, in the long term, will benefit both startups and venture capital.
Sergei Filippov, Strategic Partner of MGG Solutions Group and formerly with Morphosis Capital Partners
I have several pieces of advice for founders:
Focus on unit economics: Founders and their teams must now pay more attention to their unit economics. This means ensuring that the revenue generated from a customer over their lifetime (LTV) is significantly higher than the cost of acquiring that customer (CAC). Profitability on a per-customer basis becomes vital, and it can be postponed only if there’s a need for a quick growth rate to outpace the competition.
Efficiency and lean operations: A high interest-rate environment encourages founders to adopt leaner operations — being more strategic with hiring and leveraging automation and technology to reduce costs.
Revenue generation vs profitability: When securing additional funding is challenging, startups are forced to focus less on booming revenue growth and more on a clear path towards profitability. This might involve exploring different revenue streams, increasing prices, or focusing more on upselling and cross-selling to existing customers.
Financial discipline: Founders are more carefully managing their cash flow. They scrutinise expenses, focus on achievable profitability and seek alternative funding options such as strategic partnerships and joint ventures or revenue-based financing.
Long-term vision and strategy become vital: Founders increasingly focus on their long-term vision, even if it means sacrificing short-term growth. They understand that building a sustainable, profitable business with a clear competitive advantage is more attractive to investors in a high-interest-rate environment. That, of course, requires patience, strategic vision and a better understanding of long-term goals.
Enhanced two-way due diligence: Founders are now more mindful of the investors they partner with, understanding that the right investor can provide not only capital but also valuable strategic guidance, industry connections, and support during challenging times.
Cultural resilience and flexibility: Culturally, there’s a shift towards resilience and adaptability. Startups must be prepared to pivot and adapt their business models to changing market conditions. Thus, a culture that’s open to change and values flexibility is required.
Vince Yamat, Managing Director, 917Ventures
At 917Ventures, the continuous macroeconomic headwinds have prompted a shift towards a more resilient and adaptive mindset. Our founders, CEOs, and teams actively embrace the need for strategic financial planning, conducting in-depth analyses of bottom lines and pursuing sustainable growth strategies to successfully navigate and thrive in the evolving funding landscape.
Vinnie Lauria, Managing Partner of Golden Gate Ventures
The challenges of the current high interest-rate environment have been well expounded upon. But founders thrive on adversity, and the smart ones will take the opportunity to rise to the challenge and surpass their competition.
Early-stage investors such as Golden Gate Ventures continue making investments through the current macroeconomic climate. The high interest-rate environment pressures founders to be more cautious around growth-stage fundraising and puts greater scrutiny on their business fundamentals and unit economics. This is an opportunity for smart founders to demonstrate how skilful their team is in these pressures to gain outsized confidence from investors.
Also Read: Funding winter? Indonesia marches on … and why it will survive the gloom
This environment allows founders to use a constraint to unlock creativity. And founders who build up a rock-solid culture have a better shot at ensuring their operational discipline has longevity.
Strong business operations and culture go hand-in-hand, and the smart money will be on founders who demonstrate they can build an organisation that lasts—for example, the founders who strategically leverage their footprint across the startup golden triangle of Singapore-Indonesia-Vietnam. Founders who are creative in making each market’s unique opportunities work together will survive and thrive in this environment.
Warren Leow, CEO of Inmagine
Being economical, adaptable and resourceful would be very important amidst resource constraints. Disciplined focus, clarity of thinking and the ability to execute are the hallmarks of high-performing teams with strong leadership. Founders and senior management need to have a can-do and ‘all in’ attitude even when the going gets tough.
Xander van der Heijden, CEO of UNL
Great founders are hyper-focussed on building businesses that are not only profitable but also highly resilient.
In the past few years, venture capital was given to non-entrepreneurs without proper due diligence in place. Now, we see a shift in investor mindset that brings the fundraising landscape to a healthier state, one that will create the next generation of real entrepreneurs and builders.
Yat Siu, Co-Founder and Executive Chairman of Animoca Brands
Founders who build with purpose and for a mission bigger than themselves are always more likely to fare better than others with less conviction. In fact, an environment where it is harder to raise funding, although always challenging, can also be advantageous in some ways, because it allows truly dedicated founders to stand out from the crowd — the noise ratio is lower and true conviction becomes more visible.
Passion and purpose are all-important. Adversity is part of economic cycles and can provide a powerful character and perseverance building experience. Founders who are building in a bear market need to really believe in what they do and need to want to be doing what they do. Sometimes things won’t be easy but founders adapt and carry on in the pursuit of their vision.
Valuations today are generally lower as a result of less available capital in the market. However, I believe that the founder mindset will prevail as it has done so many times before.
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