Bernard Leong, my friend, noted Asia tech pundit and founder of Singapore-based tech blog SGE (among other things), raises some great discussion points in response to my previous post about Southeast Asia’s biggest four startup problems.
It’s a great read, and my attention is particularly drawn to his thoughts on the infamous Series A gap. As someone who has started companies here and also been an investor, he has a very valuable perspective on things:
The so-called Series A investors is non-existent: Let’s not kid ourselves: “Series A” is non-existent here. The so-called series A in Southeast Asia is really a Series C/D investment firm pretending to be early stage. You see a few features recurring among these so-called Series A firms: a) they are run by financiers, not business operators hence all technology companies are evaluated based on profit and loss (P&L) spreadsheets, b) they are looking for revenue to growth companies and c) they have no specialization in operations except financial engineering.
He explains in the rest of the post “only those with revenues survive”:
If you want to win in Southeast Asia, you have to be revenue-first, period.
It figures, then, to a point, that companies making money in the region are already accelerating at quite a rate, going beyond what would usually fit for a Series A round.
Here are additional thoughts on the subject from Jeff Paine, of Founders Institute Singapore and Golden Gate Ventures, who emphasizes the long game that entrepreneurs play in Southeast Asia:
Getting to user/revenue scale takes longer because markets are fragmented (language, business culture differences, unit economics/ARPU are lower, distribution is not as easy nor uniform)
Lack of risk taking depth of Series A investors in the region. The expectations from Series A investors are not communicated enough to seed stage startups plus risk taking capital is not so forthcoming. Hence startups do not have the 2-3 year runway luxury to “get there” over multiple financing rounds.
Consumers and businesses in the region takes time to trust (non-US) products and services especially when they are new and disruptive. Hence, distribution deals and revenue opportunities take a while to realize.
Businesses that have established a firm grounding in their home countries are expanding – Thailand’s Ookbee is a prime example – but there is also a new mindset of thinking regional from day one, as I mentioned in my 2013 preview piece for TNW.
I’m excited to see if the rise in startups aiming pan-regionally from the get-go in Southeast Asia can continue, and how that will affect the Series A issue.