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By Jacquelyn [email protected]@JacCheokBT
Singapore
FORGET unicorns; business-to-busi-ness (B2B) startups are where the in-
vestment opportunity now lies, said Singapore-based venture capitalists in a panel discussion at YourStory
Startup Dialogue, a startup event held last week by Indian startup media
platform YourStory and local public relations firm Asia PR Werkz.
Jason Edwards, partner at Qual-
gro, a venture capital firm that targets B2B startups, said: “There is too much focus on unicorns. There are so many
fantastic companies that don’t have that label.”
Cindy Teoh-Cavefors, associate director for investments at Golden Equator Group, added that while the
region boasts several unicorns – a “great” phenomenon as this “proves there could be light at the end of the
tunnel for startups” – the startup eco-system is continually growing.
“There are so many areas we can
continue to develop. We don’t have to be so hung up on unicorns.”
Both investors were speaking at the panel discussion “Lessons in ven-ture investing in Asia”. They were joined by two other venture capital-ists: Ambar Machfoedy, managing partner at Rekanext, a firm that in-vests in pre-Series A and early-stage startups in South-east Asia; and Foo Tiang Lim, a partner at seed-stage ven-ture firm SeedPlus.
When asked to identify their fa-vourite unicorn in South-east Asia, Mr Machfoedy pointed to Grab, saying “it knows the different markets very well”. The Singapore-based ridehail-ing platform operates in eight coun-tries across the region, among them Vietnam and Indonesia.
Qualgro’s Mr Edwards said he did not have a favourite but if he did, it “would be one that is profitable with favourable unit economics”.
Mr Foo did not name a favourite but predicted that the region’s next unicorn would hail from Singapore and the insurtech (insurance techno-logy) sector.
“The insurance industry is ripe for disruption. It is hugely slow and there is a lot of money there. There is also big potential in Indonesia, where people don’t even understand why they need to buy insurance, which represents an upside.”
There are more opportunities to in-vest in B2B startups given that the B2C market has become “quite crowded”, said Mr Machfoedy. “You have small startups trying to make it in B2C, but you also have the big guys like Grab and Go-Jek, each one crowding out the small guys.”
Even so, the mass B2C market presents business opportunities for B2B startups, he said. “When you try to tackle the B2C market, you need in-frastructure, such as cybersecurity or artificial intelligence to optimise your B2C operations. That’s where the B2B guys come in.”
Mr Machfoedy noted that the path to profitability is clearer for B2B star-tups. But they are subject to lumpy sales and an inconsistent sales cycle, typically a result of their lack of busi-
ness expertise to secure recurring deals, he said. “B2B entrepreneurs are usually tech people, so what venture capitalists can offer them is business experience and networks.”
Ms Teoh-Cavefors said Golden Equator Group – a fund management firm that invests in tech, real estate and prime currency – has backed an equal number of B2B and B2C star-tups.
In fact, most of the group’s portfo-lio companies have both B2B and B2C strategies, she said. They are either B2B2C businesses, or businesses with two separate revenue streams and price points, one catering to end-con-sumers and the other to enterprises.
“It’s a realistic way to go about building a business. While the B2C front has a lower customer acquisi-tion hurdle and price point, it can be challenging when it comes to making a profit. This can be supplemented by going after B2B clients, which gener-ate larger contracts that can sustain your company and give it a little bit more runway.”
By Vivien [email protected]@VivienShiaoBT
Singapore
THE brand name is one of the key driv-ing factors of successful companies in Singapore, said Minister for Educa-tion Ong Ye Kung at the 17th annual Singapore Prestige Brand Awards (SPBA) held at the Ritz-Carlton on Thursday.
“All of our successful companies have built good brand names, which are anchored on capabilities and what your products and services stand for,” he told the audience of over 500 business leaders.
But behind the company brand, is also the Singapore brand, which has been built up over five decades, he ad-ded.
“That is one reason why many for-eign firms value our market – not be-cause it is a huge market, but because if the product or service works in Singapore, it gives confidence to other markets around the world.”
Homegrown brands that have helped lift the Singapore brand were honoured with awards at the event,
jointly organised by the Association of Small & Medium Enterprises (ASME) and Chinese-language daily Lianhe Zaobao.
Among them was food and bever-age player Toast Box, which was named the Overall Winner of the SPBA for the Established Brands category.
Another big winner was B9 Dental Centre, which won the Overall Winner title in the Promising Brands cat-egory, meant for businesses estab-lished in the last three to eight years. It was also inducted into the SPBA – Hall of Fame, which is reserved for outstanding local brands that have won over a period of time.
The other two companies that bagged the main prizes include the Management Development Institute of Singapore, which was Overall Win-ner of the SPBA in the Heritage Brands category, and Novu which was Over-all Winner of SPBA among Regional Brands.
Awards were also conferred on brands that picked up the most votes from the public in their respective cat-egories. The winners were Toast Box, Natureland, Chin Lee Restaurant and Avalon.
Gardens by the Bay was honoured with a Special Merit award. Participa-tion in this award category is by invit-
ation only and reserved for govern-ment agencies and not-for-profit or-ganisations.
Kurt Wee, president of the ASME, said: “Branding is at the core of a busi-ness, as a strong brand allows busi-ness owners to build on trust that transcends geography and time.”
Goh Sin Teck, editor of Lianhe Zaobao and Lianhe Wanbao, noted that branding can also help enter-prises expand abroad.
“With many of these brands achiev-ing international acclaim, it is a testa-ment that local brands can also soar far and wide, beyond the shores of Singapore,” he added.
By Mike Chua
Singapore
CONSUMERS in emerging countries
are more receptive to innovation and
disruption than those in developed
countries – and yet, bigger marketing
budgets are being thrown into media
buys and product launches in de-
veloped countries.
This paradox, it would seem, cries
The accent is on B2B (busi-
ness-to-business) issues on Day 1 and
on B2C (business-to-consumer) is-
sues on Day 2.
Besides Mr Kea, the other speakers include the dean of the S Rajaratnam
School of International Studies
Joseph Liow and the dean of the Lee
Kuan Yew School of Public Policy Danny Quah.
Lam Yi Young, deputy secretary at
the Ministry of Trade and Industry,
will share how the government is
working with companies to trans-form them for the future; Nanyang
Technological University professor
Ng Yew Kwang will present the eco-
nomic outlook for 2019. It is not all academic, though.
Business practitioners will also
speak. They include executive chair-
man of YCH Robert Yap, chief execut-ive of Teck Sang Pte Ltd Andrew Seik,
and co-founder of local clothing
brand Love, Bonito, Rachel Lim.
Having engaged in their trade and
grown their market share in logistics, distribution of foodstuffs and retail
fashion respectively, they will talk
about how they will take their respect-
ive companies through the volatile geoeconomics of the coming year.
Jan Moller, chief executive of
Global Blue Singapore, a leading com-
pany in tax-free shopping, will be a member of a panel discussion on Day
2. He will offer ideas – backed by data
analytics – on how businesses can get
a share of the tourist dollar and how
to engage millennial consumers
❚ The event is supported by Canon
and U SME, the enterprise arm of
NTUC. To find out more or to register, log onto gevme.com/outlook-2019.
By Ng Ren [email protected]@NgRenJyeBT
Singapore
DHL Express announced on Thursday
the appointment of Christopher Ong
as managing director for DHL Express
Singapore. He replaces Frank-Uwe
Ungerer, who has held the role since
Jan 1, 2016.
Mr Ong, a Singaporean, will report
to Ken Lee, CEO, DHL Express, Asia-Pa-
cific, effective immediately.
Prior to the appointment, Mr Ong
was vice-president for business devel-
opment at DHL Asia-Pacific from Octo-
ber 2006 to September 2011. He was
then country manager for Vietnam
from October 2011 to January 2014.
His last-held position was man-
aging director for Malaysia and
Brunei from February 2014 to Octo-
ber 2018, during which he managed
over 1,200 employees and 27 facilit-ies across East and West Malaysia, and Brunei.
Before joining DHL Express, Mr Ong spent 10 years with Temasek Holdings, where his responsibilities included managing the company’s in-ternational investments. He has also been a judge for the Singapore Busi-ness Awards for the last eight years.
Mr Lee said Mr Ong has been instru-mental in driving the B2C e-com-merce and digitalisation agenda in Malaysia and Brunei, and added that “his business acumen and broad ex-perience at the regional and country levels will prove invaluable in his new role in Singapore”.
Mr Ong paid tribute to his staff for being the foundation of DHL’s suc-cess and said that he “looks forward to continue engaging our talented em-ployees and empowering them to make a difference”.
By Jacquelyn [email protected]@JacCheokBT
Singapore
INVESTING in unicorns – the holy grail for investors – is both challen-ging and risky. But this may be over-come by a systematic, diversified ap-proach of investing with top-quartile venture capital managers, according to an exclusive report by UBS.
Kasper Wichmann, UBS’ head of private equity for the Asia-Pacific, says in the report that even as uni-corns – private companies with US$1 billion + valuation – are becoming more common, the challenges and risks associated with identifying and investing in them are “considerable”, making it a “nigh-on impossible task for the individual investor”.
For one thing, unicorn status is far and few between for startups, says Mr Wichmann. Citing research by data firm CB Insights, he says that only 1 per cent of 1,098 US startups kicked off between 2008 and 2010 went on to become unicorns, among them Uber, Airbnb and Slack.
It is also difficult to identify uni-corns, Mr Wichmann says. Firstly, it is hard to look seven to eight years ahead and predict if a venture will work out. It is also challenging to turn a great idea into a viable business, even if there is a mass market for it over time. Thirdly, businesses suffer not through a lack of capital but a lack of know-how and execution.
To quantify this, the report looks at eight business-critical events for a startup: sufficient capital, capable management, product development, supply chain, competitive environ-ment, customer interest, product pri-cing, and enforceable patents.
Applying a high probability of a
successful outcome of 80 per cent on
each event leads to a combined prob-
ability of success of only 17 per cent,
the report finds. Moreover, if just one
variable drops to a 50 per cent probab-
ility, the combined probability of suc-
cess falls to 10 per cent, illustrating
how critical these factors can be for
success, the report says.
It becomes even harder to invest
in startups that are close to achieving
unicorn status, Mr Wichmann says.
Firstly, prior investors have pro-rata
follow-on rights, which give them an
option for the next round and create a
hurdle for new investors. Secondly,
new investors need to be approved
and bring to the table other sources
of value, such as industry know-how and networks, on top of just capital.
“When you reach later rounds, money is a commodity. Just bringing money is very unlikely to get you a seat at the table,” says Mr Wichmann.
When investors do manage to in-vest in a startup with unicorn poten-tial, it comes with a lot of risk, he adds. In the early rounds – when the upside of investing is said to be the greatest – there is often business model and tech risk, and failure rates for startups can reach 65 per cent.
In the later rounds, as the startup starts to generate revenue and has overcome business model and tech risks, it still faces risks like market competition, consumer demand and management execution. Mr Wich-mann says: “At this point, there is by no means a guaranteed positive out-come, let alone the certainty, that the company will become a unicorn.”
Even during the late stages or pre-initial public listing (IPO) rounds, where “friends and family with big cheque books are welcomed as purely financial investors to support continued rapid growth”, there is, con-trary to common belief, still quite some risk, argues Mr Wichmann.
Investors in a pre-IPO round will of-ten have the “least remaining upside” and be the “most exposed to any form of market correction”, he says.
For instance, Snapdeal, an e-com-merce startup and one of India’s first unicorns, was heading towards an IPO with a peak valuation of US$6.5 billion in 2016 when continued high cash burn and increased competition from Amazon and Flipkart forced it into a down round and a valuation of US$2.5 billion in early 2017, a figure that has since continued to devalue.
Mr Wichmann says: “While the
early-stage investors certainly took a
hit, they will all still make money on
Snapdeal. It is however very unlikely
that the later-stage predominantly fin-
ancial investors punting on a pre-IPO
round will recover more than frac-
tions of their original investments.”
Nonetheless, there is a way to sim-
plify the process of selecting and in-
vesting in unicorns, he says. That is
to invest in one or more experienced
managers, or “unicorn catchers”, that
have demonstrated an excellent track
record of identifying, investing in and
developing seed companies into uni-
corns. These include SV Angels, Se-
quoia Capital and DST Global.
“They can do that because they
have the expertise to not only invest
in long-term growth opportunities,
but bring with them the expertise and
contacts that fledgling companies
need to fulfil their potential,” he says.
Mr Wichmann’s advice to in-
vestors is to leverage long-standing
relationships with top-quartile man-
agers, invest in a diversified way
across a selection of these managers,
and gain access to high-potential star-
tups. “A fund-of-funds strategy may
be able to effectively overcome the
challenges of unicorn investing and
deliver a high-potential portfolio,
while mitigating risk.”
UBS Asset Management, which has
since 2000 adopted a systematic, di-
versified approach for its venture in-
vestment programme, has exposure
to 30 per cent of the world’s over 240
unicorn companies today, and inves-
ted in “a good number” of the top-per-
forming venture capital managers, go-
ing by the report.
More than 500 business leaders were at the 17th Singapore Prestige Brand Awards dinner on Thursday. Honours were presented in categories for Established, Promising, Heritage and Regional Brands. BT PHOTO
Powerful brand names honoured with awards at dinner gala
B2B startups ‘are where the opportunities lie’
Consumer insights and trends seminar open for registration
DHL Express names Christopher Ong as its new Singapore MD
STARTUPS
Working with top VC managers key to unicorn investing: report
Mr Ong, who replaces Frank-Uwe Ungerer, will report to CEO Ken Lee.
Brand Your AssetsCall 6289 8822 or
e-mail [email protected] to publiciseyour Financial Statements
NOTICES
“A fund-of-funds strategy may be able to effectively overcome the challenges of unicorn investing and deliver a high-potential portfolio, while mitigating risk.”Kasper Wichmann, UBS’ head of
private equity for the Asia-Pacific
These have an excellent track record of identifying, investing in and developing seed companies, says UBS
4 | TOP STORIESThe Business Times | Friday, November 2, 2018
