[Part 1 transcript]

Paulo: From your perspective, how have investor appetites in the region changed in terms of (1) industry focus and (2) what investors look for in companies? So how does this current landscape today compared to the previous market downturns, I guess that you have yourself like, have experienced?

Linh: Okay, so this is a very big question, I’ll try to answer or try to summarize as best I can.

So I started my investment career in 2008, during the financial crisis, and so now, looking back, I see there are some similarities. You know, obviously, it’s slightly different in that in 2008 it was a complete meltdown of the financial markets, whereas now, the markets are down and looking toward a potential recession, more highly likely a recession into the future. So it’s not like a super fast meltdown like it was in ‘08 but they’re very similar.

You know, a lot of startups, a lot of entrepreneurs, I’ve seen posts and chats on Facebook and online, are not really sure how VCs operate, especially in an environment like this. So I want to highlight a couple areas that will affect the startup.

The first one is that when a fund raises money to invest, the fund has investors we call LPs. And so when you raise the fund, say it’s $100 million. You don’t get the hundred million right away. You make capital calls, when you need the money, and then the LPs send the fund money when you’re ready, and then the fund makes the investment to the startup. 

I’ve seen entrepreneurs ask, “Why is money slower now? Are funds being stingy or they try not to send money?” That’s not the case. It’s the funds don’t have the money right away. In a situation like this where there are a lot of businesses that are short on cash, the LPs may not have money. So when the fund makes a capital call, the LPs may be slow to send them the money. So that’s this one thing I want to clear up. So in case the entrepreneurs are wondering why money is slower now.

And then the second thing is, think about how the strategy behind a fund. Usually when you raise a fund you spend half of it on new investments, and then you save the other half for follow-on investments to help your current portfolio when they raise their next round. The current fund should continue to invest to show new investors that you have confidence in your companies, so that percentage is different depending on the fund. 

Let’s say for example, it’s 50/50. During a situation where things are difficult, let’s say you have a fund that’s maybe 40% invested and there’s 10% left. It’s highly likely they’re going to be really conservative, because their current portfolio may need more help than they expected. So then talking to those particular funds may not be as helpful to you.

So if you’re a startup trying to raise money, you need to find out who you’re talking to. Who are these funds? Find out how long they have been investing. How much have they already invested? [If] somebody is [already] 40-45% invested, and if they’re looking for one final investment, it may be kind of hard for you to be that one. But if you’re talking to a new fund that was just raised, they have most of their allocation ready still to be invested. Then that may give you better odds at getting an investment.

So those are kind of just two high level things that I wanted to highlight for people as an entrepreneur starting to think about fundraising. You should understand who you’re talking to and their backgrounds, right? So it’s not just them finding out about you, you should know about them about the funds when you go into the conversation, so you understand where you stand.

Then moving on to what is going to get a fund to invest in a startup. Well, I think the first obvious thing is that fundamentals always win. So, you always want to focus on having a product that you can sell. But I would say nowadays, investors are actually okay with moderate growth plus profitability. Before, you could say, “We’re growing at a ridiculous rate, but we’re nowhere near profitability,” and that would have been fine and that actually may have been preferred. But nowadays, we’re looking for companies that can survive. This is going to be a really tough period, it could last 18 months or more. So a company that’s still trying to find product market fit may have a tough time trying to get funding at this time.

And then as far as industry focus, I mean, the obvious ones are, you know, education, health care, logistics, all the areas that are being affected, or being highly affected by the COVID situation right now.

But I would say, be careful, I don’t recommend going into an industry that you’re not familiar with. So don’t pivot into one of these hot sectors, just because it’s hot now, because this will go away. It could take a while, but it will go away. And then at that point, you still have to grow the company. There’s a balance between surviving and going down a road that you can’t turn back from. So, if you’re a current entrepreneur right now, the best would be to try to maintain as much of a straight line as you can, but keep an eye on surviving.

And then for those entrepreneurs who are still looking for a concept, I would say consider what is the new normal after COVID. What are some areas where people are really thinking about now that never even occurred to them before?

I give you an example of financial services. A lot of people never plan for an emergency. And now they may be in a cash crunch. I’m talking about personal finances, not businesses. Now that you suddenly got laid off both husband and wife, what do you do? Right, so now people may start thinking more about planning for the future, planning for retirement.

Other industries you may want to look at would be what people are forced to do now that they didn’t really have to do in the past. For example, telecommuting and working with video conferences. We always had these tools before, but now you have to use it and you have to figure it out. You have to know how to get your webcam to work and all that. So, what other things are people forced to use and forced to figure out. And then and then you go in and figure out the additional pain points because of that.

I’ll give you an example. My children talk to their grandmother in the US. And after a while, it gets boring because she’s quarantined. And so we try to talk to her every day. But what can you talk to a four year old kid about? So there is an app where it’s not just the video, but you have the book that you’re reading together on the screen. So instead of holding the book here, and then trying to like show it up to the screen, the app has the book already on the screen. So it’s just a slight tweak to videoconferencing, but it really helps keep both sides engaged. So I would say things along those lines where, you know, how can you find the pain points in these new workflows that you’re going through and then how can you improve upon that.

Aaron: I think the landscape has been very, very challenging over the last few months. In fact I was just telling a friend of mine who is in the call right now that they are very lucky that they were able to close their fundraise, just before all these things — I mean even not just before all these things but [even] during the explosion of this COVID situation.

Generally I think that the market has been [solved] already coming into the year right because normally when we fundraise we try to avoid October, November, December primarily because you do Thanksgiving and Christmas and then New Year. Coming into CNY that’s where we start to pick up and move on to fundraising, but in this particular year, it was really slow coming into the year and then this whole COVID situation makes things a lot worse. So in other words, for folks that didn’t start fundraising earlier on last year or towards the end of last year, I think life is very, very tough.

Especially coming into this, because we have seen valuations drop very drastically across the board. And this is going to be the norm. So what I think what [Yinglan] said famously was that the flat rounds are the new uprounds. But I think I could not agree more with that statement, more than anything else.

Yinglan: Most people think, you know, and companies think they have to cut costs and raise money now, but I would actually think this is the worst time to raise money, especially people they don’t know, starting a fresh conversation right now, I think it’s going to be very challenging. And particularly because it’s hard to travel. Investors need to do the due diligence and do company visits, and talk to customers. At this point in time, it’s very challenging.

So actually, the first thing I’ll point Singapore companies [in particular] to is the very generous, resilience package that the Singapore government has launched, especially because they are startup-friendly. And that’s what we need to end the call come later at 4pm Singapore time because the Prime Minister will deliver an address at 4pm. And let’s see what he has to say but I think the first resort is actually to try the government grants at this point in time.

I think the second thing is also to talk to your partners to see — are there any payment schemes that you can even change? Can you defer some of the payments? Definitely defer some of the capital expenditure that you intend to make.

Even on payroll, we have seen very creative models such as, you know, let’s say a management team can cut salaries like 40%, but in lieu of the big cut, they issue a little bit more ESOP, and I think when things go back to normal, they get big and, you know, they can [go back to] the original pay. Okay, I think we’re seeing some very innovative sort of cost cutting measures.

And I think the last part I would say is to really think creatively, I think as Linh pointed out to think of new business models, right. I think if you look at Zoom, they offer free services for schools, Amazon, offer free books and Linh’s example of the storybook. I think that was a good example. I think also it may result in radical changes in user behavior. So online education, I think it’s going to change dramatically, you know, my daughter essentially just walked from the bedroom to the living room Wednesday, because it was the first study from home day and I believe in Singapore the [social distancing] period is going to lengthen even more.

Riot Games just released their figures that online gaming in the US spiked by 75% in the past few weeks, mostly because people have a lot of time to play. We also have some interesting green shoots among our portfolio that a company called easy for example, they are doing a B2B marketplace, and we thought that businesses could be affected by the COVID institution, but it turns out that the big multinationals that work with them bought a lot of hand sanitizers and masks from them. So their volume spiked, doubled, and actually almost tripled in the past two month, but so I think always, always be on the lookout for opportunities in crises like this.

[Part 2 transcript]

Paulo: What are your thoughts on cost cutting and sort of how founders should approach staying lean during this during this time?

Linh: Quickly following up on what Yinglan was saying with being creative. I think you should also think about how you can partner with somebody else or with another company to fill each other’s holes? 

I’m not going to name names, though I know of a company that basically, they have production, but their sales team is all offline. So now you can’t really go out and talk to people and try to make your pitch and so it’s really hard to sell their product. So then what if you find a company that’s very strong online, but then they just can’t sell their product, maybe they sell travel products where, you know, nobody’s really buying it right now. So then you each take what is strong and you work together, and you could potentially merge. And then if it works out, maybe you merge into a 50/50 company so that at least you survive. The goal is to continue to stay alive until after this period, and then you can grow again. And you’ll see, I think a lot of companies, a lot of your competitors will go under and so if you are the one or two that’s remaining, even if you’re much weaker than you had been before, that’s still better than, you know, being dead. [It’s better] being super creative and trying to find any way you can to keep your doors open.

Paulo: You’ve touched on it already a bit — cost cutting strategies in particular, how, what are the creative ways? I mean, you can always reduce costs, right. But what does that really mean? In terms of say, for example, the balance sheet, the different items there? And in terms of, relationships with, for example, like suppliers and different business partners. Maybe you could concretize that for us?

Linh: I would break it out into two types of companies. There are the fortunate few who are cash rich or they’re cashflow positive and are able to maintain. So when I say cash rich, I mean, you have at least 18 months runway. So if you have that much then I would see this as an opportunity. I would continue to advertise. Continue to try to sell your product because you have very little competition out there. And so now you see CPAs can get really low, you can continue to grow the business. Even if it’s a more moderate pace, at least you’re growing.

But those I think will be very few and far between. I think the majority of the businesses will be just trying to stay alive. Most startups don’t have that much runway. You know, trying to stay alive for 18 months without funding would be really difficult. So at this point, cut everything.

I would start with cutting things that you can reverse, right? So for example, digital marketing, that’s easy. You turn off Facebook, turn off Google and then later on, you turn back on, right, so things that you can do with very little repercussions. And then once those are cut, then then you look at the more serious ones like rent, labor and HR. And so you had mentioned some creative ways you can handle HR so instead of laying off everything, maybe try a furlough where it’s unpaid leave for a little bit. I know Vietnam has certain laws on that. So you want to look up the rules and laws on that. Or you offer equity, or maybe you can turn them into a contract contractor, consulting contract, as opposed to full time, you know, just something so that you can maintain the ability to turn back on whenever the market starts turning around again. So that’s some of the ways you know, we think about expenses.

And on the other side, it would be revenue. So you’re kind of aiming for sideways, right? I mean, before basically as a start up, you definitely want the hockey stick. But nowadays, I think sideways is definitely very acceptable. Just, you know, just don’t go down.

So sideways, what does that mean? The most obvious one is can you make your product online? You know, whatever you’re selling, can you try to sell it online? Or if you’re a b2b company, can you tweak it to be B2C, and then you can try to sell directly to the consumer online.

You could also look at your entire value chain. Basically everything that you buy and everything that you send out, you know, where does it go, you know, how can you potentially turn it to the supplier, or can you move down and be direct to the consumer, right? So just look at every single tiny aspect of your business and figure out if there’s any way that you can either add on or temporarily pivot or if it would make sense then it would be a full pivot into a different business model.

Paulo: Then I’d like to zoom in on an industry in particular in ecommerce, we’re definitely seeing a lot of activity in terms of people, especially with groceries and essential items. So there’s probably a lot of growth there as well but at the same time you have a lot of pressure on the supply chains. What is your advice for commerce startups?

Linh: The initial thing I would think about is safety. Make sure that your workforce — as they are continuing to work even though everybody else is told to stay at home — make sure that they feel safe, and that they are safe. [You] really don’t want to get more people sick, just because somebody wants a box of cookies, right? That’s the first thing. Make sure you train them on hand washing to supply them with proper tools, masks and and teach them how to implement roles where they don’t have to interact directly with the customer. So that’s the first thing.

And then the second thing is the supply chain. Luckily, you know, gas prices have been down recently. So you can at least keep the cars running right if you have less revenue now and you can also reduce your expenses with the logistics chain supply chain, and the warehousing of the products, that would be good too.

And then the last item would be making sure you have the items necessary for the consumer. Maybe now is the time to start reducing the products that are luxury products or that are nice to haves. And then focus on the items that are really selling well. And this is where your analytics come in. And if you just focus on the top 30% of your products and make sure that those go out in a timely manner.

Aaron: Yeah, I mean specifically for cars I mean, honestly, what we see right now is a drop in demand right? Because a lot of people are not able to go out of their homes, kick the tires, and all those things. And to be honest, pure online buying, it’s still going to take some time before people start adoption because people want to get out to [buy].

Generally, I think the line of our own business that is purely to do with trading of cars has been hurt. And it’s not even because consumers are buying less used cars, but actually because of the fact that customers are buying less new cars. Because when people are buying less new cars, it results in less trade-ins. And as a wholesale marketplace, it becomes tougher for us to get trade-ins of cars.

That said, what we have seen is the increase in demand for our leasing or our subscription product, right, where we talk about six months subscription or one year subscription of vehicles and stuff like that. The demand for that particular product or what we call Carro Leap recently has gone through the roof. We don’t even have enough cars to fulfill the demand that we actually asked the other companies that were struggling to say, “Hey, you know, you want to do this your car on our on our platform instead, so that you know, we can work together with you to lease your cars out and you just subscribe to the platform,” so to speak.

What we have learned is that okay, while demand for trade has decreased, actually, the demand for subscription has risen a lot and that has more than enough effect to negate that drop in business for us.

So I think net for us, from an ecommerce order from a purely transactional marketplace standpoint we continue to see pressure but from the perspective of Singapore, but if you ask me in Malaysia in places like in Malaysia and Indonesia where they almost pseudo lockdown is terrible there when it comes to cars.

But I think generally it’s a matter of how we think about business models. How do we think about what the customers are fearful of is safety or this because they just want to get the car from the comfort of their home, etc, and move on to innovate on different business models that can survive through these tough times.

So we’re always constantly thinking about how we future proof the business. How do COVID-proof the business so to speak, so that at the end of the day, this particular situation that we are all in right now becomes more an opportunity, versus an issue or a trap for a company.

Paulo: What would be the consideration startups should have, especially if they’re looking to drive more adoption and retention these days, considering you have different markets with undergoing different situations and different customer behavior?

Yinglan: That’s a great question. Aaron runs a company that operates in multiple markets, and now we have a portfolio in multiple countries. And I think the impact on each of these countries has been a bit different. I think Vietnam has done a great job in testing. I think they took effective steps to actually allow the country 14 days, you know, swiftly and decisively. Indonesia is a big question mark. I think they are starting to test people. I think that most of our portfolio companies work from home.

And actually we just did a tally on the impact of COVID-19 on portfolio. And I think 75% of our companies are negatively impacted. I think 25% is actually a larger number that we thought would be positively impacted. Companies like Eezee, online education, some of these online gaming companies actually got positively impacted by the crisis.

What we’ve done is we’ve spent the past two weeks doing a stress test on our portfolio. At a high level, you know, I think 75% of our companies have a pretty healthy balance sheet 12 to 18 months runway. I read a lot, and the signs, I mean, indicate that the closest that we can get a vaccine done is 12 to 18 months, so I think that there is sort of a timing that we think that we want to prepare our companies well. I think another I would say 10 to 15% have you know, six to 12 months and another like 10% has less than that six months.

Those companies we really went down and planned out scenario planning right so assume you know revenue doesn’t drop which is unlikely because there’s a big demand shock. Assume revenue drops 80% then the worst case assume revenue drops to zero or 90%. And then come up with what you should do in these kinds of situations. We came up with a lot of defensive measures for people you know, like cutting opex or shifting capex payments or stop some of the expenditure and stop the bleeding. Cash is king right now.

And then for the offensive majors, are there new channels that are online? If you have a restaurant for example, can you solve your food delivery online? If you have a cosmetic company, they don’t have any offline shops, and you do more of the sales online. And so on and so forth.

I think just two other quick notes is that, I think is, you know, most people choose their partner in not knowing how they’ll behave in good times. And it’s easy for VC funds to invest in companies that go right into hockey stick, but I think it is in a downturn that you see whether your partners will be there for you. And whether they spend the time to help you through a crisis in it. You know, I think that’s, that’s when it’s been telling and similar for us.

I think, when we look at founders, we see how resilient they are, in the face of adversity, right. I think some of the best entrepreneurs, the Tencents and Alibabas of the world, you know, essentially went through hardship and I think it’s really a test of the founder’s capability and resilience and I think is the time where we sort of see the difference between the boys and the men. I think the message is if you try to help yourself first, and the folks are willing to help you because they see that, you know, you have the resilience to stand up for yourself. I mean, there’s sort of two points that it’s worth mentioning.

I think the last point that I thought is probably worth thinking about is you know, I think, even if you have to do layoffs, good we do it gently and kindly. And I think some folks prefer the concept of furlough but I think it is important to know that you know, their families to take care of so take good care of them, and you can, and do it respectfully.

Paulo: What is your take on B2B startups from Southeast Asia that are looking to expand internationally. And how should they deal with sort of like making these relationships especially with the situation ongoing in different parts of the world?

Linh: I think international sales right now, in theory, the playing field has been even. Before if somebody was in the country, they could do a pop-up shop or they can come and present in person. But now everything it has to be online. So technically, you have a better chance of winning a client now. However, that’s only if the business is looking to buy. And unfortunately, I don’t think most businesses are looking to expand at this point. I think even if you’re a Fortune 500 company, you’re looking at how to conserve cash.

So, unfortunately, I think B2B companies may have a more difficult time now, I mean, B2B sales already has a long lead time as it is in a good market. So in a bad market, I would almost expect the timeline to double. So for now, it may make sense to find, you know, maybe just a small portion of your offering, and then sell that cheaply to the consumer so that you have some cash to stay alive. And then once the market turns you can turn off the consumer offering and go back to the business offering.

But with that said, I would still try to communicate, right like now is the time to show the buyers within the companies that you really know your stuff, right? So if you can offer them help, whether it’s an informational PDF, or just kind of offering them a few features of your product for free so they can try it. And that may be a good way to get them used to your product. But they’re probably not going to give you money for the product until they’re financially stable, which could be 12 to 18 months down the road.

[Part 3 transcript]

Paulo: How should founders approach pitching to investors and the whole process of fundraising these days?

Yinglan: I think the first thing is get your house in order first before you go out externally to fundraise. I think that’s number one, don’t do it out of panic. It’s most likely not to get any results.

And I would do it with two categories of people first. I think one is your existing investors — have a very candid chat with them on whether it is possible to do a bridge financing.

And then I think the second category is people who have been tracking you over time. It’s not like a first conversation, but a second or third conversation. They already know you from before and met you in person, have done some work, just now you are out there actively fundraising. I think these are the two categories of people I will talk to first.

I think and then I think that a few other things. Is there I think that be prepared for the timeline to be extended because you have to bear in mind that a lot of these VCs are also being defensive on their current portfolio. So they don’t actually have a lot of time to meet new companies.

We still meet a lot of new companies, because given that we have a fresh 208M fund that is not yet deployed like dry powder. So we’re still meeting a lot of new companies, but in some cases a lot of the funds’ emphasis is on managing their existing portfolio so they don’t have a lot of time to meet you. And I think the due diligence process, as I mentioned, is going to be elongated. Even if you know me personally, diligence is more tricky. I think it’s harder to get a feel of the market if you don’t visit and have an in-person [conversation] with the team.

I would also encourage some founders, especially in the fintech space to try to lock in some debt financing, especially for banks, given that now in Singapore, the government is working with the banks to sort of absorb some of the risks with downside protection for the banks. So be creative around not just equity financing, but also debt financing, and even a hybrid of venture debt, for example, as those tend to be useful in times like this.

And I think the other group of people that are interesting for smaller companies is to go talk to angels that have always admired you. And then, you know, I think for some of the angels, you know, they could be, you know, if their capital is stuck in public markets it’s a bit more dicey. But I think there are a lot of family offices, you know, that are [interested] in investing in tech.

Now I think the dicey part about this is a lot of the family offices are also invested in the public money. So while we look at public markets and market cap, they have shrunk significantly. So as a result, their allocation to private markets have shrunk. So don’t expect a quick conversation.

And I think the other key learning here is as Aaron has mentioned, do be realistic about valuation. You shouldn’t be asking the funds to sort of come in at what you think is the right valuation.

I think now, it’s more important to have cash for survival than trying to optimize their valuation. Is it a good idea to say, Oh, you know, we have multiple offers coming in, you know, decide by next week. I mean, those are long shots, I would say, and you really have to be very realistic about your fundraising situation.

The last parting bit of advice for founders is that sometimes it’s a numbers game when we go fund fundraise because you never know where they can find the angel that is actually all-in cash. So don’t take no’s personally because I think that the market is tough for everybody. Instead of talking to only 10 investors, now you need to cast a wider net now but start from people that you know, and on a recurring basis actually ask investors to introduce you to new investors. Generally, that is a better strategy.

I think now we try to keep a weekly dialogue with some of our founders and our co investors. You want to really want to assume the worst case like you know, for some of those scenarios, you’re going to assume the worst case, then if things pick up faster than normal, then you [adjust]. So don’t think that you’ll be business as usual because for some of the consumer facing companies, you have a severe revenue drop. And you’ve got to bear that in mind. And most founders are optimistic. So I think it is important to take the worst case and then just [go] outwards rather than taking the base case. That can be the difference between life and death.

Linh: I agree with Yinglan, start with the people you already know. But if you think about this as an 18 to 24 month process, if you start now, in 18 months, when you really need the money, then that means you started the conversation already, right? So if you’re sitting there and you’re thinking, “oh, crap, I don’t have any people that I have started conversations with,” start now. And then continue to talk to them, and in maybe 6, 12, or 18 months, they already know you then and then they’ll be ready to invest. So all is not lost if you have existing relationships.

Paulo: Since we have Aaron here who is managing teams across different countries, right, which are undergoing different situations in terms of work arrangements and all of that. What has the experience been like, from the time that this outbreak came on the news and a lot of government started happening on it? And how have you been managing sort of the work from different countries?

Aaron: Yeah, so what I tend to do is I tend to empower the local CEOs to do what they need to do. But I think for us, we were quite lucky because Singapore was [one of the] first to be hit and in that sense, all these others AB you know, social distancing, working from home, working upstairs and downstairs and working in different parts of the room.

We were quite taken aback when the government decided to enforce all of these AB working relationships. We actually took it quite seriously. And we actually implemented AB work arrangement really soon back when it was just announced, I think it was in January or February.

So, Singapore then as a result has this whole process of how we did for this COVID stuff. By the time things started turning bad for Malaysia, Indonesia and Thailand, say early March, late February, we had a call with our various countries and we say, Okay, this is what I need to do, right?

So we need immediate effect. Let’s move to work from AB, right and then make sure that all systems and stuff like that needs to be accessible via the internet, right? So, you know, one of the first things that you were most worried about was the accounting system that we have in certain places. Because in some of the countries, the accounting software is actually hosted locally, right? So that basically means that we could have some issues and accountants couldn’t work from home. So the first thing we did was okay, how do we make sure that everybody works from home but that is also not possible when it comes to sales and operations, right, especially when you need to sell the car or the do viewing for the car?

So on that note, then the question is, okay, how do we make sure that there is redundancy, right? How do we make sure that okay, in the time when the government called for complete lockdown, what do we do? So there was a lot of scenario planning early on, we were very lucky because Singapore, and then very quickly, the next country that was really affected to what actually was more Malaysia and then quickly became Indonesia and subsequent to which Thailand almost in that order in terms of severity and impact on our end.

What we do is that number one, assess the situation, number two, you know, implement and share measures across the group. For myself as CEO what I tend to do is that I have daily calls, if not at least two days or so, I have an understanding of whatever that’s happening in various countries.

We are very much impacted from a sales standpoint as far as credit standpoint because we actually have a fairly large loan book right which basically means that in times of uncertainty like this and especially Singapore government recently just issuing a new law basically means that okay, you know what, you can now get away scot free for not paying your rent or paying your car loans and stuff for six months without too much impact to [the consumer].

So for us, we are watching all those kinds of things. So for me it is about understanding which metrics are important. For instance, I’m watching my NPR like a hawk nowadays, right? So it means like, even the 10 days late or one day late I need to know. Right? So it’s very important to measure each of your countries accordingly, each of the business lines according to what matters and how it will matter.

And I guess the number three thing is that a lot of us have a lot of employees that we have. Are you working from home nowadays? The question is, then how are they doing? Are they coping well? Well, do they have very good instructions from their bosses. So the next thing I do, we are going to do next across more and more countries is that we have done this survey and follow up for you guys. So we are implementing it across various countries as well, which is to understand what is happening, do you have enough directions from the various CEOs and stuff and whatnot. So currently, right now, I think I can only say that we are quite lucky for various reasons. I think numbers will be much impacted and will not be as bad as we originally thought.

Yinglan: Yeah, just to maybe add a few points on what Aaron said. I think there are some other measures that you can take which is really I think you have to figure out new sales and marketing channels. Right, without meeting offline, I think, you know, just met a company that has implemented a virtual showroom for property i think Aaron is doing something on virtual showroom for cars

But I think you know, how do you think of, you know, closing transactions and faster sales lead time and lower customer acquisition costs, or by using inside sales reps for upselling and selling right, so I didn’t even think think through actually for the b2b companies, you know how you’re going to repurpose some of your salespeople or BD people for inside sales and online teleconference. And the trick here is to do it swiftly, rather than delayed right, and then you wait and see attitude isn’t gonna help you very much.

So I think the other thing is to be realistic about your customer churn assumptions and your sales pipeline, because it’s not only a demand shock, but be mindful that some customers may not Be able to survive, or they are fighting for their survival. So they will have to cut costs massively. So don’t think in isolation, think in terms of your customers, they will also trim some expense.

And you have to have your forward budget with a very strong dose of realism. I think the other thing is you have also, you know, I think you have a nice opportunity to tune your business model and offering to fit the changed product, right. Because I think what we’re seeing is the consumer behavior is changing, I think over the past two three weeks You know, I just spoke at this MAS event on zoom, you know, you know, I think consumer behavior is changing, you know,

I think the other thing is that your competition who do not have enough cash will fall by the wayside, and they are the paid acquisition models are falling. So this actually presents an opportunity for you to, you know, take advantage of it.

I think the other thing is also talent is much cheaper. So I would say yes, you should freeze hiring to cut burn, but I think always be open for exceptional candidates that are available. And try not to cut your engineers because in southeast Asia engineers are a scarce commodity right? You know, you want to make sure that you are prepared for the upturn when it comes, right. So you got to make sure that you know, you not only survive the downturn, but you also have, you know, you want to have capabilities, you don’t want your capabilities to be really affected when the upturn comes.

I think the last message is, you know, it is the time that we need to over communicate, than under communicate. I think, even for us, we just had our annual meeting, but I took the effort of just doing one more round of calls with our limited partners to assure them how things are and what we are doing to address the situation. Take care of your team, talk to your people, talk to your board, talk to your investors try to over communicate rather than under communicate, and I think always plan for the worst case scenario and see whether the situation is [adjusts] upwards. 

For us as an investor, you know, we think our role in the ecosystem is a counter cyclical investor right. So when things are actually gloomy we may probably make more investments. But just that I think the rates are now higher we have to put more analysis into our investment cases and be a bit more selective. I think our role here is to act as a sort of a counterbalance to the to the to the market.

Paulo: I also want to extend the question to Linh as well, in terms of like operation and then business models since you yourself also manage your own business and specifically in Vietnam, right. How does it look like from your point of view? How has the change affected your business? And how is your like outlook for the months for the next few months?

Linh: Yeah, I mean, I think it’s very similar to what Yinglan and Aaron were saying is, you just have to be conservative in all your forecasts. So I guess some specific items, let’s say, right, you look at your balance sheet. And like, you know, you know, I’m saying your customers are now also hurting. So if you have accounts receivable, I think the conservative thing would be to say, I’m not going to receive those receivables, period, or maybe I won’t receive it for another six months. Right. So that’s how you should look at your financials and and really scrutinize like, let’s say accounts payable. Well before you would pay, right, but now, what can you not pay? 

Maybe let’s say rent, right? That there’s been a lot of talk about Abercrombie and Fitch saying or just not paying rent, right? So you can talk to your landlord. Or maybe you can say, look, we’ll pay you your interest, right? So if you give you this money, you would put it in the bank, you would receive this much interest. So we’ll pay you that interest now. And then in the future, when we have customers again, we’ll pay you all the backrent, right. Creative things like that, where you look at every single line item? And don’t assume what you would normally assume before, right? So if it’s a receivable, don’t assume that you’ll get it. And if it’s payable, don’t assume that you’re going to pay it. Right?

Get creative. I know that there are contracts and yes, they may be able to kick you out. But the reality is, if they kick you out who’s going to rent from them now, right? No one’s renting new places. So it’s better for them to work with you. So that you can stay there and so that they can guarantee themselves some money in the future. So just it’s creative ways of looking at the business. So when we say creative, it doesn’t just mean your product and your customer, but it’s everything else all the operations that have to do with business.

Yinglan: Okay, not just the account receivables or account payables but also signed term sheets she’s right.

So I think one thing, you know, founders realize is hey, you know I think over the past few weeks, we’ve seen signs of people walking from signed term sheets from our portfolio, one or two, but not that many. But I think it is important to note that reputations are made and lost during difficult times.

I think we, you know, I think founders as well should realize that he or she doesn’t mean anything, unless the cash in the bank. Right. So, for those people who are closing rounds, I would strongly urge you to [expedite] the process, focus on getting money in the bank, you know, [turning the] nickel and dime on small things and for our fellow investors, I think, you know, it is a time to sort of, you know, even if you have a signed term sheet, you know, maybe two, three months back, I think it is time where where your reputation is on the line, right I think for us when we sign a term sheet, the deal is considered done, but I think in many parts of Southeast Asia, you know, the the definition is, is quite loose. So I would be watchful of that.

Linh: Yeah, and along those lines, I would say you can’t be as picky about valuation anymore or the syndicate, you know, the group of funds that will invest with you. Right?

The thinking before is get a good valuation only work with people that would add value, you know, all the ideal things that you would have in a perfect market. But now it’s not perfect. And now it’s about survival.

So if the valuation isn’t so good, well get used to it, right? Because it’s better for you to stay alive than it is for you to shut down. So maybe take a smaller amount at a valuation that you’re happy with. Live for the next 12 to 18 months, and then get a better round, when you’re the only one that’s alive, then your valuation would be really good coming out the other end.