Highlights

1. Focus on a few key growth drivers (2-3 monetization businesses that can scale) to create quality contrast in an expanding competitive landscape (i.e., more competition from China coming into Southeast Asia).
2. Don’t just cut the fat; buy the prime cut “meat” for the winter (meat: revenue growth, time and savings, talent and acquisition opportunities).
3. Self-sustaining businesses are built with the right partners (long-term investors and advisors).

Top: Fazz Leadership and Yinglan Tan, Bottom: Tianwei Liu, Hendra Kwik, and Yinglan Tan

Last Friday, Hendra Kwik and Tianwei Liu of Southeast Asia digital financial services group Fazz sat on a panel alongside Yinglan to share with entrepreneurs their perspectives on navigating the current bear market. 

This panel was organized by Fazz Business following the fintech group’s rebranding to Fazz, a business account for businesses of all sizes, from MSMEs to Fortune 500s, to easily receive payments, grow their capital, and access funding. 

While we’ve written earlier this year about concrete and practical ideas on fundraising and growth in a capital winter, and some of the points there were also reiterated on the panel, this article focuses more on the sharings that haven’t been as thoroughly covered in previous content on Insignia Business Review. 

In particular, there are three big ideas we focus on: 

1. Focusing on a few key growth drivers (2-3 monetization businesses that can scale) to create quality contrast in an expanding competitive landscape. 
2. Don’t just cut the fat; buy the prime cut “meat” for the winter (meat: revenue growth, time and savings, talent and acquisition opportunities). 
3. Self-sustaining businesses are built with the right partners (long-term investors and advisors).

(1) Focusing on a few key growth drivers to create quality contrast in an expanding competitive landscape 

Be the best in a few things that can create competitive contrast

Hendra introduces the idea of focusing on parts of the business that the company can (1) actually make money from, and (2) be the best at, to become the company’s growth drivers. And this focus will be the key to build that “shine” or quality investors are holding out their money for in a bear market. In other words, it’s about being able to prove that while the rest of the market is struggling, your company is enduing, if not thriving. 

“From the founder perspective, I will just do a few things and be the best at them…In the case of Fazz, we are doing payment and lending…[if] people are willing to pay for that at a small scale, you can become the best at that and [grow on top of that]…the bear market is the situation we are in [now]. Psychologically everyone is scared…[investors are] waiting for that moment of time where they can find the place to put money…so you want to be that company that is so good it’s shining…if you can become one of the [few] diamonds they can choose, then you’re going to get the funding.” – Hendra Kwik

Check out our latest conversation with Hendra Kwik on the origins of Fazz Financial Group

Competitive contrast is built on a team who has conviction and goes the extra mile

Tianwei frames this concept of creating competitive contrast in terms of people. The people who get the funding in capital scare environments are those who likely do not need the money anyway, precisely because they (1) are going the extra mile to build a business that is self-sustaining and (2) have the conviction in their business that actually reflects in their business decisions and market performance. 

“If you are fundamentally doing something that you believe in, that’s the most important thing. If you don’t believe in it, what’s the point? The next thing is, does your team believe in it? I do angel investing on the side as well, and ultimately it’s about the team and the people…if you can see them, as Yinglan says, working until 10 PM every night, a lot of the time, these people will get funding regardless of the situation…you realize that the folks who get funding are the folks who don’t need it. Investors like to invest in people who actually don’t need the money, because [investors] realize they will survive regardless…this is the time to put in the extra miles and ask yourself, “is this something that you want to do?” If it’s not something you want to do, maybe you’re not cut out for it…” – Tianwei Liu

Check out our latest conversation with Tianwei Liu on the Xfers (Fazz Business) and StraitsX side of Fazz

What the “extra mile” means may no longer be enough in a global competitive landscape

Yinglan adds urgency to this equation of finding competitive contrast, citing the increasing influx of Chinese founders known for their battle-hardened work ethic as an additional wave of competition local founders have to grapple with. This means “working hard” may no longer be enough, and local founders have to accumulate as much advantage as they can being in the region to become that “diamond in the rough” Hendra was referring to. 

“You’re not competing with the people in this room anymore. You’re competing with the world. Bytedance is here, Shein is here, and these are global, international companies. We have hungry Chinese founders who think Southeast Asia is much easier than [navigating China today], which is probably true…You need to work smart, you need to explore your local [advantages], you need to be nimble, you need to be able to find product-market fit faster thaan the rest. The dimensions of competition have changed in the last five years.” – Yinglan Tan

Check out our latest conversation with Yinglan Tan

(2) Don’t just cut the fat; buy the prime cut “meat” for the winter

“Buying” Growth But What Kind of Growth?

The go-to measures in capital scarce markets are defensive and involve “cutting the fat”, and for good reason, given the excesses that are often accumulated prior to such market environments (and often the cause for the severity of such downturns). 

But cutting the fat may no longer be enough to survive, again given the kind of competitive landscape Southeast Asia is becoming, and companies need to have a “shopping list” of sorts of opportunities and resources to “buy” and focus on amidst a funding winter.  

First is growth. Hendra emphasizes that growth, even revenue growth is still important, but again echoing the earlier insight — what are the metrics driving this revenue growth? 

“You have to demonstrate growth but be smart about what type of growth you are showing…show one or two metrics that are true…get team members aligned to chase the right metrics in a downturn.” – Hendra Kwik

“Buying” Time on Rainy Days

Tianwei adds “time” to the list, and that involves ensuring cashflow is still productive and ready for the “rainy days”. 

“I echo gave what both the panelists are saying…almost all the startups now are thinking about not just planning for 18 to 24 months of runway. I think they will probably also set up aside 10 to 20% of the funds as rainy day funds…really just thinking about what happens if I really cannot raise money in the last 12 months or so of runway, because that’s when you have to make very a painful decision whether the company needs to shut down or you really have to [double down] and do what some founders are doing, where you take pay cuts and all that just to make sure you are sustainable. And that amount of cash might be the one that you need to have to save. So again, putting your cash into a flexible deposit account that will help you generate [interest] will be interesting. At Fazz Business, we have a product like this that can help you generate one or 2% interest rate for idle cash that’s super flexible and not locked in.” – Tianwei Liu

“Buying” Talent and Acquisitions

Finally, Yinglan adds that while cuts are being made, it isn’t worth missing out on great talent and keeping visibility on acquisition opportunities to beef up cashflow positions in the near-term.

“There’s more talent available in the market. So I think you should be very open to taking in talent and not, in a fit to cut your burden and increases runway, miss the opportunity to hire people. There’s also great opportunity to see very distressed companies…[you see] 10 million EBITDA companies selling themselves for less than 10 million…that’s one thing that’s interesting for companies to find attractive acquisitions…” – Yinglan Tan

(3) Self-sustaining businesses are built with the right partners

While there’s a lot of talk about focusing on gross profitability rather than depending on the capital markets (even Sea Group has come out with that messaging amidst their re-focusing), building a self-sustaining venture-backed business especially in the early stages doesn’t have to be a lonely fight. On the contrary, having the right partners, from venture capital firms like Insignia Ventures (ahem) and business accounts like Fazz gives companies an edge on this climb in a bear market. Hendra, Tianwei, and Yinglan both share what “right partners” means for startups. 

“Think about what you need to grow. Investors can help you scale and bring in [other] investors for the next round on the operating side…the right advisor for a startup has the ability to understand the operating side, can bring the right network or VCs to look at your [company], and are comfortable to discuss [the company] with…” – Hendra Kwik

“First survive and find the right partners who are willing and able to support you over a long cycle, then you can think about valuation…pitfalls when finding the right advisor for a startup: founders get starry-eyed by credentials, but you should think about it as hiring. Advisors can also be unproductive. Make sure compensation is aligned and they [actually] have prior experience or are a domain expert in your industry.” – Yinglan Tan