Bear markets are for building, so is often said. There’s no shortage of investors (including ourselves) who will point to history and say that the most influential and enduring companies of our time – Alibaba’s, Dianping’s, Airbnb’s, Uber’s of the world – were built in such environments as today. There is no better time to be a […]

What It Means To Build in a Bear Market [January 2023 Newsletter Editorial Expanded]

Bear markets are for building, so is often said. There’s no shortage of investors (including ourselves) who will point to history and say that the most influential and enduring companies of our time – Alibaba’s, Dianping’s, Airbnb’s, Uber’s of the world – were built in such environments as today. There is no better time to be a founder than this year, we could go so far as to say. But what it means to be a founder today and build cannot be the same as it was in recent years.

A closer look at the stories of these companies reveals a common theme of “self-disruption.” In their journeys, leaders of these companies made difficult, even risky (without hindsight) choices to focus on growth, fundamentally change their operations and culture, and forego short-term dependence on external funding to develop a more sustainable business model. It’s not the typical startup story.

Before seeking to disrupt the world, it is important to disrupt yourself first. This is all the more applicable in times of great uncertainty and challenge, where there is a temptation to depend on or focus on external factors when time might be better spent focusing on what one can control and what can be changed proactively. This “self-disruption” applies to company building as well and is a mindset that can unlock more resilient growth. When faced with challenges that are inherent to and almost certainly more pronounced for venture-backed startups, it pays to first ask what can be changed internally — in terms of the organization, in terms of the business model, in terms of even one’s approach to leadership?

QingGui Huang, the CEO of the Thai online retail platform for beauty brands Konvy, shared recently on our podcast, “Sometimes it’s not about you trying to change the world, but for yourself, you have to start understanding the market that you’re running into first and adapting yourself.” In this case, he was talking about how he as a Chinese entrepreneur building one of the earliest online beauty retail companies in Thailand had to adapt to the local culture before really making an impact in the market.

In a way, the experience of some of our companies amidst the pandemic also provide learnings and inspiration — for example, how AwanTunai, for example, refocused their tech efforts to strengthen retention which contributed to their growth despite being in the badly hit financing sector, or how CrediBook found new value in building out a wholesaler marketplace to meet the needs of wholesalers in the existing user base of their initial bookkeeping app.

There’s also the experience of a much older company — Dianping back in 2008 — which reflects this. Zhang Tao came on our podcast back in 2020 and shared how they focused on growth internally rather than waiting out the funding drought, and that paid dividends in terms of building a healthier company down the line.

“We were planning to raise a new round of funding in the next six months before the ’08 crisis but obviously we didn’t go through the funding; the funding [landscape] was dried up. Fortunately, operations were still kind of small. So meaning the burn rate is not that high. And so we were able to kind of, you know, increase the revenue source and just really push on the cost side. And we actually survived. And it’s a blessing in disguise, we actually didn’t really need money. So [we] saved a lot [on] dilution and actually the company’s healthier because we are going through more revenue and cash quality route.”

When approaching self-disruption as leaders, we can break it into three levels:

(1) Leadership Level: Taking inspiration from South Korea’s inspiring group stage match against Portugal, we write about the value of focusing on what you can control and optimizing for team chemistry beyond individual skills (easier said than done), among other learnings for leaders to win against the odds.

(2) Organizational Level: When it comes to scaling organizations, there is value in developing avenues and pathways to hire “closer to home” and investing in employee growth, as shared by these growth-stage CEOs in a panel for our last event of 2022.

(3) Market Level: Even across verticals and sectors, we see how “self-disruption” is becoming a theme for growth. For example, fintechs with financing arms/focus are looking to safer shores as they build for less predictable segments (e.g., credit for the unbanked). Counterintuitively, commerce platforms are finding more long-term value creation in diving deeper into complexities (e.g., fisheries in Indonesia). Enterprise tech is also being forced to reckon with the reality of driving MVPs (Must-Have Value Proposition) as the key to growth in amidst inflation.

An important caveat here is that “self-disruption” is not necessarily a rejection or turning away from principles or theses on which the company was built, but more often than not, a returning to these principles and theses amidst the noise and distractions of growth. A common sharing of our growth stage founders on what it means for them to “build to last” is being able to “stay true” to why and how the company was started. So “staying true” and “self-disruption” work hand in hand.

Ultimately there is no singular path of “self-disruption” because that goes against its very definition (self cannot be generalized). So for us as investors, it’s important to truly understand the businesses we are partnering with to find the best way to support them in constantly improving the health and endurance of their operations. This consideration becomes all the important in terms of how that will impact the quality of money and investment activity in the ecosystem.

New Year’s Resolutions are often the most obvious expression of self-disruption, and companies will certainly have more of these as 2023 begins. But what is truly meaningful is ensuring these changes, whether it means refocusing the business or more robust financial discipline, are integrated into the organization long-term. Perhaps that’s when building in a bear market truly happens.

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Paulo Joquiño is a writer and content producer for tech companies, and co-author of the book Navigating ASEANnovation. He is currently Editor of Insignia Business Review, the official publication of Insignia Ventures Partners, and senior content strategist for the venture capital firm, where he started right after graduation. As a university student, he took up multiple work opportunities in content and marketing for startups in Asia. These included interning as an associate at G3 Partners, a Seoul-based marketing agency for tech startups, running tech community engagements at coworking space and business community, ASPACE Philippines, and interning at workspace marketplace FlySpaces. He graduated with a BS Management Engineering at Ateneo de Manila University in 2019.