Cut the BS: start-up business models in Southeast Asia
It’s the hard questions, the uncomfortable ones, those where you don’t have answers, where you struggle at first and think about for days or weeks. The kind of question that’s taking a hard look at the tremendous amount of energy you have spent over the last six months, to work on every free second of your time in order to build up what you’ve got now. It’s the question that makes all that effort seem futile in just a string of a few words.
Where are those hard questions? They are not nearly asked enough.
From my experience of engaging with start-ups in Southeast Asia, from all angles ranging from co-owning a start-up (yes, please do ask me hard questions about how ROOMOOMO, the Asian Designers Luxury Outlet, makes money and scales), investing, advising, attending numerous (probably too many) events, close insights in corporate accelerators and incubators, I see that the vast majority of early-stage start-ups in Southeast Asia are great at one thing, and pretty awful at another.
1. Marketing: ✓
It doesn’t take much to realize the buzz surrounding start-ups in the region here, primarily those selected at incubators and accelerators. From both ends, the external side (investors’ support) and the internal side (start-up marketing), self-congratulatory, title-inflated, overly-optimistic shouting is the norm these days. We are building the next big thing, world revolutionary, market changing, industry disruptors. Seriously?
This graph is from a TechInAsia article, based on anecdotal evidence. It concludes by saying “Asia has to find its own way. It’s Asian stubbornness at work.” I don’t have hard data either, and you may disagree with my very individual assessment here… But either way, whatever explanation you may try to find, it’s not a sustainable way. You can pump all your money into sounding good, fantastic, and try to acquire users — if the product doesn’t work well, if the market isn’t there, if there’s not an actual need for the service, it will fail. Simple story. No matter how many great-sounding and good-looking slides, talks and endorsements you get.
2. Business models: maybe later?
Nine out of 10 startups fail, which is why the failure post-mortem has become so common that it’s practically a Silicon Valley cliché. The proliferation of the failure post-mortem has helped create a bizarre cult of failure that seems wrong-headed (1).
Perhaps it comes with this celebrated culture of ‘failing fast’ that let people get off the hook for it. Perhaps it implicitly plants the seed into founders’ heads that a working, sustainable business model that generates good old cash is irrelevant. It’s not all about the user growth. You can’t run a business if you have no cash flow. You cannot simply rely on investors’ money.
A case in point in the very recent history is certainly some of the Rocket Internet startups that made it into seeming ‘success cases’: Lazada, Zalora, but above all Foodpanda. Burning cash to the point of no return. And even the keenest of investors who need to get their money out somehow (for sometimes dubious reasons I don’t want to cover here) are slowly realizing something’s fishy now.
Now, back to our early start-ups: let’s be honest, they will simply not revolutionize the world. Your delivery service for X product is not going to make a substantial difference to people’s lives. Sure, it may be a nice little ‘efficiency hack’ to make people’s lives ever-so-slightly more efficient, but does it really? Does it warrant a few million USD? meh…
And more importantly: what is the business plan? At least founders should be honest to themselves. We all know that public presentations and investor pitches are a marketing game. A game of picking the ‘right’ KPIs over a transparent & comprehensive picture. But at the very least, be honest to yourself, understand your business at the heart of it, the key drivers, the success levers, where you can realistically go in the coming months…
At the end of the day — what’s the real goal? to get an investment, exit and get rich? or true innovation, disruption, increase in efficiency… 9/10 startups fail, and I’d say for founders 9/10 aren’t really after the latter. It’s a glorified world of self-promotion. And it’s pretty easy to see through, besides all sorts of other, more global, BS…
Southeast Asia, let’s start drilling down and asking more of the uncomfortable questions.
Its’s about questioning, not just asking questions — and that’s a substantial difference!
Article originally published on LinkedIn.