Entrepreneurs need patience, relationships to succeed in Myanmar: Alex Wicks, Karzo
What led you to start Karzo? Your professional background was in media. How did you go from film production to starting a logistics company in Myanmar and what was that that journey?
It started a long time. I left Australia and ended up in Myanmar
running a logistics startup is because of a girl that I followed to France many years ago. We lived in Sydney, where I worked in the film industry for a number of years. Then I moved to France with my ex-partner. We ended up moving around — she worked for the United Nations — and were on the move for about a decade.
I realised after a couple of years of moving around that I needed to maintain a professional work online. Essentially, I was following her career around the world and I knew I couldn’t just keep changing jobs. So with my multimedia background and work in media production, I started exploring ways to apply this to online businesses that could generate income.
Funnily enough, I ended up in the horrible world of affiliate marketing. The only good thing that came out of that was a bit of cash. I partnered with a friend who did the same thing — his wife is in Japan — so we started building websites and doing websites reviews. I would build them and he wrote the content. And we did well with that, but it’s very competitive. What I did learn is how to do search engine optimization (SEO) and digital content marketing. It got me into the world of online and digital marketing.
When my former partner was posted to Myanmar — a very exotic and interesting place — by this stage I’d built this SEO business based out of Hong Kong. I didn’t earn anything crazy but it paid the bills. We moved to Myanmar in 2012, which was a very different place to now as it just started to open up.
We paid about $350 for our SIM cards on the black market. There was still plastic tables outside in the street with landlines, as that was the only way locals could call. This was because they couldn’t afford SIM cards. And it was a very interesting and fascinating place. I fell in love with the country straight away.
I also lived in Vietnam for a couple of years and have a great love for it. But Myanmar was the more interesting place for me. I kept doing SEO business from there, mainly international clients, because Google Adwords wasn’t even allowed in Myanmar back then. There was no SEO and people didn’t know anything as they’d just started adopting mobile phones. Myanmar had the fastest mobile adoption in the history of the world.
But the only thing they had was Facebook and Viber, which came and just took the whole market. So when people in Myanmar engage in online search, they open Facebook. For them, that’s the Internet. They don’t really know what Google, though that is changing.
From there, what were the roots of Karzo being launched in Myanmar?
After the proliferation of the Internet — which was really bad quality in the early days — I was really falling in love with the country and saw substantial opportunity. Myanmar is interesting because of its large population (54.56 million), very resource-rich and geographically located between the two biggest markets in the world, China and India. It also borders Bangladesh, Laos, and Thailand. It is the crucial land link between South Asia, China and Southeast Asia.
I knew I wanted to build a business. It was more a matter of what not to do in Myanmar because nothing existed in terms of platforms and anything like that. I started looking and in the early 2010's, the sharing economy was this really sexy thing. This was seen in the form of businesses patterned after Airbnb and Uber seeing great traction.
I was fascinated by that. I love that whole idea of optimizing existing capacity and connecting things. I read up a lot about it and knew I wanted to build something like this in Myanmar. With it being a small network (i.e. expat community) there, you know everybody, so you can ask around. You can access people like the senior executives of Coca Cola, government officials, etc.
I kept researching what would be good to focs on in terms of the big problem in Myanmar that needs solving and would impact the country in a very positive way. And it all kept coming back to logistics. Every time it kept coming just solving this very opaque, fragmented and unreliable aspect of Myanmar’s economy. I remember sitting in Yangon during a monsoon one day discussing this with a Myanmar friend.
We both looked on the street and realized everywhere you looked in Yangon, almost every second vehicle is a truck. There’s trucks just everywhere. I
did a bit of research and found out that 430,000 trucks in the country deliver 90% of the goods. It’s all by road. And all of those trucks are owned in the form of small, fragmented family fleets. And then on the other side, all the
businesses were saying, “Logistics is awful. I really need that solved.”
That’s how it [Karzo] was born. The idea was to build a platform and connect that excess capacity. These drivers just sit on the street with their telephone
number on the side of their truck and hope someone comes and orders their truck. So it’s perfect to optimize that and make it a platform that connects it to businesses. So the idea was born then.
What year did this happen?
This was in July 2016 and I put it through the very first accelerator in the country called Phandeeyar. But I ended up leaving after a month because we couldn’t settle on the terms, which were unfavourable.
The terms were just very controlling of the company, which I understood because it’s the first ever accelerator in the country, so its very risky. But it wasn’t for me, so I left.
We went out, we started in the on-demand B2C space in Yangon delivering bits and pieces, e-commerce, couches, whatever. But
then we realised more and more the B2B space was the major pain point.
So we started shifting more to B2B and we raised a seed round from Seed Myanmar based out of Singapore. It was great, we got a few angels, and then we started going. And then, we really started ramping up and building the team. The technology wasn’t quite there yet because it’s just a market that’s not ready for technology in that industry. About a year in, we fully pivoted to being B2B. And now where we’ve moved into the Myanmar contract logistics space.
What changed and led to Cocoon Capital taking an interest in your company?
The seed round was great, and we also got a grant from the GSMA Mobile Innovation grant, which was a big stamp of approval. It was quite a lot of equity-free cash injection and allows us to set up an office of Mandalay
and really expand along the four transport corridors of Myanmar. We were relatively established by then.
We started talking to Cocoon because we were going to all these events looking at the next capital raise. And Cocoon were very interested in us. For one, Myanmar is fascinating and they understand the importance of Myanmar. Secondly, they’re very B2B-focused. Michael Blakey, the partner at Cocoon Capital, has made a few investments in logistics and really understands the space.
What they really understood and saw of the big vision we had, was of course the long-term aspect of not just the trucking and logistics service, but building out all those additional revenue streams linked to it. Since then, we’ve partnered with banks in the country to offer loans and other financial
products.
We’re partnered with car dealerships and truck dealerships for services such as selling tires. We can eventually link that to truck drivers who can then get loans to buy new trucks, because there’s no creditworthiness in Myanmar. We’re building the first “creditworthiness in the country” project through our database. So we have a lot of attracted parties, insurance banks, car dealerships, and other corresponding companies that want to work with us.
What’s really the biggest challenge of operating on the ground in Myanmar and the advice you’d share for those entrepreneurs from Europe, Australia or elsewhere who want to enter the Myanmar market?
Patience. A lot of patience. You really need to commit. It’s still a very
frontier market, it’s still highly uneducated. I’ve seen a lot
of people over eight years I’ve lived there rushing in to try and set up a business and exit or sell it within 2 years. That’s just not going to happen in Myanmar, you’ve got to slowly make changes.
Commitment to the country is very, very real. It’s not a modern market or even a tech-savvy market yet. So you need to commit, be patient and build relationships first. It’s very relationship-based.The technology will come, but it will come later. Just like Thailand or Vietnam, it takes years.
Myanmar is very strategically located country. It is part of the CMLV (
Cambodia, Myanmar, Laos, Vietnam, Indochina) group of countries. It’s an entryway India and Bangladesh, as well as perhaps into China. For those companies scaling up their business and entering from outside with an established business model, what should they bear in mind given its dynamics?
I’ll give you an example. When luckily when I started Kargo, now Karzo, the platform model wasn’t set up or regulated. They [the government] didn’t know what that was. You couldn’t just set up a company.
You’d have to explain why you’re not just a logistics or technology business but a platform in the middle. They didn’t get it. But luckily, Uber and Grab
came in just at that time and had to work with the government for six months to organise new regulations for what this sort of platform-centric business model is.
So now that’s done, when people come in, you just need to be patient and work with the operational realities of Myanmar. A lot of times, it’s challenges you’ll find you wouldn’t expect to deal with. We just
take so much for granted in a modern market but it doesn’t exist there yet. So you might be stalled in creating this new idea in the market before it can be adapted to and made official in Myanmar. It’s those sort of things that happen. And again, it’s very on the ground and traditional in terms of being relationship-based.
That’s why a lot of potential competitors of ours that are present in more mature markets can’t just come in and plug-and-play into Myanmar. You’ve got to build something slowly for Myanmar and fit it into the market as it is now. This is so that later on, you can turn it into a very scalable tech-savvy business.
It sounds like Karzo is evolving a very resilient business model, given Myanmar is a frontier market and is operationally challenging. What you see in terms of expansion - an Indochina play or moving into India and perhaps establishing a footprint in Thailand?
Currently, our big focus again is just Myanmar because it needs a good product to solve its logistics problem. So we’re very focused on building that out, as we’ve been quite successful in doing that. But the reality is there’s still a lot of trade at the border of China and Thailand, though not so much with India yet. But we hadn’t planned to move into Thailand.
We’ll launch a Yangon-Bangkok corridor, as our clients kept requesting it because there’s a lot of government infrastructure projects; they want to build out those border crossings to create a corridor into Southeast Asia and then up into India. So we actually started doing that 6 months ago and that’s getting built out quite quickly.
So we are actually seeing logistics flows into Thailand now and we’re doing orders back into Myanmar. But we’re organically growing with our existing client base. We haven’t moved into Thailand and have no plans to set it up right now, but we do have a beachhead with that corridor. We can do full trucking cross border into Thailand and into Myanmar.
In the long term, Myanmar being that key land bridge is crucial. And you’ve got the Belt & Road Initiative (BRI) coming from China which is one of their priorities. That’s going to happen but it’s not going to happen soon. There’s a lot of investment going up there in terms of infrastructure and everything.
And then we have India with their Look East Policy, as they call it, and the building of the India-Myanmar-Thailand Trilateral Highway, coming down from Tamu on the India-Myanmar, flowing to Mandalay, Yangon, and then into broader Southeast Asia. The big drive in these coming years is to connect India to Southeast Asia. Again, we see massive opportunity and want to be fully established and we are now along all the corridors.
But what we see as initial first phase is growing organically with existing clients and flowing right through Southeast Asia into Vietnam. The second phase that involves the India border is going to take time. That is when the Look East Policy really kicks in and Myanmar government opens that up properly, then we’ll connect Southeast Asia to
South Asia.
We see huge value of looking to the markets like Bangladesh, India, Sri Lanka and potentially beyond because they’re very similar, in that they have cultural and logistical parallels to Myanmar.
Taking a step back and just looking at the Myanmar startup ecosystem and then at the Southeast Asian startup ecosystem, what’s your general perspective?
It’s getting better in Myanmar, for sure. When the first accelerator happened, there was this big excitement. And if you start up, got going, the problem is investors and the startup scene around the region just don’t understand Myanmar, so it’s very hard for investors to take that leap.
There’s a lot of talent on the ground with ideas and passion, but skills-wise it’s
still not up to par. But the startup scene’s getting better. It’s nothing like Vietnam or anywhere else for that matter. But the problem now is that things have stalled with COVID-19 and some other political developments in the country. I reckon the investment world sees Myanmar as a very tough
space because they just don’t understand it. But that is going to change
quite rapidly, even while Myanmar is still quite far behind.
Myanmar has been through a rough few years in terms of this
Rohingya humanitarian crisis that’s happening. This is also compounded by the COVID-19 pandemic. How does this affect your operations?
The Rohingya issue doesn’t affect us as we don’t operate in Rakhine. Well, not in northern Rakhine where that issue is. You can’t really at the moment, but there’s a lot of areas in Myanmar where you can’t as there’s conflict oingoing in various states for many years. The only point of that is, again the
investment world sees it as a potential risk. For COVID, we took a very early response. It basically started in Myanmar in April 2020. That’s when everyone
reacted, when they saw a surge.
But Myanmar in April is actually the holiday month as its the Burmese New Year. It’s called Thingyan, it’s a water festival like Songkran in Thailand. So essentially the country shuts down for two weeks, with everything closed. So a business can’t operate. But the big explosion of COVID-19 happened the week before Thingyan and all the truck drivers raced back home because the states closed their borders. So we essentially lost three weeks of April. It was a big hit, but it’s anticipated because you always lose two weeks anyway.
We were wondering what would happen, but because we’re in a very essential services — we service the construction, agribusiness, animal feed and FMCG sectors among others — things need to keep moving. So we weren’t that affected and actually saw an upturn. We’ve seen a big spike in RFQs where we’re actually beating our targets.
We’ve had from existing clients a lot more interest for quotes and we’ve actually signed a lot of other businesses in the market. Because no other competitors to our service exist. We’re four years in the market, still first to market, and we really have the only service in the country that is established properly. So we were getting a lot more interest.
You’ve been stuck in Singapore since March 2020. How has this affected the management of the company, given that the remote working arrangement? And what do you see the future holding for Karzo once you get back to the ground there?
I’m very lucky. I’ve got a very solid team and luckily the management team are all on the ground. It’s two international and two local hires, as we’re at the stage where everything was really quite set and process-driven, getting ready for growth with the Series A raise. So I’m very lucky to have them all on the ground there. We all reacted very quickly to COVID-19 and worked from home and we’re all back in the office now. But I’m lucky to see that it runs fine with me not being there.
And in a way, it’s good with me being here [Singapore] as the holding company is based here. That’s okay. I’m realising I don’t have to be there the whole time, which is quite good. But we have 42 staff with a very strong management team. So that’s okay. When I get back, the whole idea
is to get back and focus on all the project we have online in this coming season. It’s a busy trucking season right through to April next year. And I need to be involved in that.
I need to be on the ground and talking to the management, the team and travelling around the country. We’re building up this whole national logistics directory. I’m going to do that with my COO. And that’s our plan.
The plan is to build out this sort of end-to-end supply chain service. We’re not just doing core trucking, line-haul trucking, we’re actually going to build our customs clearance, freight forwarding, full suite supply chain logistics service for corporate business. So that’s port management, container-to-warehouse, warehouse management, warehouse-to-border, and cross-border into the
region. We’re focusing on that until 1Q 2021, when where we’re going out for a proper Series A fund raise to really grow into Myanmar and beyond.
