Backs to the Wall – How Small Businesses in Singapore will be Impacted by an Emerging Financial Crisis

Already, signs of this rise are visible. Demand has been on the uptick even before the pandemic struck, according to Funding Societies, a P2P financing platform founded in 2015.

January 2020 was Funding Societies’ best month for loan disbursals, according to senior commercial director Vikas Jain. February saw a slowdown due to the Chinese New Year, but March brought a 50% spike month-on-month in financing requests.

Introduction to Backs to the Wall crisis

“April has shown a slight reduction compared to March, perhaps due to the various government schemes (grants and loans) being announced across the three markets (Singapore, Malaysia, and Indonesia) that we operate in,” Jain added.

With supply chains affected by the widespread disruption of business and consumer activity, Funding Societies has seen more working capital requests compared to invoice financing.

Validus Capital, another five-year-old P2P lending platform, also saw an increase in its pipeline of credit-approved unsecured loans in recent months. The platform claimed it recorded a 50% spike in disbursement compared to the same period last year.

Finaxar, a four-year-old lending infrastructure startup, also saw a 2X-3X demand spike in the last month, according to co-founder Tan Sian Wee. “It was building up from February onwards,” he said. “In March, you could see demand come in; in April, when the circuit breaker was announced, there was a jump.”

Whether the alternative financiers can fulfil the rise in demand is a different matter. In these pandemic times, they could end up deciding which SMEs are able not just to survive the downturn, but also gear up for the future.

Short on cash

As Covid-19 shut down the country, the Singaporean government moved quickly to ensure SMEs had access to the cash they needed for survival. It increased its risk share of loans to SMEs from 80% to 90%. The central bank, the Monetary Authority of Singapore (MAS), is providing money to banks at an interest rate of 0.1% per annum. Enterprise Singapore initiative for SME loans are funded through banks and financial institutions.

Local banks have also taken steps in this direction, going on a lending spree. As of 30 March, SMEs made up between 10-15% of the local banks’ loan books. That’s set to increase drastically. For example, even with the government’s 75% subsidy for wages of local and permanent resident employees, SMEs still need to come up with the rest.

OCBC Bank expects to disburse S$1 billion (US$700 million) in government-assisted loans to SMEs, which is more than what it lent during the 2008 global financial crisis. The United Overseas Bank (UOB) allocated S$3 billion (US$2.11 billion) to SMEs, offering loans up to S$550,000 (US$387,000) with no collateral required. DBS, the biggest local bank, has availed $3.2 billion (US$2.25 billion) for SMEs under the government relief programmes.

However, bank loans are subject to credit scores. Only those SMEs with a good credit rating can avail larger loans, in line with the risk that banks are taking on. Even if banks are extremely generous, the loans will have to be on their balance sheets. Which means there will not be enough credit to go around.

Expanding the Competitive Product Offering Through a Productivity Tool For Goals Setting

Building bridges to other products is not new. Not only does Slack boast a directory of over 2,000 apps and integrations, but also its own fund that invests in promising companies that build software for its service. These integrations, however, are mostly done by third-parties.

Like Slack, Lark also lets outside developers build on its platform. Given its Chinese roots, this could help it “build productivity that’s more leading edge,” said Gavin Tay, an analyst who covers the digital workplace industry for research firm Gartner. However, understanding that it needs to make up ground, ByteDance has also actively built out integrations itself. It tapped its in-house development team to build ties with services like project management apps Jira and Asana.

Let there be Lite

Let there be Lite

“ByteDance is willing to do the nitty gritty and grunt work of integrations,” the former employee added. “The product is still young and yet there are thousands of integrations.” This hands-on approach to adding bells and whistles gives Lark a fighting chance of appealing to potential customers.

Singapore-based Tay points to features like digital punch cards—popular within DingTalk—and biometric entry as differentiators that US companies aren’t likely to add. That’s alongside more local features in Lark like chat message translation for Chinese, English, Japanese, and Thai. Subtitles for video calls do not presently include translation, but one would imagine it is on the horizon.

Similarly, DingTalk Lite is available in Japanese, English, and Traditional Chinese for users in Japan, Malaysia, Singapore, Hong Kong and Macau, said Alibaba. It also said it offers local customer service with a focus on Malaysia and Japan. The Lite version is a response to demand, Alibaba said, but it could also serve as a feeder to the core DingTalk app and paid services.

Dingtalk Lite is not Alibaba’s first effort at reaching businesses in Southeast Asia. It initially went after overseas users in 2018 when it launched a version of DingTalk for Malaysia and other parts of Southeast Asia.

China interface

Alibaba and ByteDance are both helped by the economic importance of China to countries in Southeast Asia. China is a key trade partner, accounting for a double-digit percentage of trade in the region’s six main countries: Singapore, Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. During China’s stand-off with the US government, ASEAN nations’ imports to China surged further, cementing their economic ties.

This economic closeness gives Chinese productivity apps an advantage over US tools in Southeast Asia. Companies that have business or clients in China struggle to find communication platforms that work both in and outside China due to Beijing’s internet censorship.

Like consumer apps Facebook and Twitter, business services like Google’s productivity tools and Google-hosted email remain blocked in Mainland China. Virtual Private Networks (VPNs) that allow companies to subvert China’s internet censorship apparatus are increasingly difficult to find, and are technically illegal. Even Western services that aren’t blocked today could be blocked in the future or may be too obscure for China-based employees.

The Complete Guide to The Covid Wedge for Alibaba’s Motivation in Southeast Asia

Targeted at larger enterprise customers, Lark offers unlimited video calls for up to 100 people, 200GB of cloud storage, synchronised calendars and company-wide chat, all in one app. Still, a spokesperson said it is seeing increased adoption among SMEs, startups and educational organisations.

“We offer the full version of our service for free so customers can start this digitisation process,” Joey Lim, Lark’s commercial lead for the Asia-Pacific region, told us in an interview. “Most business technology is built for large organisations which have the resources. The smaller enterprises are those who suffer, yet they need to communicate and collaborate.”

Background information and what is covid

But Lark does make money, with enterprise customers paying for additional services such as cloud storage. And it is actively cashing in on that opportunity in Southeast Asia. Lim, who joined after a decade of sales roles with US enterprise software giants ServiceNow and Salesforce, leads a growing Singapore-based sales team that also works with resellers. It touts 6,000 customers, including ad firm dentsu X in Singapore and Indonesia-based IT provider Weefer.

ByteDance and Alibaba see the current situation as a wedge to access Southeast Asia, but adoption remains a tall order. While the region’s digital economy is forecast to boom to US$300 billion in 2025 from US$100 billion in 2019, SMEs have been slow on the digital uptake. We recently wrote about how Singapore, arguably the region’s most tech-forward economy, has fought a years-long battle to get SMEs to digitise.

The Chinese giants will also have to face off against incumbents like Slack, Google’s corporate services, and Microsoft Teams. Zoom, the US-based video conferencing service, has shown new entrants can win market share. It grew from 10 million daily meeting participants in December 2019 to 300 million as of April 2020. Zoom, though, is a nine-year-old business and success didn’t happen overnight.

Western leaders

Western leaders

Microsoft Teams Southeast Asia downloads in April 2020 (according to Apptopia)
Google Docs Southeast Asia downloads in April 2020 (according to Apptopia)
There is promise. Downloads of Lark across Southeast Asia surged from nearly nothing at the start of 2020—just 22 per day on 1 January—to over 5,500 daily at the end of April, according to data from app analytics firm Apptopia. DingTalk and DingTalk Lite downloads doubled to over 3,000 daily by early April. But building on that surge—which saw both outpace Slack—is a tough task.

Standing out

Realising what they are up against, the Chinese duo are leaving no stone unturned to become the de facto productivity apps in the region. “US services are often take-it-or-leave-it in terms of product, but Chinese companies will always do more,” a former ByteDance employee told us.

Take Lark, for instance. While it began as an internal ByteDance tool before being spun out in September 2019, it rivals most competitors by offering cloud documents, internal communications, and video calling. Apart from slotting multiple features into its product, it has also worked to integrate thousands of other tools that companies may find utility in.

Controlling Travel Routes, Automated Race Tracks

Malaysia-headquartered research firm CGS-CIMB estimated AirAsia’s total monthly cash burn rate to be around RM527 million (US$122.3 million). In a research note published on 7 April, it assumed if 20% of the cash balance was refunded to consumers due to flight cancellations, the remaining kenbalance of RM2.4 billion (US$560 million) will last AirAsia less than five months. Realising that giving cash refunds would further drain its coffers, Fernandes offered credits for replacement flights instead.

The core business of AirAsia

The core business of AirAsia

To conserve cash flow, the airline will not take in any new aircraft deliveries this year, leaving it with 242 aircraft, one less than 2019. It is also relooking its orderbook with Airbus and has restructured a major portion of the fuel hedges—all with an expectation to reduce 30% of its year-on-year cost for 2020.

It also doesn’t help that its overall earnings are constantly dragged down by AirAsia X. As of 31 December 2019, AirAsia X had a cash balance of only RM358 million (US$83 million) and borrowings of RM6.32 billion (US$1.5 billion).

Its net loss widened 62% year on year to RM489.5 million (US$113.55 million) in the year ended March 2019, while revenue fell 4% year on year to RM4.4 billion (US$1 billion). Which is probably why Fernandes is seeking out a loan from the Malaysian government to cushion the blow. But it won’t be easy.

AirAsia was said to be exploring options to fundraise for ‘X’. It could seek help from Malaysia’s sovereign wealth fund Khazanah Nasional Bhd, integrate AirAsia X into the parent group, or shut the division down altogether. But the government is already straddled with the ailing national carrier Malaysia Airlines Bhd that is fully owned by Khazanah, and it may not have enough resources to support other local airlines.

It would be a wise move for AirAsia to shut down the long-haul unit, says Shukor Yusof, founder of aviation consultant Endau Analysis. “Whether the owners have the courage to do that remains to be seen.”

While the albatross around AirAsia’s neck remains its problem child ‘X’, it also has other pressing concerns to address in the short term. Especially now that it has resumed its domestic flights within Malaysia and Thailand. (AirAsia’s domestic flights in the Philippines, Indonesia and India remain grounded, at least till mid-May.)

Not everyone can fly

For the first quarter of 2020, from January to March, AirAsia recorded 80% group-wide load factor—which indicates the airline’s capacity utilisation—ahead of its 77% target. Higher load factor is positive because it increases revenue and profitability. But the coming months or years will not be as rosy.

For one, airlines are recommended to practice social distancing for each passenger flight by emptying one-third of plane seats. However, such a move will render the airline business uneconomical. In turn, to ensure a minimum profit, airlines will then have to increase ticket prices by at least 50%.

In other words, cheap travel is over. This would be the biggest blow to low-cost carriers, who rely on cramming as many people as they can into their flights. AirAsia, which has shaped its entire business around the motto of “now everyone can fly”, will have to brace for a huge hit in its future earnings.

The Definitive Guide to Udaan’s Current Situations and Strategies

The company hit the ground running, fuelling aggressive growth through aggressive losses. This was a strategy its founders Amod Malviya, Sujeet Kumar and Vaibhav Gupta picked up from their former employer, e-commerce giant Flipkart. Initially, it had no membership fees, no delivery charges, and no listing charges. When sellers were onboarded, the company didn’t seek to charge them until they’d transacted on the platform for a while. Unsurprisingly, this led to incredible growth and, with it, funding.

What are scaling sprints?

What are scaling sprints

Udaan made no money in its first year of operations. Fourteen months later, it became a unicorn—a startup with a valuation over US$1 billion—thanks to a US$225 million funding round led by DST Global and Lightspeed Venture Partners in September 2018. Just over a year later, it continued its fundraising hot streak with a US$585 million round in October 2019 to reach its current valuation of US$2.7 billion.

But while Udaan has scaled rapidly, sustainability is a whole other matter, according to several employees, buyers and sellers we spoke to. The company has struggled to monetise its services while simultaneously burning money to capture the market. Udaan had issues surrounding its commissions, high return rates, poor customer service and high credit defaults, several employees, sellers and buyers said.

Trustroot Internet, the company’s Singapore-based parent entity, saw its revenue from operations increase from Rs 3.24 crore (US$423,644) in the year ended March 2018 to Rs 46.36 crore (US$6.1 million) for the following year. Its total losses, though, widened from Rs 60.3 crore (~US$8 million) to Rs 779.5 crore (US$103.2 million) in the same period. Covid-19 was merely the sucker punch that ultimately staggered the B2B Goliath.

Monetisation moves

Udaan has been burning money rapidly to capture the B2B market—it had a monthly burn rate of US$15 million in 2019. But even the best-funded startups must monetise, and Udaan sought to do that by charging commissions on transactions via its platform.

In May 2019, Udaan introduced commissions between 8-10%, excluding GST, two buyers and sellers told us. Not only did this come out of the blue, they felt it was a particularly steep price to pay. In contrast, other B2B platforms like Amazon Business, ShoeKonnect, and AJIO Business charge commissions in the 2-3% range, Ramawathar Sharma, a mobile accessories retailer said.

For Udaan, it was a marked deviation from its original strategy. “We want to scale, not charge commissions,” Udaan’s co-founder Sujeet Kumar had assured a supplier at a buyer-seller event in Mumbai in September 2018, according to a video provided by a former employee. Kumar said if they charge commissions on each order, sellers will not be inclined to return again. The event was held to celebrate Udaan’s US$1 billion valuation that month.

Instead, Udaan’s stated intent was to make money from data-backed ads, the way Facebook and Google did, through financial services, and through logistics. “If we solve logistics at scale, look at any global company, like FedEx, they work at 10-15% profit after tax. Credit is not free, we charge that also. And when the platform scales, people will advertise,” Kumar, who headed logistics at Flipkart, said at the event.

REDDOORZ and Building A Local Simple But Powerful Brand of Their Own

Rippel also served as Nasper’s representative on the board of Indian e-commerce Flipkart before it was sold to Walmart in an historic $17 billion deal.

It is early days for the firm, but its involvement–which includes a seat on the board—could give RedDoorz some crucial experience as it moves towards a potential IPO, which Saberwal said could happen as soon as 2022.

Those three letters weren’t commonly uttered alongside startups in Southeast Asia. Sea’s listing on the New York Stock Exchange—under Nash’s leadership—is very much the exception to the rule. Today, though, the region’s other billion-dollar companies like Indonesian duo Gojek (ride-hailing) and Tokopedia (e-commerce) are also eyeing public listings.

It may seem premature for RedDoorz to harbour such lofty goals, but Saberwal is typically matter-of-fact with his response. “I’m not here to build a $100 billion business,” he said. “I want to build a $2-3 billion company with decent returns for our investors that’s known across its region and is the biggest in Southeast Asia.

“We 49-year-olds make companies with good returns, but maybe we won’t change the world,” he added with a laugh.

RedDoorz hopes to draw inspiration from Sea’s 2017 IPO

It’s tough to predict startups reaching the IPO stage—just ask SoftBank, which has bet billions on WeWork and other similarly controversial companies. RedDoorz and others in Southeast Asia, however, have prevailing winds in their favour.

“For the first time, companies in Southeast Asia are able to focus on everything the region can offer,” Asia Partners’ Rippel told us. “A decade ago, it was ‘This company is interesting but it is only the market leader in, for example, the Philippines or Thailand.’”

“Founders also didn’t have the ambition or perhaps skills to go regional. But that playbook has been written and now we see more entrepreneurs executing this playbook,” Rippel added. “Today, it’s common to see a company successfully penetrate at least 3-4 countries across the region. That’s exactly what RedDoorz has done.”

The RedDoorz-OYO clash might be a notable parallel to the Uber-Grab battle.

Uber’s retreat from Southeast Asia is widely acknowledged to be down to cutting losses ahead of its IPO this year, while Grab had just one focus—Southeast Asia.

Hitching a lift

Hitching a lift

OYO is yet to tap its relationship with Grab, the $14 billion company that is Southeast Asia’s top ride-railing service and an investor in OYO. Grab has steadily added travel options within its app as it evolves from transport app to super app. Adding OYO bookings to that selection would make sense for both companies.

OYO, meanwhile, has many distractions. Not only is it going after expansion in every continent bar Africa (at least for now) but its core vision of budget hotels is being stretched to cover businesses as diverse as cloud kitchens, coffee chains, event management, co-working and more. RedDoorz, however, is laser-focused on cracking Southeast Asia. According to Saberwal, Qiming, which has seen OYO’s entry and alleged stumbles in the Chinese market up close, is confident that OYO isn’t something to worry about.

The issue underscores a broader problem facing Indian start-ups that rush to scale before finding a sound business model

Zilingo does e-commerce and it does not specialise in garment making or design,” they said. “The sellers have the product and they go to the website to sell, but that doesn’t give Zilingo a fashion industry core.”

Having spent heavily on sales and two offices, management balked at the lack of revenue and refocused on sourcing for fashion brands in late 2019. But it didn’t serve to improve Zilingo’s “core”.

“We didn’t hire specialists, which is essential in fashion where you have different strategies for sports or casual wear. You really need to specialise,” another ex-employee said of its failure to hire local industry personnel to front the US push.

Covid conundrum

Covid conundrum

It’s almost like Zilingo wasn’t steadfastly focused on fashion alone. It had a lot going on.

CEO Ankiti Bose often refers to the business as an octopus. with its tentacles dipping into many businesses. Zilingo wanted to do many things beyond simply selling fast fashion to consumers, and it was that octopus-like ambition that signaled its expansion into the US and Australia.

Narayanan declined to comment when approached for this story. A Zilingo spokesperson said the nCinga team now manages Zilingo’s Saas business.

Like other Zilingo strategies, a core issue was inconsistent decision making. Despite significant hiring, many of the key leadership came from consulting or finance backgrounds and were early in their careers, the former employees said. High management churn in the US, too, made Zilingo prone to changing course, which was exacerbated by a disconnect between management and staff, another person said.

High profile

At 28 years old, Zilingo CEO Ankiti Bose is the most visible female startup founder in Southeast Asia—she was dubbed “Southeast Asia’s tech sensation” by Bloomberg. She founded Zilingo after a visit to Bangkok inspired the idea to bring Asia’s street fashion vendors online. She maintains close links to Zilingo investor Sequoia, having started her career as an analyst with the firm’s India office.

The octopus strategy—which ran from financial services like working capital for fashion sellers to more outlier proposals such as ethical fashion sourcing using RFID and blockchain technology—proved more challenging to execute. The former employees suggested that fewer ideas with more focus would have been easier to manage.

One such example is Zilingo’s desire to be a digital version of Li & Fung, a 113-year old Hong Kong company that manages sourcing and supply chain for fashion brands in the US and Europe—including Walmart and Kate Spade & Company.

In December 2019, as part of that push, Zilingo spent US$15.5 million to buy Sri Lanka-based nCinga, a software business that digitises manufacturing companies which counted Zilingo as a customer. The deal—Zilingo’s first acquisition—would enable it to bring technology to manufacturers and, in doing so, connect them to its global supply and potential customers like REVOLVE or celebrities from CAA.

However, the status of Zilingo’s nCinga-fronted digitisation is uncertain. Sid Narayanan, Zilingo’s head of Saas products and the executive who led the acquisition deal, left Zilingo during the restructuring. A prominent venture capitalist told us that Narayanan has started his own company.


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Ruangguru’s CEO Belva Devara is also one of the expert staff members appointed by the president’s office, and this link made him a welcome target for critics. He eventually stepped down from this position.

“Why was there no transparent tender? Why were only several platforms included by direct appointment?” asks Bhima Yudhistira Adhinegara, a researcher from the Institute for Development of Economics and Finance (Indef), one of the most vocal critics of the Pre-Employment Card.

“I think it’s a conflict of interest. The skills problem the programme was intended to solve is different from the current situation with layoffs. The government should be focusing on direct transfers and securing basic incomes, not [channelling aid] through private companies like Ruangguru,” he comments.

Criticism also rained down on Andi Taufan Garuda Putra, the CEO of micro-financing platform Amartha. He’s another one of Jokowi’s expert staff members.

He had used an official letterhead to promote his company to subdistrict heads around the country, promising Amartha’s support in a variety of Covid-19 relief efforts.

It’s safe to say that it was not well-received. Andi Taufan also stepped down from his expert staff position after the incident. Adhinegara, however, sees this new face of PPPs as a relationship of mutual dependency.

New rules or no rules?

New rules or no rules

The Indonesian government needed the tech sector to fulfil Jokowi’s campaign promise of an innovative, forward-looking Indonesia that is open to foreign investments. Startups, many of them chasing scale and profitability, welcomed access to public funds and infrastructure, and the legitimacy government contracts gave their unproven business models.

“Some startups previously burned money profusely; they received money from abroad. [Now] some may struggle to achieve sustainability,” Adhinegara tells us. “They become interested in bureaucracy and government projects. It’s one strategy for startups to survive—get government backup.”

Adhinegara’s position is provocative. He coined the term “millennial oligarchs” to refer to the tech CEOs whose closeness to the people in government he finds concerning. Adhinegara even challenged Devara to an online debate, which the Ruangguru CEO did not respond to.

Millennial Oligarchs

Indonesia has seen its share of oligarchic power structures, especially during the 31-year reign of President Suharto, who was known for doling out licenses and government contracts to family members and cronies. Today, startup CEOs have been given advisory roles in President Jokowi’s office, and they’ve become close collaborators with authorities during the crisis. It’s a far cry from Suharto days, but critics warn of the potential rise of “millennial oligarchy” if checks and balances aren’t in place.

Others, including Ishak, whose developer community was involved in creating the Pre-Employment Card website, remain optimistic about the programme.

Upskilling young people remains a challenge that can only be solved with government-private sector tie-ups, Ishak believes, and the Card is on the right track. “The problem we see now is in the quality of the content. They are trying to fix this,” he says.

Lack of transparency is still a concern though, notes Nadia Fairuza Azzahra, an analyst at the Center for Indonesian Policy Studies.