The Advantages to Shipping Multiple Products From One Company

Emergex, though, is still a risky bet for Vickers. The vaccine space is crowded; some of the biggest pharmaceutical companies, like Johnson & Johnson and Sanofi, and big donors like the Bill & Melinda Gates Foundation and BARDA, are racing to produce a Covid-19 vaccine.

The crown jewel in Vickers’ portfolio, though, is Samumed, a San Diego-based regenerative medicine technology company. In 2012, Vickers invested 15% of its US$81.1 million fourth fund into Samumed. The company’s most recent fundraise—a US$438 million round—in 2018 valued it at US$12 billion. Almost single-handedly, Samumed has turned Fund IV into one of the top-performing funds in the world—Vickers has projected returns of 42X for it.

Turning to deep tech

Turning to deep tech

“We like deep-tech startups because they typically aim to solve a real problem in a breakthrough way. Because of this, the value is much more defensible compared to, say, a consumer-discretionary tech business,” says Paul Santos, managing partner at Singapore-based Wavemaker Partners.

“Many deep-tech startups will tend to have valuable intellectual property (IP) or trade secrets that allow them to earn high margins and basically ‘print money’ if they get things right,” adds Santos. Wavemaker focusses on seed funding in enterprise and deep-tech startups across Southeast Asia. Biotech companies like Emergex are particularly likely to grow in status and value given the prevailing Covid-19 crisis.

Samumed and deep tech notwithstanding, Vickers’ funds haven’t all been runaway hits. In fact, its fund performance has been rather mediocre, according to experts. With only five full exits (and six partial exits) to date, its limited partners are yet to see great returns.

Take its Fund II, for example. As of the quarter ended September 2019—some 13 years into the fund’s existence—Vickers estimates a multiple of just 2.58X. This sort of return is paltry, given how much time has passed. The fund’s internal rate of return (IRR) stands at just 11%. Finian Tan, Vickers’ co-founder and chairman, however, is a study in confidence.

Before Baidu

Prior to DFJ, Tan had a brief stint as the deputy secretary of trade and industry in the Singaporean government. He claimed to oversee the creation of the billion-dollar Technopreneurial Innovation Fund to boost tech investments in the city-state.

With the spoils from the Baidu deal, where Tan took up his carried interest in the form of shares, he began life as chairman and co-founder of Vickers in 2005. To date, the firm has raised just over half a billion dollars. One of its earliest investments was the Asian Food Channel (AFC), a Southeast Asian pay television channel. AFC was sold to American media company Scripps Networks Interactive in 2013 for US$66 million, giving Vickers a solid exit. According to a pitch deck obtained by us, Vickers exited AFC with a 5X return.

Prior to starting Vickers, Tan’s biggest claim to fame was a shrewd US$7.5 million investment in what was then a newly created and little-known Chinese search engine called Baidu. At the time, Tan was helming the Asian operations of Silicon Valley VC Draper Fisher Jurvetson ePlanet. By the time Baidu went public on the NASDAQ in 2005, the VC’s 28.1% stake was worth around US$1 billion.

A flaw in its business model meant the company expanded too boldly

One key strategy investors saw opportunity in was its expansion to markets like North America and Australia in 2019. Zilingo aimed to capture the imagination of Hollywood, international celebrities and influencers. To work with them on developing their fashion labels. It barely scratched the surface.

Beyond the ideas, brands and influencers wanted to see success stories. But Zilingo’s few celebrity brands were from Southeast Asia—including Indonesian actress Pevita Pearce—and not recognised in the US. The firm also apparently struggled to get its promised supply chain together. Zilingo could really call on fewer than 100 factories for manufacturing, one former employee said, despite projecting far bigger numbers in public.

A bumpy month for start-up Zilingo

Instead, the ‘soonicorn’ finds itself pulling out of these markets. Zilingo is now pushed to refocus its efforts on Southeast Asia—its homegrown but less lucrative fashion buying market. But the pandemic is no time to rebuild a business in an already less lucrative market either.

With its shiniest growth engines removed, Zilingo faces a crucial period if it is to live up to its billing.

“You’re always valued on future growth potential, the bigger the promise the higher the value but have to deliver. It’s a gift and a curse—you get a lot of money but a lot of pressure.”


Hollywood (not) calling

On paper, Zilingo had the credentials to break the US. It boasted a supply chain of 5,000 manufacturers across Asia, it knew e-commerce—through its consumer and business-facing online stores—and it pledged US$100 million to building out its North America operations. To top it all off, it had Jay-Z’s branding to propel it forward.

Zilingo opened offices in New York and Los Angeles to fashion business and crack Hollywood. It hired local design teams to adapt to market flavours, and it even recruited a six-person sales team dedicated to the US.

Hollywood (not) calling

The idea was simple. Any celebrity or influencer with a large online following could develop their own fashion label using Zilingo and its supply chain network. The strategy was modeled on the success of celebrities like Kylie Jenner—who sold her Instagram-first cosmetics brand to beauty giant Coty for US$600 million in November 2019.

Those already in fashion, like fast fashion labels, could tap that network to quickly iterate on new ideas. With Zilingo, designs would become finished products in months—rather than a year—meaning faster reaction to trends and more sales.

The pitch won Zilingo audiences with big names like Creative Artists Agency (CAA)—Hollywood’s top talent agency—and Revolve, a pioneering online fashion brand that raised over US$200 million in a 2019 NYSE IPO.

But while Zilingo’s ‘move fast’ approach worked in the startup world, it didn’t port to fashion. The US push culminated in a handful of products, one highlight of which was a set of towels for a brand, former employees said. The issue was much the same in Australia, where promising meetings did not translate to sales.

The Market Environment where Swiggy Strategy is Applicable

Classroom training was not possible. So, Swiggy began to virtually train up to 45,000 delivery partners to cultivate new habits. For instance, the food-ordering business requires a delivery person to just pick up a brown bag from the restaurant and ferry it to the user’s location. The restaurant takes responsibility for the contents of the brown bag.

But with Swiggy Genie and groceries, its delivery personnel are responsible for the contents and quality of items they pick up. Swiggy’s operations team prepared videos of step-by-step explainers of these new processes. In early April, Swiggy began an app-based video training programme for its delivery partners.

More than 25,000 experienced delivery personnel accessed these training modules on the delivery partner app, followed by a test conducted in various regional languages. According to a Swiggy delivery executive, the tests help to stay updated with small changes in processing orders. It typically takes him an hour to check these videos.

Modular learning

Modular learning

The learning modules focus on specific points like what is a grocery pickup, how is it different from a food pickup? What is the difference between a paid order and a non-paid order? (A paid order is for pick-up and drop errands. A non-paid order is one where the customer pays after confirming the order.)

To widen the scope of its store listings, Swiggy began to crowdsource information—asking its customers to share details of their favourite shops. “In a locked-down world where I can’t send people out to do a survey, and I can only rely on Google and other such public information to some extent, we had to ensure no popular stores are missed out. Just ask the consumer,” says Sunder of Swiggy.

Sunder says Swiggy previously did this while expanding its food services to new cities. “We asked consumers to tell us the most famous restaurants in their neighbourhood. Local intelligence is always good,” he says. Swiggy even launched food services in Manipal (an education hub) before Karnataka’s second-largest city, Hubballi-Dharwad, because a crowdsourcing initiative showed far more demand from Manipal.

Swiggy’s Wish Granted by the Genie

Swiggy worked out compensation packages for delivery personnel during the ongoing Covid-19 phase, as well as for when normalcy eventually sets in. “We are changing the way compensation structures work,” says Sunder.

Before the lockdown, the incentives were for maximising food deliveries. “But now, it is hard to generate many orders for delivery partners to be able to make what they are used to. With low order volumes, they won’t even come to work,” he adds. Instead, Swiggy extended a minimum guarantee to more delivery personnel to keep them logged in to Swiggy even during the lockdown.

The company also had to adapt its compensation system for its three line items—food, groceries, Genie. This is because the average distance of a food order for a delivery-partner is 3.5-4 kilometres. But for a Swiggy Genie order, distance is defined by the consumer. So, the compensation system has to factor in varied scenarios for distances that a Genie delivery demands.

Swiggy’s big wish from Genie—reinvention

“We kept talking to consumers last year,” says Vivek Sunder, COO of Swiggy. “We had constant quantitative data in terms of what they were searching for on the app,” he explains, citing search terms Swiggy gathered in the period. “We also did focus group discussions—a bunch of conversations with consumers on a specific topic.”

It’s all part of a conscious evolution for the company. In an interview with us shortly before the lockdown was enforced, company co-founder Sriharsha Majety indicated that Swiggy’s mission was no longer to change the way India eats. “Our mission today is to elevate the quality of life of urban consumers by delivering unparalleled convenience,” he had said unequivocally. With hyperlocal logistics as the engine, of course.

Changing its spots

Changing its spots

This change was also communicated to the company’s employees during a town hall in mid-March, shortly before the nationwide lockdown. Swiggy’s founders communicated two sharp messages during the meeting. The primary one was about protecting its food delivery business—focussing on building consumer trust and communicating the measures being taken to keep food deliveries safe, recalls a manager. He asked not to be identified as company policy prevents him from speaking to the media. The second part of their message was about the company’s diversification.

It was a logical step, says the manager. “We have a lot of our fleet roaming around the city. The peaks when the delivery fleet were fully utilised were the lunch hours and dinner hours. Between 3PM and 7.30PM, Swiggy is overstaffed. They don’t have enough orders between the two meal times. So, it makes a lot of sense to do everything hyperlocal.”

The question is: will Swiggy’s greatest strength—food ordering—impede its diversification? “They have to prioritise essentials delivery right now, compared to food delivery because there is a problem in that business,” says an investor in Swiggy. “It’s about how they focus on the new businesses, which may not have otherwise got enough attention because of the food-ordering business.”

Locked down, ramping up

While the number of restaurants on its platform dwindled, so too did Swiggy’s delivery fleet. 240,000-strong at its peak, these numbers have dropped significantly due to the lockdown, though Swiggy declined to offer any specifics. Despite its depleted fleet, Swiggy accelerated its plans to take Genie and Stores countrywide once the lockdown kicked in.

The company also told us that only 25-40% of the restaurants are operating in the 200 cities where they are permitted to be open. This takes a significant load off its fleet of delivery partners. Even with this, though, Swiggy was still up against it when it came to operationalising its new hyperlocal offerings.

Swiggy has already set about deprioritising food delivery. According to reports, plans are afoot to lay off up to 900 employees from its cloud kitchens business. It has also slashed marketing expenses and is no longer footing discounting—a ploy that has helped it scale rapidly—on its platform.