Recession Run: BAce Capital advises founders to chase value, not valuation

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this series, we talk to investors to suss out what opportunities they see, what strategies they’re implementing, and what areas of investment they’re looking at in the next few months.

As the global economic downturn continues, Southeast Asian startups are facing several challenges. Funding, for instance, has significantly slowed down over the last few months. Many startups need to realign their focus in order to survive, and laying off employees is one way to do that.

Having enough cash to stay afloat is very important, even at the expense of “lower-than-expected” valuation, explains Benny Chen, managing partner at BAce Capital.

“The funds, though expensive, are necessary to help the founder weather the storm and live to fight another day,” he tells Tech in Asia.

“We believe founders should chase customers instead of investors. They should chase value creation rather than valuation,” he adds.

Benny Chen, BAce Capital’s managing partner / Photo credit: BAce Capital

That’s why he suggests that all founders review their cost structure and improve operational efficiency. He noted that they also need to review the company’s priorities and work only on areas they’re really confident about.

“Founders will be surprised that their business will operate as usual even after cost-cutting measures,” he says.

Chen also pointed out the importance of being in constant communication with investors, whether you’re raising more money or not. Keeping up with the capital market and getting more feedback about your business is also vital amid trying times.

Another perspective that founders need to keep in mind is how an economic crisis affects their competitors, too. “Stay optimistic, because you might be able to seize their market share if the above have been executed well.”

Chen shares that in general, the valuation of startups in Southeast Asia is going through corrections, and this trend will probably last longer. However, it could also become a turning point for many founders, redirecting their attention to building their companies.

See also: Tech layoffs in Indonesia shine light on employee legal rights

Founded in 2018, BAce Capital was established by former executives of Alibaba and Ant Group. It focuses on providing seed to series B funding to startups in China, India, and Southeast Asia.

The firm’s portfolio includes Singapore-based fintech firm Aspire, Vietnamese logistics company Loship, and Philippine-based food startup CloudEats.