Let me put it out there – raising seed funding is easy. If you are not too greedy or choosy, nearly every Singapore government agency has some scheme to seed your first idea. We have MDA for media-related startups, Spring Singapore for new, innovative ideas, and even MCCY with funding for social enterprises that help the community.
Frequent readers of startup related news sites such as SGE, TechinAsia, and the myriad of other sources covering the startup scene in Southeast Asia, will note a bubble brewing in US$250,000 to $500,000 seed rounds. Prior and further to this, many (in Singapore and Malaysia especially) have already gotten a first round of funding from a government agency.
So with all this cash being thrown around, why focus on revenue first? Shouldn’t it always be about market share and all the other fancy valuation terms Silicon Valley invented? I’ve heard many startup founders explain their business strategy as “mindshare” or “let’s worry about that later, we can raise funds anywhere.”
I must beg to differ; vehemently even.
Silicon Valley’s model of making many technology startup founders incredibly wealthy has become surprisingly entrenched. However, I don’t believe that same model applies in Southeast Asia, or even to Asia in general. Here’s why:
1. There is no “next round”
Venture capitalists focused on funding firms in the three to five million dollar round are an extremely rare breed. A Singapore-based VC in that category once remarked to me that “for every 50 seed round funders, there is only one of me”.
So what does this mean for us startups? Well, it means we cannot continue being deluded by Silicon Valley – which I might add, Bravo TV has sunk to new depths – and admit that the situation is actually quite dire.
After blowing over $50,000 on your initial development and another half a million on what’s called market share acquisition, all that’s left is a company without any real tangible value.
But perhaps you are nearly there and just a few more months away from reaching the tipping point. It doesn’t matter because without funding you are next to dead. And your company, worthless.
2. Losing Equity Reduces Motivation
There is the oft-cited saying that all startup founders would have heard at least once, “Would you rather own a slice of a big pie, or own all of a tiny pie?”
As much as you want to take that next investment to grow your fledgling startup, core values of your company will change the moment external funders come in. This is not to discredit the many great angels out there who genuinely want to contribute back to the scene – but ideas and your mission will change, at the very least to some extent.
Suddenly, instead of creating and living the job (and life) you want, it becomes managing quarterly cycles and living by KPIs. A great number of Singapore startups are already intimately familiar with dreaded “funding milestones,” which become the dictator of your company’s strategy and growth.
With all these distractions, founders and key employees become less motivated and the once promising startup gradually loses that opportunity-grabbing agility as it becomes yet another corporation.
My favorite book that underpins my startup philosophy is Get Real by 37Signals, the group that created products like Basecamp. I highly recommend it for all founders interested not in following a fund-chasing approach, but instead want to build a company and the perfect job for yourself.
3. This is NOT Silicon Valley
Many in the West are looking at Southeast Asia and Asia with much interest. It’s a growth region with a lot of potential. I don’t disagree with that.
What the numbers don’t tell you is that Asia is extremely diverse. Made up of hundreds, if not thousands, of languages, cultures, and religions, Asia is not an easy market to acquire. This is especially so in Southeast Asia, where there is almost no shared language across countries. You cross over the causeway from Singapore and the predominant language becomes Bahasa Melayu. Take a ferry down south and it’s Bahasa Indonesia. To quote the phrase often seen on market T-shirts in mainland Southeast Asia – Same same, but different!
To put this into a comparative context, if it takes $35 million to gain widespread adoption in the more homogenous and highly liquid US (though Americans might disagree with that description), $3 million is almost impossible to get your startup Asia-wide adoption.
So with all this doom and gloom I’ve mentioned, how then do I see our startups surviving? I advocate a revenue-first approach. Every single product line introduced must come with some form of viable and executable monetization plan. Basically, give your investors more dollars for their dime, and throw away the notion of Silicon Valley get-rich-quick schemes.