Southeast Asian startups will face a hard time raising money

These are challenging times for Wahyu Muliady, the founder and CEO of Ameera. He is finding it tough to raise new funds and approach new investors to invest in his seed-stage startup.

Muliady established Ameera, a company providing point-of-sale (POS) software for micro, small, and medium-sized enterprises, in 2018. The software helps users integrate transactions, finance, inventory, and operational reports.

Photo credit: Piqsels

He received early funding from an angel investor the same year the company was founded. Muliady used most of the funds for technology development and the rest on the sales division. Around 5,000 clients, from mom-and-pop stores to food and beverage merchants, have come onboard to date.

However, the company is still burning cash to gain more customers or clients. It is attempting to catch up with other existing POS software providers such as Moka, which has around 20,000 clients. He believes Ameera can race to match Moka by having 30,000 clients next year. From his calculations, the company needs to raise at least US$2 million in funding from new investors.

To Muliady, everything he needs for the sprint is almost ready. His startup has the technology and experience from the first two years of operating. The market for Ameera is out there and still growing. So there is only one – yet the most imperative – thing pending: the new financing to buttress up his ambition.

The clock is ticking. The existing funding is only enough to finance the company until the end of 2020. Hence, Muliady has knocked on door after door, approaching potential investors and venture capitalists since the end of 2018. However, no new investors have offered to invest in Ameera.

“I spoke with some investors, but they offered too low valuations. I approached 500 Startups, which was recommended by my friend, but we have never had any further discussions. I realized that getting investors is difficult, perhaps because my startup is not a first mover or originated from a fresh idea. Another reason is that I don’t have many connections with investors,” Muliady told KrAsia on the sidelines of a Block71 event in Jakarta.

Not all startups are alike

On the one hand, Muliady has to race with other startup founders who are getting millions of dollars in funding. On the other hand, many investors have changed their old mantra from concentrating on growth to focusing on businesses with healthy fundamentals instead.

Marshall Utoyo, co-founder and chief design officer at online furniture store Fabelio, has a different experience when raising new funds for his company. He is very optimistic about interest from investors.

“We actually see that the investor interest has shifted post-WeWork era. Investors now look for a business with good fundamentals when it comes to startups, such as the gross margin and the sustainability of the business. Our business is very healthy and still can attract many investors,” Utoyo said.

Alexander Rusli, an active investor in 12 startup firms and also a chairman at iFlix Indonesia, said that investors are getting more selective and careful in allocating their money to startups nowadays. They prefer to save their cash if there are no good deals, especially when it comes to early-stage investments.

“It is a cyclical period. When the global economy is tough, people prefer to conserve cash. However, this is not the first time. It happened a few years ago. At some point, we know the show must go on, digitization must happen,” Rusli told KrAsia in a recent interview.

WeWork’s failed initial public offering and the unprofitable businesses of ride-hailing giants Uber and Lfyt have disenchanted investors, causing them to not invest in “burning cash” businesses; instead, they are turning their heads to businesses with good fundamentals.

Better luck next year

Huge interest but few quality startups