B2B startups 'are where the opportunities lie'
Singapore
FORGET unicorns; business-to-business (B2B) startups are where the investment opportunity now lies, said Singapore-based venture capitalists in a panel discussion at YourStory Startup Dialogue, a startup event held last week by Indian startup media platform YourStory and local public relations firm Asia PR Werkz.
Jason Edwards, partner at Qualgro, a venture capital firm that targets B2B startups, said: "There is too much focus on unicorns. There are so many fantastic companies that don't have that label."
Cindy Teoh-Cavefors, associate director for investments at Golden Equator Capital, added that while the region boasts several unicorns - a "great" phenomenon as this "proves there could be light at the end of the tunnel for startups" - the startup ecosystem is continually growing.
"There are so many areas we can continue to develop. We don't have to be so hung up on unicorns."
Both investors were speaking at the panel discussion "Lessons in venture investing in Asia". They were joined by two other venture capitalists: Ambar Machfoedy, managing partner at Rekanext, a firm that invests in pre-Series A and early-stage startups in South-east Asia; and Foo Tiang Lim, a partner at seed-stage venture firm SeedPlus.
When asked to identify their favourite unicorn in South-east Asia, Mr Machfoedy pointed to Grab, saying "it knows the different markets very well". The Singapore-based ridehailing platform operates in eight countries across the region, among them Vietnam and Indonesia.
Qualgro's Mr Edwards said he did not have a favourite but if he did, it "would be one that is profitable with favourable unit economics".
Mr Foo did not name a favourite but predicted that the region's next unicorn would hail from Singapore and the insurtech (insurance technology) sector.
"The insurance industry is ripe for disruption. It is hugely slow and there is a lot of money there. There is also big potential in Indonesia, where people don't even understand why they need to buy insurance, which represents an upside."
There are more opportunities to invest in B2B startups given that the B2C market has become "quite crowded", said Mr Machfoedy. "You have small startups trying to make it in B2C, but you also have the big guys like Grab and Go-Jek, each one crowding out the small guys."
Even so, the mass B2C market presents business opportunities for B2B startups, he said. "When you try to tackle the B2C market, you need infrastructure, such as cybersecurity or artificial intelligence to optimise your B2C operations. That's where the B2B guys come in."
Mr Machfoedy noted that the path to profitability is clearer for B2B startups. But they are subject to lumpy sales and an inconsistent sales cycle, typically a result of their lack of business expertise to secure recurring deals, he said. "B2B entrepreneurs are usually tech people, so what venture capitalists can offer them is business experience and networks."
Ms Teoh-Cavefors said Golden Equator Capital - a fund management firm that invests in tech, real estate and prime currency - has backed an equal number of B2B and B2C startups.
In fact, most of the group's portfolio companies have both B2B and B2C strategies, she said. They are either B2B2C businesses, or businesses with two separate revenue streams and price points, one catering to end-consumers and the other to enterprises.
"It's a realistic way to go about building a business. While the B2C front has a lower customer acquisition hurdle and price point, it can be challenging when it comes to making a profit. This can be supplemented by going after B2B clients, which generate larger contracts that can sustain your company and give it a little bit more runway."
