SINGAPORE - For years, becoming a unicorn was the main goal of start-ups. Now, with venture funding drying up and many young companies' survival in doubt, another creature is the talk of the town: the cockroach.
Venture capitalists and technology chieftains converged in Singapore in recent weeks to hobnob over a number of high-profile annual conferences, marking the city-state's grand coming-out-of-Covid-19 party.
Yet gone was glamour and talk of blitzscaling, and participants instead focused on the drastic need for conserving cash and a dimming future.
"It's cockroach time - do whatever it takes to survive," Ms Tessa Wijaya, co-founder of Xendit, a digital payments firm valued at US$1 billion (S$1.4 billion), said during a panel discussion. "It's a little bit gross but it kind of works. If you can survive the next two, three years, you're probably going to thrive."
In the past several years, South-east Asia attracted abundant capital from investors eager to bet on one of the fastest-growing Internet economies. Perpetually growing teams was the norm at richly funded companies and for many young leaders and staff, this was the only environment they've ever known.
Now the start-up ecosystem is facing headwinds. Global venture funding slumped to US$74.5 billion in the past three months, its lowest level in nine quarters, according to CB Insights. That represents a 34 per cent quarterly drop, the biggest in a decade.
"Cash is not only king, it's king, queen and everything else," Mr Raj Ganguly, who started B Capital Group with Facebook co-founder Eduardo Saverin, said at SuperReturn Asia, a conference that drew a record 1,500 senior executives. "A lot of what we've been doing is pushing companies to have more realistic cash runway discussions."
That sentiment was echoed by Ms Jenny Lee, a managing partner of GGV Capital and one of the most sought-after figures who spoke at five conferences, including Forbes Global CEO Conference and the Milken Institute Asia Summit.
"In my 22 years as an investor, this is probably the most complex environment globally," Ms Lee said at the Tech in Asia Conference on Sept 21.
The most important thing to remember in a downturn, she said, is never the valuation but "your ability to have a cash runway".
Her venture capital firm is advising its portfolio companies to have enough cash to stay afloat for 36 months without having to raise additional funds.
About 80 per cent of them are now in that bucket, said Ms Lee, who launched GGV's first office in China in 2005 and now leads the firm's United States fund-raising activities.
After reaching sky-high valuations, tech companies the world over have seen the worst year of their lives amid surging inflation and interest rate hikes. Many are cutting jobs and shutting parts of their operations to shore up balance sheets ahead of a potential recession.
In South-east Asia, Sea and Grab Holdings, Singapore's biggest tech companies, are emblematic of this new reality: Their US-traded stocks have lost more than half their value this year, and Sea warned it does not anticipate being able to raise funds in the market.
Founders who have been through previous cycles remained upbeat about the prospects for companies with proven business models.
Mr Julian Tan, the founder of a start-up whose app FastGig matches employers with part-time job seekers, said he has not had problems raising funds this year and has received calls from investors looking for sustainable businesses while trying to tackle social issues.
He said South-east Asia has so far had few services for manual and semi-skilled employees, which make up the vast majority of the working population.
"Not-so-good start-ups have been filtered out. Now is the time for real start-ups to shine, go out and raise from value investors," said Mr Aung Kyaw Moe, who sold a chunk of his 19-year-old payments company 2C2P to Ant Group this year. "We cannot go and buy US$1 revenue with US$2 subsidy using investors' money. This has to stop."
As in previous downturns, efficiency is emerging as a key focus.
"This was a word that wasn't used for years," B Capital's Mr Ganguly said. "It was always about growth, growth, growth. Now we talk a lot about efficiency."
Mr Patrick Cao, president of Indonesia's biggest Internet company, GoTo, said his firm will focus on reducing subsidies and streamlining operational expenses while offering services that merchant partners can monetise further.
"We've accelerated our break-even targets," he said, "but there's still a lot of work to be done."
GoTo's arch-rival Grab downplayed its long-held slogan of being "South-east Asia's leading superapp", the powerful tagline that helped the company raise billions of dollars from investors including SoftBank Group.
Its newly defined goal, posted in its investor day presentation slides, underscores its intention to become more focused after burning through cash since its inception: "South-east Asia's largest and most efficient on-demand platform that enables local commerce and mobility." BLOOMBERG