Before the pandemic, tech startups in Southeast Asia were booming. Everybody was optimistic about the future, and investors saw endless opportunities for easy money. With many tech companies overvalued, some raised more money in investments than they were providing in value for their users.
But when COVID-19 caused an almost worldwide lockdown and governments imposed social distancing rules, markets started to collapse, bringing everybody back to reality. Some sectors, such as healthtech, edtech, video conferencing, and online grocery startups, could still chase profits. In contrast, others such as travel, event planning, freelancing, ride-hailing and space-sharing businesses had a hard time and needed to shrink, liquidate or even shut down.
Southeast Asia has their fair share of unicorns in the tech startup world. We look at how they are helping build the SME ecosystem.
Despite the upheaval, Southeast Asia is still home to some unicorns and indeed, decacorns. We take a look at how four such companies have been coping with the new economic challenges.
Traveloka, Indonesia’s answer to Expedia, was hit very hard during the lockdown. The whole travel sector collapsed, and there was not much they could do. In July, Traveloka, fortunately, got a new capital injection of $250 million USD as it strives to recover from COVID-19. Unfortunately, the hotel and flight booking platform still had to lay off around 100 people, which is 10% of its employees.
Ferry Unardi, Co-founder and CEO of Traveloka, stated that although they felt the impact of the crisis, he believes the company will prevail by adjusting to the right strategy. And there is some hope; Traveloka has seen a little revival in the domestic and short-distance travel sectors while the activities market has also improved. In June it launched the Traveloka Clean Partners campaign, an initiative to show their commitment to support health and safety protocols, while at the same time contributing to the recovery of Indonesia’s travel and tourism sector.
Before the pandemic, ride-hailing, food delivery and payments firm Gojek’s super app was playing a pivotal role in digitalising Indonesia’s intensely local commerce, in a growing economic landscape. However, at the beginning of the year, after a reassessment of their “growth-at-any-cost” philosophy of the past few years, Gojek closed GoGlam, a beautician booking service, and GoFix, a home appliances repair service.
More bad news followed as in June, Gojek announced it would lay off 9% of its employees, or 430 workers, and close down GoLife, a service offering home cleaning and massage services. The company’s physical food courts, GoFood Festival, were also no longer sustainable. But the ship has not sunk yet. Gojek is in the final stages of a more than $3 billion USD investment round and currently sits at a $10 billion USD valuation, making it a decacorn like some of its investors Facebook, Google and Tencent.
This Singapore-based ride-hailing company had to get leaner after the crisis hit them hard. Luckily, the increased demand for delivery services is offering a chance for the firm to redeploy staff. In April, Grab offered some employees the option of unpaid leave while senior executives took salary cuts to conserve cash. It wasn’t enough, however, and by June, Grab had to lay off about 360 staff, or 5% of the total. Grab announced that from July 1, the 18,000 drivers who contribute the most commissions to the firm will get a 12% rebate on their fee, meaning they will only pay 17.6% of the fares totals to Grab, instead of the usual 20% rate.
eCommerce giant Bukalapak is one of the few companies profiting from the crisis. Due to the lockdown, the eCommerce sector received a significant boost. Indonesia’s eCommerce is likely to grow from $23 billion USD in 2019 to $35 billion USD this year. Whereas before, the focus was on products such as electronics, people are now turning online to buy their daily needs, such as personal care items and groceries.
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And, in an attempt to leverage the current demand, Bukalapak’s display marketing head, Anugrah Mardi Honesty, said they were partnering with many fast-moving consumer goods (FMCG) brands.
The coronavirus pandemic has had a considerable impact on the global economy. Depending on the sector, some companies benefited from higher consumer demands, but most unicorns in Southeast Asia have to face reality and reassess their business strategy to survive the winter.
The golden investment age is no more, and venture capital firms will be more demanding with startups regarding spending plans and viable products. Many tech startups in Southeast Asia will face lower valuations, smaller funding rounds or need to seek alternative modes of funding. But every crisis holds an opportunity for growth. Just as Uber and Airbnb rose after the 2008 financial crisis, some startups will still manage to take their place amongst the unicorns of the region thanks to the current pandemic.