Built to last: How venture capital helps build lasting enterprises
COVID-19 has disrupted markets and economies around the world. But with disruption, also comes opportunities. Money Mind takes a look at how venture capital is helping tech firms in their journey to longevity.
SINGAPORE: COVID-19 has disrupted markets and economies around the world. Where this is disruption, however, there is also opportunity - and venture capital is helping tech firms in their journey to longevity.
Livspace is an e-commerce platform that brings together interior designers, contractors and vendors to help customers plan their home renovation in one place.
It is present in six major cities in India, as well as in Singapore. From the start, its founders aimed to disrupt a traditional business model.
One such traditional business model is the home interior and renovation industry.
According to Livspace CEO and co-founder Anuj Srivastava, this industry is still managed in a very traditional way worldwide. He said he and his team saw the opportunity for a technology platform to integrate the value chain, and solve complex, multi-integrated problems.
But these plans hit a roadblock when the COVID-19 pandemic struck, and countries around the world locked down.
"When we were all in May, and April, these were very uncertain days," said Mr Srivastava.
“Like many companies, we were in the non-essential category. So both in India and Singapore, while the online portion of our business continued because people could work on their own, ultimately, you have to go to a person's home to install home interiors. So the last mile nature of the work completely stopped.”
In May, the company laid off 450 staff, or about 15 per cent of its workforce.
But since then, business has bounced back, and the company hopes to become profitable in India next year.
In September, Livspace raised US$90 million in series D funding. Switzerland-based Kharis Capital, Venturi Partners, Singapore’s EDBI and Peugeot family holding company FFP were among the investors in the round. The series D funding also included backing from existing investors Ingka Investments, the investment arm of IKEA’s owner, TPG Growth, Goldman Sachs and Bessemer Ventures.
Weeks later, it obtained more than US$4 million in debt funding from an existing investor.
In all, Livspace has raised more than $200 million since being founded in 2014.
Singapore-based Jungle Ventures invested in Livspace five years ago as it seeks to find Asian startups with potential to become global brands.
Founding partner Amit Anand said the company looks for founders who have long-term vision and ambitions, and then supports them by coaching and mentoring their leadership development.
Since 2012, Jungle Ventures has raised more than US$350 million and has backed more than 35 founders across the region.
Start-ups in its portfolio have been resilient thus far, with some growing in value to be acquired by tech giants Twitter and Rakuten.
"Failure typically happens because you've either not understood your market well or you're not well-capitalised. But most often than not, failure happens because founders are not able to transition to become CEOs," said Mr Anand.
“The planning for exit has to start right at the moment of your entry. If you look at some of our exits, most of the companies would have had some level of founder-to-founder interaction for years, would have potentially a commercial arrangement before the exit.”
The sale of online inventory and order management software TradeGecko to US-based Intuit is Jungle Venture’s most recent exit.
The deal, reportedly worth more than US$80 million, took place during the pandemic.
"We've been partners with Intuit for over five years," said Cameron Priest, founder and former CEO of TradeGecko.
"Our customers could use TradeGecko for the inventory and order management and QuickBooks for their accounting, and our software would talk online again, both being cloud-based systems," he added.
TradeGecko started in 2012, providing software to help small- and medium-size enterprises sell online.
Prior to the acquisition, it had built up a profitable business serving customers in more than 100 countries, and had offices in Singapore and Toronto.
But business slowdown has also seen it lay off workers early this year, according to reports.
For now, the migration of many small business online is opening up demand for its backend management software.
For its own growth journey, TradeGecko says its venture capital partners provided valuable help.
“VCs bring this kind of pattern recognition where they've seen it many times, and they can give you that context and that advice. And obviously, if they don't know, they can make introductions because they have their own networks. The most valuable part, you realise you're in it not alone. Everyone goes through the same things," said Mr Priest.
And despite the bumps on the road in this pandemic year, there are still opportunities out there.
“There's no better time than now to actually start a company. The capital that it takes to start a company is less than what it would 10 years ago," said Livspace's Mr Srivastava.
Mr Srivastava also said that start-ups have a better potential attracting great talent now than a decade ago.
He added: "And then thirdly, the important thing is that consumers today actually trust the Internet medium. So in terms of adoption cycle, it’s relatively easier as well.
But very importantly, your heart has to be in the value proposition that you offer. And the value proposition at some point in time needs to be able to generate margin so that your company can be profitable.”