Funding Decreases, Unicorns in Southeast Asia are Pursuing Profits

A Singaporean investment company, Temasek Holdings, noted that funding to Southeast Asian unicorns has continued to decline since last year. Startups with a jumbo valuation are also encouraged to record profits.

There are at least 12 unicorns and decacorns in the region, namely Bigo, Bukalapak, Gojek, Grab, Lazada, Razer, OVO, Sea Group, Traveloka, Tokopedia, VNG, and VNPay. Unicorn is a startup with a valuation of over US$ 1 billion, while decacorn is US$ 10 billion more.

Based on Temasek’s report titled e-Conomy SEA 2020, this jumbo startup received a total fresh fund of US$ 8.7 billion. The value decreased to US$ 5.6 billion last year. Meanwhile, during the first semester of this year, it was only US$ 3 billion. Series C and D funding rounds also decreased from 19 in the first half of 2019 to 17.

“Securing funding in the near future is likely to be more difficult because investors are avoiding businesses that spend a lot of money,” said Chief Investment Strategist and Head, South East Asia, Temasek Rohit Sipahimalani as quoted from his official broadcast, Tuesday (10/11). “The path to profitability has started in earnest.”

Unicorns and Decacorns Need to Focus on Their Core Business

Rohit said, “burning money” to boost gross merchandise value (GMV) or attracting customers is not a problem. “But what is more important now is to look at the quality of GMV and customers, is this sustainable. In the end, it can be applied to a business model that is profitable for the long term,” he said.

He assessed that unicorns and decacorns need to refocus their core business to ensure they are on the right path to profitability. Rohit noted, some of which focus on digital payment services.

Rohit said unicorns in Southeast Asia participate across the spectrum of digital financial services. “Their success will depend on being able to streamline their core business to focus on profitability, and access to sustainable funding,” he said.

In the midst of the coronavirus pandemic, Gojek and Grab said that their business was recovering, supported by GoFood and GrabFood food delivery orders. In addition, both are exploring cloud computing-based restaurant services (cloud kitchens).

Unicorn and Decacorn Begin to Recover from Crisis

Last October, Grab President Ming Maa said that the company’s business was almost recovering to pre-coronavirus levels. One of the pillars is food delivery services, which contribute more than 50% to income.

“Our business recovery continues, with group revenue in the third quarter up more than 95% compared to the position before the Covid-19,” said Grab President Ming Maa in an email update to the newsletter about the company’s business, quoted by Reuters last October ( 22/10).

The spokesperson for Grab Indonesia agreed with the data, but did not specify the increase in business for each service. With this increase, Grab’s valuation is also said to have increased more than US$ 1 billion.

Likewise with Gojek. Although the company has not responded to requests for responses regarding transactions during the corona pandemic, the Demographic Institute of the Faculty of Economics and Business, University of Indonesia (LD FEB UI) noted that food delivery services have increased.

LD FEB UI surveyed 4,199 Gojek consumers regarding service use last September. As many as 65% of them are increasingly using GoFood. Then 68% use GoPay, 57% paylater, and 36% GoSend.

As a result, consumer spending on buying daily necessities through GoMart increased by 44%. Meanwhile, shopping for food delivery rose 26% and transactions using GoPay increased by 8%. However, consumers reduce spending on transportation services, especially online motorcycle taxis by 18%. Apart from decacorn, Traveloka’s homeland unicorn business is starting to recover.