Genesis Archives

In this issue of our House View, we shine the spotlight on an extremely talented individual within the Genesis ecosystem, Tom Kim, founder and CEO of Deliveree.

Deliveree was established in 2015 with a core focus on the efficient transportation of commercial goods and large items across Indonesia, the Philippines, and Thailand. The company set out to address the challenges associated with transportation inefficiencies and the high cost of logistics. The company is projected to exceed $100 million in GTV this year. Deliveree has a team of 550 dedicated employees and a robust network of 100,000 drivers operating on its platform. Deliveree has successfully raised $109 million in capital to date.

The problem Deliveree is solving is the prevalence of one-way deliveries leading to empty return trips. In short, Deliveree devised a dynamic marketplace that connects independent drivers and trucking companies on the supply side, with tens of thousands of customers driving the demand. Matching supply to demand in this manner is no easy task, yet Deliveree managed to overcome this challenge and achieve a utilisation rate of nearly 70%, which surpasses the industry average that sits at under 50%. This accomplishment has direct positive effects on both the environment and productivity, as fuel and time are optimized. Moreover, it benefits independent truckers who rely on commission-based earnings, thereby allowing them to earn more. Notably, customers such as UPS, DHL, Philip Morris, Suntory, and Lotus’s (formerly Tesco) can now leverage an asset-light approach, booking trucks as and when necessary, which helps streamline their balance sheets.

The Genesis team first engaged with Deliveree in 2016 for discussions around debt financing and then again in April 2020. Deliveree stood out to Genesis for several reasons, including healthy, mid-teen gross margins, a dedicated and experienced management team, with a strong commitment to resolving logistical challenges. Genesis and Deliveree shook hands on a first debt facility soon after and Genesis subsequently participated in an additional round that saw Deliveree complete a massive $70 million Series C funding in June 2022.

Genesis’ investment philosophy includes a dedication to supporting startups with meaningful impact objectives. We work closely with our portfolio companies, assisting them in identifying and implementing essential impact and environmental, social, and governance (ESG) concepts throughout Southeast Asia. Deliveree is amongst the first of our portfolio companies to demonstrate a bold commitment to these principles. In May 2023, Deliveree published its inaugural report detailing its ESG and impact achievements. We are proud to have played a small part in Deliveree’s journey in this regard.

Please enjoy this Q&A with Tom.

Tell us more about your declaration of war against empty trucks and how far has Deliveree’s technology and marketplace come?

Tom Kim [TK]: Deliveree connects thousands of truck drivers and cargo shippers through its dynamic marketplace where they can find and fulfil orders every day. We are constantly upgrading our tech stack which is now third generation and going onto its fourth evolution. These improvements are based on the feedback of our loyal business customers.

Our drivers use our proprietary mobile app that shows them the live bid price and lets them accept delivery orders on the go, even while they are on a specific route. The app also helps Deliveree to track the trucks’ location and offer a hyper-local view of truck capacity for route planning.

Using our Big Data and predictive analytics, we “smart assign” bookings to drivers, which enables them to create optimised routes and schedules. On average, our drivers achieve utilisation rates ranging from 60% to 80%, with an average of 70%, as they criss-cross the map every day picking up and dropping off loads for a diverse range of customers.

In turn, this allows customers of all sizes to access affordable, flexible, and scalable trucking and cargo shipping solutions in a way that significantly increases efficiency and reduces cost. We can achieve these utilisation rates within metropolitan areas and even across larger areas such as Java Island in Indonesia, Luzon Island in the Philippines, and the Bangkok Metropolitan Area in Thailand.

Please elaborate on Deliveree’s “smart assignments” technology and how that sets you apart from traditional logistics providers?

TK: Deliveree’s “smart assignments” technology sets it apart from traditional logistics providers. This technology, driven by intelligent algorithms applying massive historical data sets, assigns trucks to bookings in the most optimal locations and times. This maximises truck utilisation and minimises empty driving distances, resulting in higher efficiency.

We believe that Big Data is the key to logistics evolution in Southeast Asia. Our success hinges on the ability to gather, combine, and effectively use data sets to tackle the region’s logistics efficiency challenges. In contrast, many competitors are still in the early stages of their first or second-generation tech, lagging behind Deliveree in user experience, features, integration capabilities, toolsets, and most importantly, Big Data and predictive analytics.

A key feature of smart assignments is the ability to estimate the duration of each booking based on massive historical data sets from seven years of operations. This allows the algorithm to help drivers build booking schedules with routes and timing that fit and flow together from one booking to the next, further streamlining logistics operations. By leveraging the power of Big Data, Deliveree aims to precisely predict booking durations, resulting in fully optimised truck schedules. This innovative approach not only solves the problem of empty trucks on the road but also addresses the elusive issue of empty backhauls (the holy grail of logistics). Moreover, it helps to reduce traffic congestion, minimise environmental emissions, increase driver earnings, and lower customer shipping costs. While it may seem too good to be true, Deliveree is working towards this future every day through significant investments in Big Data sets.

What was your motivation for setting up a formal ESG reporting process?

TK: Deliveree’s solution benefits various stakeholders, including truck drivers, businesses with goods to deliver, and even the environment. Our latest ESG report is available here.

We address the challenges faced by independent owner-operator drivers and small family trucking companies with unstable income and limited job opportunities. Through onboarding and continuous training, drivers qualify for jobs with larger enterprises that have strict requirements, such as certifications for occupational health and safety (OSHA) to enter warehouses and logistics facilities. Additional certifications, like defensive driving for energy clients and perishable goods handling for FMCG clients, are also provided.

Our comprehensive training and certification program prepares drivers for the new gig economy. Together with our mobile app, they secure delivery jobs that significantly boost their earnings, often up to 2.3 times more. This empowers businesses to connect with reliable and qualified drivers for their transportation needs while contributing to better route optimisation and environmental sustainability.

In our ESG sustainability report, you will see how our smart algorithms optimise delivery routes, providing bookings to trucks in the right place at the right time.

This increases their utilisation and decreases the distances those trucks drive while empty. Additionally, businesses can leverage Deliveree’s partial loading services, enabling them to send goods, cargo, and packages without needing to rent a full vehicle. Our algorithm calculates the most optimal and efficient route by combining cargo from multiple businesses, ensuring efficient deliveries.

Who helped you with the process and the thinking behind your ESG initiative?

TK: As part of Genesis’ venture debt to Deliveree back in January 2021, we made a commitment to Genesis Impact and E&S framework where we will start to develop a basic idea around impact development goals and objectives. However, at that time we were focusing on growth and not ready to devote resources to a deep dive to evaluate our potential ESG impact.

This changed in 2023 when our database and data science resources became substantially more sophisticated. Deliveree’s servers process vast amounts of data related to our millions of transactions and core operational functions. So the data was already there, but the hard part was building the right queries to extract, clean, and draw conclusions from the data to tell the ESG story along the main themes we outlined.

With guidance and support from Genesis who made introductions to experts and consultants in this field, we identified four key ESG impact themes that align with UN Sustainability Development Goals. Then we pursued the data extraction and analysis to validate our achievements along these themes.

We started by delving into the essence of Deliveree’s core business. While the impact was already evident, the challenge was quantifying and measuring this impact in a tangible manner. Genesis and Deliveree held several discussions, engaging in informative and collaborative discussions on quantifying impact using our existing data.

By documenting our ESG and impact achievements, we aim to strengthen our credibility in the eyes of investors, partners, clients, and vendors. This commitment to ESG impact reflects Deliveree’s dedication to sustainability and responsible business practices.

What are some key highlights of Deliveree’s ESG sustainability report for 2022/2023?

TK: At a high level, I am very proud to share the following achievements:

Emissions Reduction: Deliveree’s “smart assignments” has reduced CO2 emissions by over 3 million kilograms, equivalent to planting 143,000 trees (UNSDG: Climate Action).
Road Traffic Reduction: Through efficient truck assignments, Deliveree has decreased truck road usage by 5.3 million kilometres, equivalent to 7 return trips between Earth and the Moon. (UNSDG: Infrastructure and Sustainable Cities).
Income Acceleration: Independent drivers and small trucking businesses on Deliveree’s platform experienced significant earnings growth, with average hourly earnings increasing by 2.8 times for 73% of vendors and total earnings increasing by 2.3 times for 82% of vendors. (UNSDG: No Poverty and Decent Work).
New Economy Education: We provided extensive education to drivers, offering an average of 44 instructional hours per vendor, enabling them to thrive in the mobile app and gig economy. (UNSDG: Decent Work and Reduced Inequalities).

We have gained a strong reputation for our customer-oriented services. However, we also want to recognise the unsung heroes behind our success: the countless truck drivers who own and operate their own vehicles, as well as the small family businesses that own and manage their own fleets. Our platform empowers them to control their financial futures, leading to a positive impact on their respective communities.

What was the response to your report?

TK: Unfortunately, the response from the media and investment community was not as warm as we had hoped. From this, we realised that ESG and impact investing are still relatively young fields, and there is a limited track record of long-term performance data. In this respect, I am proud that Deliveree is ahead of the pack when it comes to monitoring our ESG and impact.

What are your business plans for the next few years?

TK: We are commencing our last private fundraising in the second half of 2023 with plans to IPO in Indonesia in late 2025/early 2026. To coincide with these capital markets plans, our consolidated group will reach EPS break-even by 4Q 2025.

Follow Deliveree on LinkedIn for more updates.

The technology industry has been one of the most dynamic and fastest-growing sectors of the global economy in recent years. 2022 was a tale of two halves. The first half of the year (and even into Q3) continued on a positive note and benefited greatly from the COVID-induced growth on the user and innovation front. Globally, startups benefitted from the preceding year of funding strength which saw investors plough $621 billion into startups globally, including $20+ billion record funding for Southeast Asia startups.

Towards the second quarter of 2022, we surveyed our portfolio founders on the fundraising environment and business outlook. A clear majority of them were optimistic about the future, observed business growth but were already noticing the slowdown in fundraising. Amidst these uncertainties, three of our portfolio companies Deliveree, Believe, and Trusting Social raised approximately $180 million of funding (April to June 2022).

Source: CB Insights State of Venture 2022 Report

As we rolled Into the second half of 2022, and certainly more towards Q4, a new reality set in for the tech industry clouded by an array of challenges ranging from economic uncertainty, market volatility, geopolitical tensions and reverberating ripples from the pandemic. Venture investors slowed their pace of investing, due diligence took longer, valuations retreated, and we started seeing signed term sheets being delayed or even revoked. Round sizes also began shrinking and later stage startups struggled to raise growth capital while holding on to lofty valuations set during their prior fundraising rounds. Funding for tech companies globally declined to $415 billion, -35% YoY but remained healthy compared to pre-pandemic levels.

According to Carta and as a benchmark on valuation, 22% of US venture-backed companies in the US, both private and public, reduced their valuations in Q3 2022, nearly tripling year-over-year. Meanwhile, as the maxim goes, “flat is the new up” with 34% of companies witnessing a rise in their valuations — the lowest increase in five years.

While the weakening fund raising environment became more evident as the year progressed, robust fundraising in the first half of the year more than compensated for the slowdown in the second half of the year with 887 funding rounds totaling US$28.8 billion in 2022 (compared to $25.7 billion raised in 2021), according to a TechinAsia report.

Referring to a joint DealstreetAsia and Enterprise Singapore report, Singapore-headquartered startups closed 517 deals in the first nine months of 2022 raising $8.11 billion, a little shy of the 487 deals and $8.28 billion raised in the same period of 2021, and with less dealmaking as the year prior.

VCs Prefer Early Stage, Late Stage Deals See Declining Investment Interest

Investment statistics from the earlier report also indicate VC preference towards early stage deals, which are defined as seed through Series B rounds. Late stage are attributed to Series C and above rounds. From the graph below extracted from the DealstreetAsia and EnterpriseSG report, investors have shifted their investment dollars into a larger number of smaller, earlier venture deals. The median size of seed rounds have doubled from $1.2-1.5 million in 2021 to $2.5-3.0 million in 2022. For later stage deals, the report also highlighted a contraction of deal value for Series D and E companies by 30-50%.

In the United States, startups seeking late-stage funding are failing to attract investors as dour sentiment in the public markets and dull exit conditions make it tougher to justify higher valuations. As valuations slip to reasonable levels and startups begin to trim operating expenses to get closer to cash or EBIDTA positive levels, they may once again start to look attractive to venture and PE investors who are keen to deploy their fund capital to work.

M&As & IPOs

We observed a notable rise in private-to-private mergers and acquisitions, as publicly-listed big tech companies saw a steep decline in their share price and valuation which in turn affected the SPAC and IPO listing opportunities. Completed venture-backed acquisitions in the first three quarters of 2022 totalled $81.7 billion, according to PitchBook data, down 40.7%, from $137.8 billion in the same period the year before. No significant venture-backed tech startups went public. In total, IPO deal proceeds plummeted 94% in 2022 — from $155.8 billion to $8.6 billion — according to Ernst & Young IPO report. Looking at 2023, there is an air of optimism that the IPO drought will “un-thaw” and favorable market conditions will return to allow the growing pipeline of IPO filings waiting to list – including Instacart (US), Vinfast (Vietnam), Tiktok (China), Stripe (US) and Epic Games (US).

On the M&A front, Microsoft reportedly acquired Fungible, a Santa Clara maker of data centre chips and storage device for $190m, about $134 million less than Fungible had raised in funding since its launch. Closer to home, according to a Tech in Asia report, Singapore-headquartered Amplify Health – a joint venture between AIA Group and Discovery Group – has announced its acquisition of AI-powered data analytics firm Aida Technologies. GoTo Group, the Indonesia-based tech giant, has acquired Swift Logistics Solutions for 583 billion rupiah (US$38 million).

Cryptopocalypse

A year in review would be incomplete without mention of the events that took place in the crypto space which was rocked by high-profile scandals through the year. Terra Luna for example, a cryptocurrency that was launched in 2019 as a stablecoin pegged to the U.S. dollar, witnessed a crash of its Terra (LUNA) crypto token in May 2022 from $120 to $0.02, a 99.9% correction. Forbes Digital Asset estimated that nearly $60 billion was wiped out of the digital currency space.

Three Arrows Capital (3AC), a crypto hedge fund founded in Singapore and believed to be managing around $10 billion in crypto assets, incurred significant losses due to its staked Luna position. 3AC has since filed for Chapter 15 bankruptcy proceedings in the US Bankruptcy Court for the Southern District of New York to protect its US assets from creditors. And this triggered a contagion of Chapter 11 bankruptcy involving Voyager, BlockFi, Genesis Global and Celsius who had dealings with 3AC. And just before the year ended, the crypto industry experienced a Black Swan event that saw crypto exchange FTX valued at $32 billion based on its most recent funding round declared bankrupt. FTX Exchange was the world’s third largest cryptocurrency exchange specializing in derivatives and leveraged products. News around FTX’s leverage and solvency involving FTX-affiliated trading firm Alameda Research triggered a liquidity crisis when FTX’s customers demanded withdrawals worth $6 billion. FTX Token (FTT) is a utility token that provides access to the FTX trading platform’s features and services. The value of FTT fell by more than 80% within two days. The crypto industry is still reeling from a brutal 2022, having lost over US$2 trillion of its value throughout the year. Crypto companies still managed to raise a total of US$21.3 billion in funding in 2022, down 42.5% from the previous year.

Recalibration in 2023

The general consensus is that 2023 will remain challenged but with green shoots on the horizon. Negative macro conditions are set to continue into 2023 – sustained inflation, raised interest rates, Russia v Ukraine, China-Covid slowdown etc. However, there has also been positive news flow on many of these fronts in the past weeks (e.g. inflation levelling off; China emerging quicker than expected from Covid-slowdown, China tech reawakening etc).

Taken together, and as it relates to the tech industry, it seems 2023 will provide the backdrop for a healthy recalibration period for startups globally. In Southeast Asia, for example, where most founders have not yet experienced a significant market downturn, this has been (and will continue to be) an opportunity for founders to adjust internal KPIs towards a more sustainable growth and fundraising future. Creativity loves constraint and we believe that great startups, with solid fundamentals, will emerge winners in a tight operating and funding environment.

Cash is king. VCs are encouraging their portfolio companies to conserve cash and extend their cash runway into 2024 so as to be able to operate through some of these macro headwinds. To that end, it’s worth noting that the companies in Genesis Fund I Portfolio have a weighted average cash runway of approximately 17 months this quarter (up from 13.5 months in Q3 2022).

Profit before growth. Founders are expected to be more disciplined around spending and investors are edging these startups to turn “profitable”, the definition of which is wide, but in these times has come to prioritise a meaningful and sustainable business model.

Talent stocking. Hiring exceptional talent used to come at a premium but with many startups downsizing, startup founders can now hire more prudently with less pressure on the P&L. In Southeast Asia, it’s been reported that retrenched executives from tech companies (and new job seekers) are actively in the market looking for opportunities but with more modest salary expectations.

Dry powder. Venture firms have continued to raise record capital, even as startups received far less money than they did in 2022. Dry powder was estimated to be as high as $1.3 trillion globally for private equity and $580 billion globally for VC. While we do not expect VCs to invest at a pace comparable to 2021, there is pressure stemming from fund size, duration to deploy and the need to put capital to use. As previous downturns have clearly shown, investors with dry powder will find it a rewarding time to deploy capital, amidst more reasonable valuations and the ability to set better deal terms.

2023 Hot VC Target Sectors

January is a hotbed for new tech innovation unveiled to consumers through the annual Consumer Electronics Show held in Las Vegas USA. The 2023 show is focused on a number of areas, including the metaverse and Web3, digital health, sustainability, automotive and mobility, and human security for all. There was strong participation from Asia which include those from South Korea, which number more than 500 and include the likes of Samsung, SK, Hyundai Motor and LG, while just under 150 exhibitors hail from Taiwan. We highlight some interesting technology showcased at CES:

- Sony teamed up with Honda to exhibit a new brand of electric vehicle called the Afeela. The Afeela logo appears on a narrow screen, or “media bar,” on the vehicle’s front bumper. This can also interact with people outside the vehicle and share information such as the weather or the car’s state of charge. Unlike the car Sony showed off at CES 2020, this car is expected to hit the North American roads in 2026. Japan and Europe will follow.
- The battery-operated WasteShark by the Dutch firm RanMarine Technology is an autonomous surface vessel designed to remove algae, biomass, and floating pollution such as plastics from lakes, ponds, and other coastal waterways. At least 14 million tons of plastic end up in the ocean every year, and plastic makes up 80% of all marine debris found from surface waters to deep-sea sediments. Marine species ingest or are entangled by plastic debris, which causes severe injuries and death.
- Canadian-based eSight Eyewear plans to display a headset designed to help people with visual impairments such as age-related macular degeneration (AMD). AMD is an eye disease that can blur your central vision. It happens when aging causes damage to the macula — the part of the eye that controls sharp, straight-ahead vision. The macula is part of the retina (the light-sensitive tissue at the back of the eye). AMD happens very slowly in some people and faster in others. If you have early AMD, you may not notice vision loss for a long time; hence the importance of regular eye exams. Once the user puts on the device, they will be able to see distinct features such eyebrows, mouth and eyes.
- Singapore-based Igloo Company will show off its second generation of smart padlocks at CES, including a slimmed-down fingerprint-based model and another featuring enterprise-grade security. The latest smart padlocks will ship in the spring. The keypad-based Padlock 2 builds on the company’s original Bluetooth-enabled smart lock by manufacturing it to military standards, including a hardened steel case. The Padlock 2 gets eight months out of a single charge of its lithium battery (the original relied on disposable batteries), and its shackle can withstand up to 15kN of cutting force, 5kN of pulling force, and 100Nm twisting force.
- And last but not least, there has been immense interest in generative AI since ChatGPT came online and mesmerised consumers with its ability to provide real-time chat responses (see below). In 2019, Microsoft invested $1 billion in OpenAI, the tiny San Francisco company that designed ChatGPT. Microsoft is now poised to challenge Big Tech competitors like Google, Amazon and Apple with a technological advantage as it is rumoured to be in talks to invest another $10 billion in OpenAI. See the picture below (right column) where we tested Open AI’s ability to write a short paragraph on electric vehicles. Try it at https://chat.openai.com/chat

Genesis welcomes our latest Limited Partner, OurCrowd, is a global venture investing platform that empowers institutions and individuals to invest and engage in emerging companies. OurCrowd manages more than $1.9B in committed funds for its 300+ portfolio companies and venture funds.

We sat down with Jon Medved (JM), Founder & CEO of OurCrowd. John is a serial entrepreneur and investor, who has been named by the Washington Post as “one of Israel’s leading high tech venture capitalists” and by the New York Times among the “top 10 most influential Americans who have impacted Israel.

Q1: You’ve been in the startup industry for a very long time. What is it that excites you about the industry?

JM: Startups are the lifeblood of technological innovation and progress. Decades ago, Lockheed Martin invented Skunk Works, and Xerox created Xerox Park, where the brightest minds could dream up big ideas unhindered by stultifying corporate red tape.

Today, the smartest companies in the world – including all the tech giants – realize that the only way to bring innovation into their products is to scout for startups developing relevant tech, invest in them, and snap them up. Today’s entrepreneurs have become Rockstars who are often celebrated and admired. They are responsible for building the world’s largest companies who have completely transformed our lives. Startups are developing the tech we need for computing, communication, and commerce, not just for the tech industry alone, but to address the critical issues of our time: food production, healthcare, clean water, sustainable energy and much, much more.

As a venture capitalist, I have the privilege of enabling visionary founders and innovators by connecting them with the investors who can fuel their startups and transform their dreams into commercial reality. Our companies literally save lives, heal the sick, and provide fresh food, water and clean energy where it’s most needed. They protect critical infrastructure from cyber-attacks. They provide the digital tools that help businesses grow. They entertain and they create employment. And when they succeed, they repay their investors many times over. It’s the best job in the world.

Q2: OurCrowd is a well-known equity investor and you’ve now launched a venture debt strategy. Can you tell us your rationale? What has been the reaction from your investors and startups?

JM: OurCrowd’s mission was always to democratize access to private markets, so in that sense it’s just a natural continuation of our journey. This initiative also came at a perfect time. Demand for venture debt is at an all-time high as entrepreneurs and investors alike realize its critical importance in the market.

This new debt product serves us in two ways. It allows us to further support our portfolio companies by offering them non-dilutive financing, which is highly relevant given the decline in valuations and the desire to avoid serious dilution from a down round. It also expands our value proposition to our investors with a cash-generating facility that provides steady income and much shorter duration than the equity investments. We are getting great feedback from both portfolio companies and investors for adding this new asset class, as evidenced by the oversubscribed Genesis first close.

Q3: Why did you choose to partner with Genesis?

JM: We decided to partner with Genesis because of the Genesis team’s strong domain expertise, with 40 years of VD/VC/PE experience and $100m+ venture debt deals executed. They are probably the most experienced venture debt team in Southeast Asia. The team’s performance speaks for itself in the early results from Fund I.

Genesis also gives us access to a unique market opportunity. Venture debt is growing strongly across Southeast Asia and high-growth companies that raise venture debt typically do so concurrently with an equity fund raise. In 2021, a record $621B was invested into global startups with $25B injected into companies in Southeast Asia. This represents a 3x increase over equity raised in 2020.

OurCrowd also likes to invest alongside strong LPs, like the Fund I investors who also decided to invest in Fund II and include some of the strongest institutional investors in the region. Moreover, we know many of the key members of the funds management for many years, and not only like them and appreciate them as fine human beings, but we continually are amazed by their talent and high ethical standards. When a great team addresses a huge and fast-growing market opportunity at the right timing, this is a good time to invest.

Q4: Where do you see the venture capital industry, especially venture debt, going in the next 5 years in SEA and Israel?

JM: A typical benchmark used by research analysts is to estimate the total size of the venture debt market as a percentage of total venture capital invested during a given year. Estimates are that the venture debt market in SEA represents ~2-5% and in Israel ~5-10% compared to 15-20% in the US. These two markets achieved fundraising records in 2021. Israeli startups raised $25.4b, a 136% increase on the previous year, while SEA startups raised $25.7b, a 167% YOY increase. We believe that the record VC money raised in 2021, maturing of the market and strong demand for venture debt amid the current global slowdown will continue to be the main drivers pushing the growth of this market.

Q5: How and where can startups in SEA and Israel collaborate together?

JM: Startups are shrinking the world. Cross-cultural collaboration is essential for innovation, because it breaks boundaries of thinking and attitude. Just look at how many of the top tech executives in the US are immigrants. One of Israel’s great strengths that has helped make our tiny country a global tech powerhouse is the fact that our population comes from more than 100 different countries, creating a rich cultural diversity that expands knowledge and thinking. Every time an Israeli startup begins a collaboration with a partner or customer from another country, it adds to its experience and effectiveness.

We are now seeing the same phenomenon in our new relationship with the Gulf states following the signing of the Abraham Accords, where Emiratis and Israelis are bringing different and complementary skills and experience to bear on a wide variety of issues and creating something brand new and even more exciting. In the same way, collaboration between startups in SEA and Israel can only enrich everyone involved and expand their horizons. Israeli companies can benefit from SEA skills in scale up and manufacturing, SEA companies can benefit from Israeli R&D prowess and deep tech innovation.

Q6: What do you look for in a founder or founding team?

JM: OurCrowd vets hundreds of startups every month and chooses perhaps one or two percent to add to our platform. Our founders must display technological excellence, relevant experience, original proprietary technology, good management skills and commercial sensibility. It is very rare for one person to have all those skills, so we tend to invest in teams of founders whose skills and experience combine to create the right group to establish, lead and build a company with a potentially commercial product. Moreover, we want to work closely with our teams, so it helps to like them!

Q7: What are the challenges and opportunities that you are seeing in the tech industry?

JM: The world is in crisis. We need answers to the critical issues facing our planet and its people. Startups can create the technology we need to fix the world. Just look at BioNTech, a startup founded by Turkish immigrants in Germany that created the vaccine marketed by Pfizer. Startups that tinker with problems that no-one needs to solve will not survive. But founders who identify a real problem, develop a practical, commercial solution and find a way to market will continue to succeed.

Q8: Any advice to founders on weathering the current downturn?

JM: This market correction was almost mandatory if you look at the soaring valuations of the past few years. Founders can no longer expect to enjoy the soaring double-digit price/revenue ratios that we have seen. There is still a lot of venture capital waiting to be deployed, but investors will want to see realistic business models and more modest spending. Founders should trim costs, extend their runway, and turn to alternative financing like venture debt instead of dreaming of huge cash injections from selling off tiny parcels of equity at high valuations.

Q9: What is your favourite movie and why?

JM: It’s A Wonderful Life. No explanation necessary.

Q10: What’s next for you?

JM: I have the greatest job and the cutest grandchildren in the world. I’m staying right here with them in Jerusalem, the most beautiful city on Earth.

Tech has been through a rocky patch so far this year, what with the gyrations of the stock market, delayed IPOs, depressed valuations, renegotiated term sheets, and layoffs. How does this align with what we’re seeing on the ground in the tech and venture ecosystem in Southeast Asia?

Our observations in the first half of the year are that investors continued to bankroll their fundraising activities and pressed on with new and follow-on investments into Southeast Asian startups despite current market conditions. Surprisingly, as at the date of this report, the pace of investments coupled with ever-growing deal sizes suggest an inverse correlation to the market correction.

For example, three Genesis portfolio companies announced strong follow-on Series C rounds in the first half of 2022, registering between a 1.78x to 2.92x increase in their enterprise value. In April, Sequoia-backed Trusting Social, an impact-driven Fintech focused on creating unique, personalised financial credit scores for the unbanked and underbanked individuals, announced its initial close of $65 million led by Vietnam’s consumer-focused conglomerate Masan Group.

A month later, Believe, a direct-to-consumer (D2C) startup specialising in consumer beauty products and backed by Accel India, raised a $55 million Series C financing led by Venturi Partners. In June, Deliveree closed its $70 million Series C led by Gobi Partners and SPIL Ventures (the CVC arm of Salam Pacific Indonesia Lines). Deliveree has been focused on creating a dynamic marketplace for the trucking industry across Indonesia, Vietnam and Philippines, matching independent truck drivers and customers with cargo.

And this was on the back of various other deals announced publicly. Indonesia’s Fintech Flip raised $100 million Series B (Tencent, Block, Insight); eFishery $100 million Series C (Temasek, Softbank, Sequoia);, Bibit $80 million (GIC); Astro $60 million Series B (Accel, Tiger Global); Singapore’s ShopBack $80 million Series C (Asia Partners); BioFourmis $300 million Series D achieving unicorn status (General Atlantic); Neobank Stashfin $270 million equity/debt Series C (Uncorrelated Ventures); Neuron Mobility $43 million Series B (GSR Ventures, Square Peg); Multiplier $60 million Series B (Tiger Global, Sequoia); Thailand’s Fresket Series B $23 million (PTT Oil, Openspace) and many more.

We also observed a continuation of Seed and Series A funding closes for startups across Southeast Asia. For example, Eratani, an Indonesia-based agritech startup raised a $1.6 million Seed round while Li Ka-Shing’s Horizons Ventures co-invested $7.5 million into Ilectra Motor Group, a 2-wheeler EV targeting the Indonesian market.

A Return to Profitability With Leaner Companies

Growth, especially growth at all costs, requires significant capital to take market share now and worry about profitability later. More often than not, customers and revenue acquired in such fashion are far from ideal, leading to higher churn rates, lower retention rates, and driving up costs even further. Raising too much capital at early stages can result in undisciplined spending leading to layoffs and other painful reactions when the burn rate skyrockets and future funding becomes scarce.

It is sobering to see news on startup layoffs across US and Asia including Southeast Asia (here are some dedicated websites tracking these statistics) and casualties such as Kaodim, an 8-year-old startup in Malaysia, which means “take care of it”, that shuttered its services as Covid halted the home-services industry. Softbank Asia’s Propzy, which bagged a $25 million Series A in 2020, dissolved a major part ofits business and reportedly laid off 50% of its employees.

On the flipside, good founders understand the value of a long-term mindset and the importance of building startups with the right values and structure so they can grow into lasting companies. The “exuberant climate” for start-ups has turned and investors are demanding to see financial metrics that are in line with the company’s stage of development. Therefore, it is prudent for start-up leaders to make adjustments in order to enhance operational efficiency and to focus funding resources to achieve important key performance indicators so as to reach the next funding round.

And there are certainly opportunities for resilient founders and companies in a market correction. As with prior downturns, we believe there is a correlation between economic cycles and the formation of category-defining companies. Companies such as Uber, Airbnb, Square, WhatsApp, MailChimp, and Adobe were all founded during recessionary periods. Moreover, today’s founders have an arsenal of tools ready for them to launch their disruptive companies in a cloud-based world with less capital required for growth and the ability to operate with no hard assets. And venture capitalists are still hunting for startups that could well become tomorrow’s category-defining companies.

A great example is Deliveree. Genesis visited Deliveree at its South Jakarta office in June to catch-up with Tom Kim, Deliveree’s Chief Executive. Tom was wrapping up Deliveree’s Series C fund raise and shared how Deliveree had been keeping a tight rein on hiring and marketing expenses which is why the company was able to garner an industry-leading gross margin in the mid-teens, compared to better-funded competitors, some of whom have low, single-digit to negative gross margins.

Brisk Pace of M&A Transactions

A “buyer’s market” has emerged as deep-pocketed acquirers pick up targets of good value. Acquiring targets in order to bulk up seems to be more attractive as the IPO window remains closed, keeping exit valuations depressed.

For example, India’s Pine Labs acquired Southeast Asian startup Fave for up to $45 million. Singapore’s Funding Societies announced it is acquiring digital payment provider Cardup to expand its payments offering.

In fact, Genesis has been receiving requests from founders who want to strengthen their balance sheet with venture debt for the sole purpose of acquisitions – a smart way to raise lower dilutive capital and add breadth and depth to their business.

We expect the pace of M&As to gather further in coming quarters given the conversations we have been having with founders who want to leverage on venture debt to buy up smaller competitors.

Abundant Dry Powder Globally For Venture Capital Investments

Preqin estimates there is more than $497 billion of global venture capital dry powder as at May 2022 (dry powder being the amount of capital that has been committed to funds minus the amount that has been called by general partners for investments).

Quarterly funding levels in 2022 remain above quarterly funding levels in 2020 and prior, according to CB Insights (July 2022) with $108.5 billion raised across 7,651 deals. This is despite the fact that quarterly funding has slowed in 2022 amidst tightening liquidity and a global meltdown in technology stocks.

US VC fundraising tops $120 billion for the second consecutive year, according to Pitchbook. A strong showing from established managers in the first half of the year has pushed capital raised to a record pace. These managers have closed 203 funds worth $94.7 billion through the first six months of the year. Already, 30 funds have closed on at least $1 billion in commitments, eight more than the previous full-year high of 22 recorded last year. While this activity is most likely a continuation of momentum from 2021, it’s still an encouraging sign around the level of capital availability through the uncertainty that the next few years may bring.

In Southeast Asia, fund investors have increased allocations to the Southeast Asia venture corridor. Southeast Asia and India-focused VC funds have raised $3.1 billion in the first 5 months of 2022, eclipsing the $3.5 billion these funds raised in all of 2021, according to a Nikkei Asia report in May 2022.

Established Southeast Asia players like Sequoia, Accel, Jungle and Mass Mutual have raised larger, multi-stage funds. Sequoia raised $2.85 billion, which includes its first dedicated fund for Southeast Asia with a pool of $850 million. And despite the shaky short-term outlook in tech, Sequoia remains optimistic about Southeast Asia’s start-ups, as do new entrants White Star, Antler, and Altara. From our conversations within our network of General Partners (GPs), it is evident that companies that can demonstrate financial discipline and prioritise healthy topline growth with manageable bottom-line expenses will be rewarded in this investment climate.

While GPs believe that the pace of investment may slow compared to 2021, this does not also mean that investing into new deals will come to a halt; rather the deal selection and diligence process will take longer as GPs will now insist on observing certain metrics and may choose to sit on the sidelines while monitoring progress.

On the topic of valuation, we also notice that GPs have already lowered their WTP (willingness to pay) and this is a common theme across funds globally. Seed and pre-A startups are likely most impacted and may see as much as 50 – 75% reduction in valuation as investors prefer not to take very early-stage risk. Series B, C and D startups remain attractive for GPs to continue investing in given their life-cycle and more reasonable enterprise values, and as highlighted above, there remains a barrage of early growth startups that have raised $50-200 million in a single round of financing with little to no discount to valuations. It also appears that funding has shifted away from late-stage pre-IPO mega deals which has resulted in the declining minting of new unicorns into the tech sector (which mirrors the global phenomenon).

Summary

While we recognise this will be a tough period for investors and companies alike, we equally believe that this will be a rewarding time for investors and GPs who have stuck to their investment thesis of backing mission-driven founders who are building sustainable businesses and aiming for market leadership positions.

The medium to long-term outlook of venture capital investing will improve as valuations and investment pacing return to more sustainable levels. And not forgetting the abundant VC dry powder waiting to pounce on attractive deals in the shorter term.

All of this should also lead to more robust dealflow for venture lenders like Genesis. Investors are now more focused on more sustainable companies with a path to profitability, healthy gross margins, lower burn, more reasonable valuation ascents etc. These are the very companies that Genesis has always invested in. In fact, in the last 2 quarters, Genesis reviewed more than $100 million of deals, and since inception, our total dealflow has crossed the $1 billion mark, which is a significant milestone.

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Martin Tang is the reading champion in Genesis – he is an avid reader and believes that reading the experiences of people who have gone before is one of the best ways to learn. As he always tells us, “a person who does not read is no different from a person who cannot read.”

If you aspire to a career in financial services, especially in the venture capital space, Martin recommends the following books to help you hit the ground running.

1. Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel & Blake Masters

Considered the first book that inspired many aspiring startup founders, this book delves into the new ways we can create value and innovation in any area of business. This comes from a very important skill that every entrepreneur must master – learning to think for yourself.

2. Never Finished: Unshackle Your Mind and Win the War Within by David Goggins

The author, a retired US Navy SEAL and ultra-marathon runner, shares his philosophy on how to master your mind, overcome physical and mental obstacles, and cultivate resilience to achieve one’s fullest potential.

3. The Magic of Thinking Big by David J. Schwartz

A self-help classic, this book emphasizes the transformative power of positive thinking and offers practical tips to overcome self-doubt and cultivate success. It underscores the impact of one’s mindset on personal and professional achievements and is invaluable for individuals who are “feeling stuck”.

4. Start with Why by Simon Sinek

This book explores how successful leaders and organizations inspire action by communicating their “why” — the purpose, cause, or belief that motivates them. In contrast to businesses that focus on “what” they do or “how” they do it, the most influential and innovative ones start with a clear understanding of “why.” Sinek illustrates how a compelling sense of purpose can create a loyal following and drive success.

5. The Power Law: Venture Capital and the Art of Disruption by, Sebastian Mallaby

“The future is not predictable; it is only discoverable.” In his book ‘The Power Law,’ Sebastian Mallaby offers a behind-the-scenes look at the people who financed industry giants like Google, SpaceX, and Alibaba. It dissects the successes and failures and offers insights into the tech industry’s evolution and its global impact.

6. What It Takes: Lessons In The Pursuit Of Excellence by Steve Schwarzman (co-founder of Blackstone)

As you can tell, I am a big fan of Blackstone! Steve Schwarzman is the grand daddy of the investment industry. He took US$400,000 and co-founded Blackstone – a firm which manages US$684 billion (as of Q2 2021). He generously shares his expertise and insights on what it takes to achieve excellence. I am always re-reading this book because I find new wisdom every time.

7. Good to Great: Why Some Companies Make the Leap…And Others Don’t by Jim Collins

This is an excellent book – backed by tons of deep data and research and is well-written. It is full of insights about why some companies go from good to great, while others fail for the same reasons. What intrigued me is the “curse of competence” that hinders companies from achieving greatness. I will not spoil it for you; read the book and find out!

8. Laughing at Wall Street: How I Beat The Pros At Investing (By Reading Tabloids, Shopping At The Mall And Connecting On Facebook) by Chris Camillo

Investment success is not mystical. It comes from being very observant of your surroundings and identifying trends. This book is full of engaging anecdotes and common-sense explanations.

9. David & Goliath: Underdogs, Misfits And The Art Of Battling Giants by Malcolm Gladwell

This is a classic Malcom Gladwell book where he sheds light on how we think about disadvantages and obstacles. We all know the story of how a shepherd boy, David, felled the mighty Goliath with a sling and a stone. The author challenges us to re-think about the “Goliaths” in our lives and what successes can arise out of adversity.

10. Outliers: The Story of Success by Malcolm Gladwell

Another classic by Malcom Gladwell. Backed by data, he traces the reasons for the success of some overachievers. What do Bill Gates and top football professionals have in common? Are they really that much more different from us normal folks? This book changed the way I looked at success.

We hope this list will help you become a more successful version of yourself.

Deliveree Drives Sustainable Logistics with Tech and Big Data

Reflecting on 2022 and Looking Ahead Into 2023

Fireside Chat with Jon Medved

The Bulls & Bears of Venture Capital Investing

Top 10 Must Reads for Interns and Gradudates