JAKARTA — In Tech in Asia Conference on 21 October, East Ventures founding partner, Willson Cuaca moderated a panel about startups in the time of crisis. In this panel, startup founders can learn how East Ventures portfolios – Traveloka, Sociolla, and Waresix – successfully fundraised in total of US$408 million during pandemic.
During this session, startup founders can also learn the key traits of success to overcome pandemic crisis.
- Resilience: How Traveloka bounced back from almost zero revenue to the state before the pandemic;
- Resourcefulness: How Sociolla is still able to deploy what they plan faster;
- Discipline: How Waresix’s team showed discipline in maintaining their financial fundamentals.
For conference attendees, watch the video in Tech in Asia or read the transcript below, which has been edited for accuracy, brevity & clarity.
Willson Cuaca: Good afternoon everyone, welcome to the Tech in Asia Virtual Conference. My name is Willson and I’m moderating this panel with the subject of Startups in The Time of Crisis. Joining me in this panel are Henry, Chris, and Andree. Henry from Traveloka, Andree from Waresix, and Chris from Sociolla. We have limited time, so I’ll let everyone introduce themselves briefly. Go ahead Henry.
Henry Hendrawan: Hello everyone, my name is Henry, I am currently the President of Traveloka.
Christopher Madiam: Hi everyone. I’m Chris from Sociolla, an omni channel retailer as well as a B2B company that delivers to more than 55.000 doors in Indonesia. We focus in beauty and personal care as well as the mom and babies categories, currently we are operating in Indonesia as well as in Vietnam market. Thanks.
Andree Susanto: Hi, My name is Andree, I’m the CEO and founder of Waresix. So Waresix is a logistic platform that provides transportation including trucking and warehousing services. Currently, we have more than 40.000 trucks who support our first mile and mid mile sectors, and we have about 300+ warehouses which have coverage in more than a hundred cities.
When the crisis hits
Willson: To give the audience the context regarding why we would put this panel together with Traveloka, Waresix, and Sociolla, it was because three of them just raised significant amount of money during this pandemic period. During the lockdown, while everybody stayed at home, they went out and fundraised. Traveloka has raised US$250 million, Sociolla has raised US$58 million, and Waresix has raised US$100 million.
Three of them are all portfolio companies of East Ventures we have backed since day one, and even really from day zero. When we looked at these three gentlemen [and their respective companies], we closed the deal as the first investor in our first meeting. So this is very interesting that three of them now are here together with me in this panel and I would like to deep dive into each of their experiences—how the pandemic actually impacted their businesses. From East Ventures’ perspective, there are three ways in which startups have been impacted by COVID-19 degression, the first one being impacted badly, the second being slightly impacted, and the third one being positively impacted. Maybe we can start from Henry in Traveloka. What happened in Traveloka?
Henry: So not surprisingly COVID-19 was really tough on us. Especially the second quarter, if you think about our bookings and revenue, pretty much these numbers went down to zero. To give you perspective, due to cancellation of travel plans during COVID-19, at one point we had almost 150,000 requests for refunds just for flights only, and that was more than ten times the previous state before COVID-19 at any given time. It was one large amount that equaled to US$100 million and we had to work with our airline partners who were also experiencing challenging times in terms of managing their liquidity and operational challenges.
So these two factors combined, the business going down and the operational challenges, pushed us to act fast and decisively. So a few things that we did during COVID-19 I think can be summarized into three main points. Number one, we took control of our financials really fast. We cut a lot of our costs weekly, especially for things like performance marketing, and variable costs through reprocessing of our engineering. Number two, we actually increased our investment in customer service. We talked about the challenges in managing refunds, and even though we cut cost in a lot of areas during COVID-19, the one area that we actually increased in investment is in customer service.
Besides spending more dollars in customer service, we actually shifted a lot of our human resources to customer service. One of the things we did was we asked for volunteers inside the company who was willing to help in customer service. We had almost 1000 people in Traveloka helping us for customer service. Third, last but not least, we still spent our time trying to figure out the customer needs and innovate based on these observations. So there were several products and innovations that we came up with that we developed during the COVID-19 time. So in summary Willson, it was a very challenging time but we felt that we acted quite fast and decisively and we managed to overcome the crisis.
Willson: Okay. We will go further and deeper on those items. So next I’d like to shift my focus to Chris, what happened to Sociolla?
Christopher: I think for us the impact we experienced was somewhere in the middle – so we were impacted but not too badly. Since we are omni channel retailers, our business mainly consists of mainstream offline problems, but we are also predominantly online. For the offline issues, I think because we just started building our offline stores last 2019, it was also a relatively newer business area. So in 2020, because of the success that we had in 2019, we had a big plan to enforce. We initially planned to roll out offline stores aggressively. This is the omni retail system that we had started up, but then in March, suddenly the impact of the pandemic hit and definitely hit us in the offline space; our offline stores had to close because all the malls had to be closed. So we needed to change our strategy quickly.
Instead of rolling out all of these stores, we switched our plan to focus more into the online market, which has been doing very well. There has been a switch in the focus. For example, we pivoted from our focus in make up into some other categories like personal care and more essential goods. During COVID-19, I think what we did well during this time was we switched our focus as well to build our fundamental business because we knew that our number one priority was that we needed to survive and after we felt the consistency of survival, we could pivot to identifying all the opportunities that will arise after the pandemic is over. We all believe that this is going to be over. So as soon as the thing is over we must think about what we can do. So when COVID-19 clears up, we can get ready to secure all the opportunities.
For now we are focusing on current opportunities. For example, we built our warehouses across 21 cities in Indonesia, we accelerated our international expansion plans to Vietnam, and we also tried to enhance all of the technology that we currently have. When the pandemic is over, we will be at the forefront to secure the opportunities that lie ahead.
Willson: Okay, thanks Chris. We will go deeper as well on those items. Andree, go ahead.
Andree: I think how COVID-19 impacted our business is that it created uncertainty. It created new dynamics in our customers’ supply chain. For example, there was an attendance shift, sudden spikes, and suddenly, at the beginning, users started building their stock as well. And then what we observed is that some sectors were moderately affected, while others were highly affected. How we overcame this was at first, we selected different sectors and tried to shift to the primary sectors quickly. One of the key examples was that when the COVID-19 started, suddenly people started buying refrigerators and televisions because I think people were bored and they started investing in their electronics in their homes. At the same time, pharmacy products also had really high demand, so we started shifting our priority so that we could become very agile and modular, especially on how much we deliver, how fast we deliver between online and offline.
Willson: Okay thank you! I have a follow up question for Andree, let’s stay with you for a second. You are seeing that there are some behavioral changes between the pre COVID-19 and after during the COVID-19 period. Do you think it will last? What are you expecting for what’s ahead?
Andree: In our sectors and line of work, what we saw during this COVID-19 period is that people are trying to get out of their comfort zone. We can benefit from this by taking on the adoptions and changes in consumers’ behavior. In the past, people were often skeptical to meet their demands online but because of our ability to aggregate demand in an efficient manner, we saw new users began to adopt the platform. Even in terms of the preference, sometimes B2B people need hard-copy documents to fulfill their processes but for customers we saw an increased tendency to move and try the digitized way.
Willson: So you witnessed digital transformation in your industry?
Andree: Yeah, in some industries we saw that COVID-19 actually created a positive magnitude.
Willson: I see. How about Chris? What did you see? How did the consumer behavior change in your industry and do you think will this last after COVID-19?
Christopher: In my industry, I think the changes are temporary. But there is a unique case that we learned. When the pandemic hit in early March, we saw makeup category drop like crazy. I think it was more than an 80% drop because people don’t go out anymore so they don’t need a lot of makeup. But at the same time, I saw a huge increase in demand for personal care items, especially the essentials. But after two to four months, we saw the makeup category started picking back up. The demand was increasing back to almost the level prior to COVID-19.
But of course, this shift happened on our online platform, not in offline. Now consumers are becoming more adaptable, realizing that they must adapt the new era we are living in, adopting new habits like doing video conferences like this. So, before, they might not need to use the makeup but now they started to again to use the makeup like before. So I think this is one of the things we see in our industry.
Willson: So you mean in the early days of COVID-19, people were fine to do video conferences without makeup and as of late they have been reverting back to using makeup?
Christopher: Yes I think so maybe.
Willson: Okay, Henry what happened to you in Traveloka? You mentioned earlier that your revenue almost hit zero. What happened after that? And have you seen any pick up or any changes in the behavior of consumers in the travel industry?
Henry: I think we need to recognize that travel is actually recovering surprisingly well in Southeast Asia. And maybe what people see in the disruption that is still happening actually affects international travel most. Travel between countries is still difficult and prohibited, but we see domestic travel starting to pick up. People are traveling within their own countries, and domestic travel is actually relatively alive, well, and quite robust. So the three biggest markets that Traveloka have right now are Indonesia, Thailand, and Vietnam. In these countries, the recovery is quite strong. Vietnam, in fact, in regards to transactions, has already returned to 100% pre- COVID-19 level.
Willson: That’s great to hear.
Henry: Thailand is almost 100% as well and this is closely followed by Indonesia. In terms of hotel transactions, Indonesia is almost at 70-75% pre COVID-19 level. So the recovery is on a pretty good trajectory. What we are seeing now is that people are changing their travel behavior. Now, people are going back to leisure travel but the travel is short term and short distance. So someone in Jakarta will probably not go to Japan and Hongkong anymore during these days, instead they will take a short trip outside of the city or they take a staycation in one of the hotels in the city.
This is one of the behavior changes that we noticed happening. In response we are leveraging this change in behavior because the strength of Traveloka is actually in domestic and local travel. So this is actually playing to the strength of Traveloka and we feel that we are benefiting from this shift proportionally from the recovery versus other travel platforms.
Willson: So it is great that you are in Indonesia, one of the largest countries in the world. Fourth largest democracy and we have so many islands. So people actually can travel domestically and use Traveloka as a platform to buy their rooms and ticket. But when the tourists can’t fly have you noticed a shift in transportation? For example, do they drive?
Henry: Yes. Interestingly, what we have seen is that the recovery in flights is weaker than recovery in the hotel industry. The demand for hotels within the large metropolitan cities is actually recovering faster. And the hotels that are close to metropolitan cities, like areas outside of Jakarta, areas outside of Surabaya, are doing actually quite well because people are still looking for places to go during the weekends.
18 Months early
Willson: One more follow-up question for Henry. Based on our research, in general, in the e-commerce space, there is acceleration going on and it seems like we are 18 months in advance compared to what we have planned. At the same time we are also seeing that the situation in Indonesia is not that good, many layoffs, many activities of production stopped. In your own industry, do you see the consumption levels in the country actually going down? And how is this translated into your business trajectory?
Henry: Yeah, we are seeing a change in terms of consumption level in Traveloka. In the short term, we noticed that people were booking lower number of room nights, so maybe before, we see that customers with families will book one week of leisure travel, but now maybe we see only two or three days. We see shorter booking windows and we also see that they are choosing cheaper options in terms of their travel and leisure needs. So in the short term we see that people changed their behavior due to the effects of COVID-19.
Willson: Okay, let’s move over to Chris. Chris, during the lockdown period or PSBB in Indonesia, while everybody stayed at home, you opened up 21 distribution centers across Indonesia. How did you do that?
Christopher: Basically, the first thing we needed to move on is to figure out what to do with our offline stores that were inside of the malls since the PSBB regulations called for them to be closed. In order for us to be able to serve the customers we needed to be able to reach our traditional stores. I think there is a shift in terms of behavior, but people still need to buy essentials. And because they need to stay at home longer, I think consumers are pampering themselves more but because they cannot go to the malls, they buy from the closest store to them. This happened mostly in the second tiers cities who had more traditional stores.
In order for us to be able to reach them, I thought that we needed to be able to build this second warehouse. And then our team concluded that this was a very good opportunity for us, since the pandemic situation actually made available many good warehouse locations for us. Afterwards, we strategized and thought it was best for us to expand not just in our warehouse infrastructure, but also optimal spots in malls. One of the reasons for the second warehouse is actually for us to support all of our operations, not only to serve our B2B distribution but also to help us serve our e-commerce business in the future. All of the team had high spirits. I was pleasantly surprised by the motivation of everyone – what we planned to do in six months happened so much quicker than our expectation.
Willson: So you are saying that you are keeping your team busy during this lockdown period?
Christopher: The team is busier because they actually have more initiatives than before, especially building our fundamentals because of this opportunity. Before, every time you want to secure a good location it takes a lot of time or a lot more negotiations. Now everything is happening very fast. Negotiation takes about three days and the price is pretty affordable. And secondly because everything needs to be done remotely, including surveying our warehouse virtually, and the signing of everything actually happened much quickly. Thus, the team is as busy as ever.
Willson: Okay, one more question Chris, I can understand that you are trying to expand to different cities in Indonesia outside Jakarta, you can imagine how to open those warehouses, sign virtual contracts across Indonesia. But how could you go to Vietnam? Can you like do it from Jakarta and plan on how you open things in Vietnam?
Christopher: This is also something that I would never have been able to imagine before COVID-19. I mean this is something that feels almost impossible for me. I met my country manager, the first hire for Vietnam back in February, so luckily I met him before COVID-19 hit in Indonesia. I asked him to come to Jakarta, then we had a call and I convinced him to join in April 2020. I gave him a plan and convinced him regarding the expansion because it was a good opportunity, the same thing with Indonesia actually.
In Vietnam, recovery was much faster and there were a lot of good spaces for the offline store that became available. Before, it was just impossible. And secondly, the opportunity for us to secure the partnership with all of the places in Vietnam became so open during this situation because everyone was getting hit. Now, we have more than 55 people in Vietnam team and we are also planning to open our offline store in 2021. However, because of this situation we are accelerating even more, so now we plan to open the store in November 2020.
Willson: Okay that is very interesting.
Let’s move to Andree. Andree, while you said that there was a lot of uncertainty in your sector, you tried to pick the primary verticals, right? But at the same time even with all this uncertainty, you still maintain the company at positive EBITDA. How did you do that?
Andree: Okay so what we focused on in earlier days was building the networking in the city and working with reputable clients. I think it helps to focus on the certain clients when starting to build solutions. When the pandemic hit, you already established trust with them so you are actually increasing your share of hold when others players are actually not able to serve them right, so you focus on the core values and offer the efficiencies.
I think based on that, when we increase their trust level, we give them more values and bring them efficiency, more volume and revenue, and at the same time you are keeping respectably positive unit economics. And that’s what we have seen and what we did for the past two years. And that’s where the difference lies based on the consumers, I’m in the first mile and mid mile business of logistics, so I work in the back end distribution from warehouse to port, and then port to warehouse, and warehouse to warehouse. It’s rarely seen by most of the consumers, but actually we are the one that are distributing their products so that you can fill whatever consumers staples you have, the electronics you have, and the offline source of things in demand.
Logic of fundraising
Willson: I see. So, in terms of the financials of the company, you are already profitable and the reports are always positive, so why did you want to fundraise again?
Andree: Okay that is a good question. So, the idea behind this fundraising is because we understand we are only scratching the surface of the logistics business. Logistics is really big and we want to use this opportunity to increase our natural density because logistics is a density game. When you have the opportunity to grow and set up your foot print, you do it because at the end of the day you’ll acquire economies of scales, bring more efficiency to the stakeholders, and bring more value to the clients. At the same time, we are also open to find synergies with startups and might use this opportunity to invest in our product.
Willson: I see. So regardless of COVID-19, because you are doing well, and the market is so big, you chose to still fundraise during this period?
Andree: Yes that’s basically the idea.
Willson: Okay that’s very good position to take. I assume that you will get a good variation of responses here. Let’s move to Chris, why did you fundraise during this period?
Christopher: I think founders need to think what is best for the company and the timing we choose to fundraise. For us, we chose to start the fundraising process in March. Nobody knew what was going to happen at the time. Frankly, everyone looked quite pessimistic in March because basically we didn’t know what we were going to really do.
A pandemic like this has never happened in our lifetime. Thus, as a founder, the first call is to secure the cashflow. Secondly, as founders, we believe that in every chaotic situation, in every hard situation, difficult situation, there will be good opportunities that will arise. So, we want to be at the forefront of the game when the tides turn back, so we want to secure enough cash to be able to secure any opportunities that arise.
Willson: Okay so you used this opportunity to strengthen your financial foundation to be able to execute more after the crisis?
Christopher: Yes, so that’s also what we are executing at the moment. We strengthen all of the fundamentals, we build all of the infrastructure and for sure we are strengthening our cashflow. So in the past, maybe there is less opportunity for organic growth. However, now I think we can see there’s going to be a lot of the opportunities for us, so we want to be ready for that position.
Willson: Okay, now let’s move to Traveloka. Henry, based on your projections you said that the travel industry has been recovering well, Vietnam 100%, just now you mentioned Thailand almost 100%, and Indonesia hotel booking is at 70%, and I think Traveloka are going to break even soon right?
Henry: Actually yes.
Willson: Profitable soon as well?
Henry: Well we are in the position to have a stronger financial position than even before COVID-19. I think the way I like to describe this is that during the COVID-19 period we cut a lot of fat [the word “fat” is an investor metaphor refer to business investment to projects or marketing efforts that was spent ineffectively], but we strengthen our muscles as well. So we are coming out of COVID-19 as a stronger company.
Learning from crisis
Willson: So, you exercise a lot? Strengthen your muscles, cut the fat, become lean. And then if you are about to profitable soon, why did you fundraise again?
Henry: Well, I think the recurring theme here is you want to make sure you have a strong balance because coming out of this crisis, we are predicting there will be a lot of opportunities, right? And Traveloka do see potential areas of growth, beyond our traditional let’s say travel categories. As you know, Traveloka were expanding into lifestyle and financial services before COVID-19 and we will continue to do so after the crisis. And in fact, with the fundraising process, we brought in a couple of strategic investors that are bringing strategic capabilities to enhance our offerings, especially in the financial service product categories.
Willson: Okay. Now let’s move to Andree. Andree, what lessons have you learned during this crisis?
Andree: I think the lessons that I learned, I agree with some of what Chris said earlier, that in a time of crisis there is also opportunity. So, the lesson I learned is how we want to really work efficiently as a company. It will help us to be sustainable. Let’s say in this time of crisis and pandemic, you are very concerned about your financials and how we want to grow and meet your projections. I think in terms of the decision making process, in terms of how we want to structure the company, we have to be very mindful on how we do things so that when you cannot go aggressive, you can go defensive.
I think this mentality also helped my team get out of their comfort zones as well. We are also more diverse in our sectors. We do not only serve one particular consumer good but we have five or six more industries that we see to actually be sizable and growing fast. So, we want to allocate our resources so that we can catch the wave in other sectors.
Willson: That’s great. Chris, what have you learned during this crisis?
Christopher: One thing that I learned during this time is that I actually have a great team. And I’m really thankful to have this strong team behind me. We did do a lot of things that seemed to be impossible before. Before COVID-19, we never thought that we could fundraise from home, expand to many cities in Indonesia and also expand into the international market – all from home. It is something that I thought was truly impossible. But thanks to my team, who were able to demonstrate strength beyond my expectation, we did it.
So, I think one thing that I really learned in this situation is having a good team to support you as a founder or a leader of the company is really important. Having a strong team that believes in your vision is really important no matter what you do. The industry can be really bad, but we can turn it around like Traveloka, if you have a good team. I believe that a strong team behind great leaders change everything. I think one of the real key things is developing a really good team that supports the vision and the mission of the company. So, during the bad times, we can manage all the challenges and when the good times come, we can also thrive by having this good team behind us.
Willson: So, during the bad times if we stick together, when the good times comes, even stronger relations will be formed. Henry, so what have Traveloka learned during this crisis? I remember when we met in February and the Wuhan outbreak just started. We were having breakfast and you told me some of the horror stories that are going to happen soon. What have you learned so far with the dramatic situation you experienced, you went down all the way, and then suddenly you exercised, and now you are getting stronger. Can you share?
Henry: I would say maintain a positive mindset through the crisis. I think it’s really important. If you look at the unfolding crisis with a blessed mindset, believing that in every crisis there is bound to be opportunity — I think you’ll be okay. And as a leader I think you should have a positive outlook and have the ability to motivate the team to keep going and keep pushing.
Willson: Okay, so I will wrap up the session. It is interesting that these three companies are doing very well even during this crisis – the way they respond, the way they handle various situations. In regards to the leadership, I can see that there are three traits from these three companies. We see how Traveloka showed resilience in this crisis, how Sociolla showed resourcefulness, how there’s no excuses even if you stay at home, you are still able to deploy what you want to do, even plan it faster, execute it faster.
And we see how Andree and the Waresix team showed discipline in maintaining their financial fundamentals. I hope that this three companies and the stories that they shared will inspire all the next generations of founders in the future. Thank you so much everybody. Thanks for joining me today.