This week we switched up our interview questions and dug a little dipper into the digital economy in Malaysia. We got the chance to tap into the mind of Sayantan Das, managing director of foodpanda, to share his insights on the food delivery business as well as the key aspects to look out for when building your portfolio and pitching to investors.
What is your outlook on the digital economy in Malaysia?
The digital economy we have here in Malaysia is still growing. There’s still a long way for Malaysia to catch up. When we look at our closest comparable like Singapore, they’re quite ahead of us. However, this could just mean that there’s a lot for us to undertake and solve, which breeds opportunities.
At N.E.W, one of our missions is to help entrepreneurs avoid costly mistakes. What are some of the common mistake that you have observed from young Malaysian entrepreneurs over the years?
I think it’s really easy for young entrepreneurs to get carried away with the business idea. Basically, when we look at start-up success stories, whether its Facebook, or Grab, entrepreneurs don’t know 70-80% of the story that lead to that success. Entrepreneurs should have a solid business plan if they plan to start. When I say business plan, I mean a profitability road map. As an investor, there are 31 million people in this country, everyone has an idea, but what makes an idea successful is the execution, and how you are able to monetize that idea. I think these are the few things that entrepreneurs fail to look at, which in turn leads to a death of an idea. If your product can’t make money then, no one would want to invest in it. So that’s something I think is very pertinent.
Another thing with young entrepreneurs is that they need to build a good support structure. A lot of these 22-23-year-old, fresh out of university, they jump into things not knowing what’s to come. They need to find the right team and the right mentor to back them up and point them in the right direction. They need to get the right sort of advice from people who have a decent track record. I think it’s important to leverage off their experiences.
You mentioned that entrepreneurs don’t know the story behind the success. Can you elaborate more on this?
It can be something as crude as starting up your business in a dingy office. Sometimes you even need to clear off rats and cockroaches. (Laughs.) It may sound irrelevant or redundant, but these are things that you really need to be prepared to take on board. In my perspective, if you’re not ready to ‘clear out rats’ from the office then you’re not ready to build a business. You need to get your hands dirty, you can’t have a CEO attitude or mentality from the first day.
On top of that, it really takes a lot of experimentation, many successful businesses are a result of pivots. Entrepreneurs need to be ready to accept that ideas may fail. The question is ‘are they ready to pivot or are they too attached to an idea’? Then they’ll need to see if the idea has a good product market fit and market demand. Do closed beta testing, make sure you have a relevant sample size that enables you to validate your product. The other part of the story really comes down to whether you have the right investors, team or even the right aptitude. When I look at entrepreneurs, I want to look at good track records. It doesn’t mean they need to graduate from great universities or obtain great degrees, but more on their personalities. It’s the little nuances that provide me with an insight to who you are.
But what if the Entrepreneurs do not have any track records?
In that case, I would see how well they build a team, their leadership skills. I always believe that as an entrepreneur you should always have a great team backing you up. Whether it’s getting a great CTO, CMO or co-founder, I want to see how well the team is likely to achieve success.
Why do you think some tech entrepreneurs fail, is it because they don’t pivot as well?
I think there is a very delicate balance between moving ahead with your idea and adapting to a new one. Pivoting is challenging, which is why I said that having the right mentors and tech experts to give you the right advice is critical. People look at businesses, inside-out. People tend to get stuck in the core, you may be oblivious to your surroundings outside. That’s why you need those mentors to give you guidance and tell you when something is not working.
I think entrepreneurs inherently will be stuck to their ideas, because it is something they have spent sleepless nights thinking about, so it’s very hard for them to detach. If you have the correct support structure, I think it will help entrepreneurs to detach and look at the bigger picture, and then refocus.
Where would entrepreneurs find these mentors?
I think it’s all about hustling, right? It can be as simple as connecting through LinkedIn. I cannot speak for everyone else, but for me I’ll be happy to give some guidance and not look for anything in return. I’ve received a lot of emails from young entrepreneurs asking me to be their mentor.
Besides that, you can also find these mentors in business communities. However, there aren’t a lot of business/ tech communities in KL currently. When I compare Malaysia to Singapore and Bangalore, there are plenty of communities and meet-ups going around. Every single day there will be two to three meet ups for the tech community regardless of the industry that they’re in.
You mentioned earlier about the importance of a business plan. What are some of the weaknesses that you’ve noticed in the business plans that have been presented to you?
I think one of the main weak point is when businesses don’t validate the market correctly. It’s really important to know the total addressable market, serviceable available market and your current market share. These figures really need to be validated and you can’t just simply assume a certain size. For example, if I’m doing a business plan for foodpanda, the total addressable market shouldn’t be the number of people online, it should be the number of people online who are ready to place an order through a food delivery platform. That will really give me a good sense of what the size of the market is.
The other thing is to showcase the product market fit. One of the few ways to showcase the product market fit is through peer comparisons. Any comparable businesses that exist in the market today both locally and internationally can be used as your benchmark. If you look at a market like India, some of the most successful start-ups there are learning from each other. Take Flipcard and Snapdeal, they mimic the Amazon model and replicated it in India. You can leverage these sorts of things because there are similarities in demographics, market sizes and even business models.
Speaking about products and market fit, how important is it to have a working prototype when you make your first pitch?
I think when you’re going for seed funding or angel funding, you should definitely have an MVP (minimum viable product) ready, or something demonstrable at least. The MVP doesn’t necessarily need to be ready-to-market, but it should be viable enough to showcase your capabilities.
A lot of the product these days are digital, so it’s not really difficult to build a website, or to come up with an app prototype. When an entrepreneur does this, it shows how dedicated you are and that your efforts are in the right place. Plus, the more you climb up the funding ladder, let’s say you’ve reached series A or pre-series A, you’ll definitely need a product that is ready-to-market. Because If you’re looking for millions of dollars in funding, then you’ll need validation that stands up to the test. It’s all about the metrics that are supporting the execution and the demand for your product.
So what are some of the metrics that you look at?
I would look at the customers you’ve acquired within a certain timeline and your revenue model. Obviously, what I want to see is a positive relationship in terms of traction. Let’s say you launch your product and at day 1, you’ve acquired 100 customers, on day 60, is it still 100 customers or is there a positive trend? So growth trend is important. Hockey stick is always good. (Laughs.)
One last question about pitching before we move on. If you only had time to listen to 3 aspects from an entrepreneur, what would those 3 aspects be?
That’s actually a really good question. First and foremost, I’d like to know how well you can overcome the problem that you’re looking at. Secondly, ‘are you the best person to solve it or can your team solve it? The third thing ‘how do you see your product acquiring a billion customers’?
Great. Let’s talk about funding for a moment. What is your opinion on the funding environment in Malaysia?
When you look at the seed funding space, there are a lot of ‘angels’ who are ready to invest in your business. Purely because the product is interesting to them. We’re sort of in a good geography as well, and you can venture into other neighbouring countries such as Singapore and Indonesia to get that initial seed funding to kickstart your business.
But I think there’s a lot more that needs to be done at the series A and series B stage. I think we need more well-known VC’s (venture capitalist) or PE’s (private equities) to really take the plunge. I think a lot more entrepreneurs need to be more aggressive in pitching and reaching out to these series A and series B investors.
Why do you think the series A and series B funding’s in Malaysia fall short?
I think the gap is there because a lot of attention has been directed to Singapore or Indonesia due to the market size and market efficiency in those countries. If you look beyond South-East Asia, the focus has also been diverted to India and China. I think the reason why Singapore does well when it comes to the investment phase is because they actually have a dedicated program for young entrepreneurs or first-time entrepreneurs that is highly supported by the government. They are not afraid to put in the money, so there’s actual investment happening there.
I think Malaysia should really look into building this community where we have good insights into the start-up ecosystem. As an investor, where would I go if I wanted to invest in Malaysian start-ups? Is there a database where I can look into? I think what other countries like Indonesia, Singapore and India do well is that, as an investor I can easily go to these networking events and tech events to interact and mingle with entrepreneurs, where entrepreneurs can showcase their ideas. I believe this is lacking in the Malaysian ecosystem.
As a parting question, can you share with us which sector of the tech space in Malaysia would you encourage entrepreneurs to invest their time in?
I would go for fintech. Also, I think the sharing economy is interesting. I think we can look more into talent distribution and freelancing. These have picked up quite well in other countries. I think it’s good to allow people to earn that additional income. So, if I’m a graphic designer, how can I distribute my talent and how can I diversify this talent that I have?
Lastly, what is the vision for Foodpanda?
Foodpanda’s core business is delivery. Our vision is to ensure that Foodpanda reaches the masses. We’re not just talking about city areas like KL, but we want to reach rural areas too. I think Foodpanda has the best in class logistics in terms of hyperlocal efficiencies. We don’t employ a warehousing model where we store food. We want to provide our customers with a really localized experience.
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