One Indonesian SaaS startup’s long road to success: Startup Stories

Since 2013 Sirclo has been inching its way towards a sustainable business model.

Sirclo's CEO Brian Marshal. Photo: Sirclo. Sirclo's CEO Brian Marshal. Photo: Sirclo.

When Brian Marshal thought of starting Sirclo in 2013, he admits, he wasn’t yet aware of the existence of multinational company Shopify–a US-based brand that was doing just what he had in mind.

Sirclo’s idea was to provide a customizable template for e-commerce stores which small businesses could use to create their own, making it easier for them to sell online under their own brand.

The product, “like WordPress but with e-commerce features,” would focus on the needs of Indonesia’s millions of small and medium enterprises (SMEs). The thinking was that if these SME had beautiful, easy-to-use online stores, they could grow their business, and would be willing to pay a fee for Sirclo’s software.

Since Indonesia didn’t have many Software-as-a-Service (SaaS) companies then, Sirclo became one of the country’s “first wave of SaaS startups,” Marshal said.

In 2014, Marshal convinced early stage VC firm East Ventures to fund its Seed round.

“That was our honeymoon phase. Getting Seed funding was easy. We thought now we will build a product and then customers will come,” Marshal told KrAsia.

However, he said, Sirclo and many of the SaaS startups of its cohort quickly realized it was not going to be that simple.

The sellers Sirclo approached typically relied on social media and manual processes to sell their products online. For example, in lieu of a digital checkout process for payments, these informal sellers would wait for the customer to send them proof of payment in the form of a photo of a transfer slip, then ship the product.

Despite the inefficiencies, sellers “seemed quite happy” with the status quo said Marshal.

He realized SMEs needed hands-on support if they were to adopt more complex digital tools. Sirclo would need to explain how to use the product, offer the SMEs continuous support after the initial setup, and be able to deliver tangible benefits to their clients.

The honeymoon is over

Another looming problem for Sirclo was the deep-pocketed competition from marketplaces such as Bukalapak, Tokopedia, and Lazada that offered shops for ambitious sellers who wanted to have an instant online presence.

More often than not they were going after some of the same potential customers. Even though Sirclo promised its clients a solution that’s far more customizable than its competitors, especially when it came down to branding and presentation, Sirclo’s number of paying customers stayed below its expectations.

For Indonesian SMEs, Marshal realized, investing in the simplification of business processes and branding isn’t the primary concern, or at least it wasn’t at that time.

One possible reason for Indonesian SMEs’ unwillingness to invest in these changes could be that a significant number of them are family-run. Their cost and operational structures may rely on family members to help out and they operate out of private homes. According to OECD, Indonesia reported to have about 60 million of such informal micro enterprises in 2014.

Sirclo knew it had to pivot to survive and began to hatch a new idea. The team noticed that sellers were listing their products on multiple marketplaces and social media channels, and had to manually create and upload content for each platform.

The team decided to create software that would focus on helping these sellers manage multiple digital storefronts.

“This second idea was to create an interface on which they [SMEs] can link [their products] on Lazada, Tokopedia, Shopee, and other marketplaces in an efficient way,” Marshal said.

But by this time, around 2015 and 2016, disagreements between the co-founders of Sirclo additionally weighed on the startups’ progress. Eventually, Marshal’s partner exited the company.

Andreas Thamrin, who co-founded Shopdeca, an e-commerce startup that got acquired by listed company Migme in 2016, joined Sirclo’s team as a new partner.

Back to basics

Thamrin brought in fresh perspective, and most importantly, a lot of experience in retail and distribution.

“With Andreas we decided to pivot the company again,” Marshal said. “Clients asked us to do e-commerce for them, so now our business model is that of a distributor. We now handle the online distribution for brands such as Levi’s in Indonesia.”

Sirclo’s services are now more akin to that of an e-commerce enablers like aCommerce, Marshal explained. One difference, at least at the moment according to him, is that Sirclo operates under a consignment model and does not charge its clients based on a breakdown of the services it delivered.

“Consignment is what retailers are used to,” Marshal said. “We handle all the necessary steps for them from warehousing to fulfillment and in the end we have a profit sharing agreement.”

That’s not to say the earlier SaaS products have been laid to rest. Marshal said the Shopify-like software for online stores ‘Sirclo Store’ is still available, and has found a niche client base in the form of up-and coming local brands that get their start by selling on Instagram. The interface that simplifies selling on multiple storefronts, called Connexi is also available to brands who want to manage their online sales themselves across multiple channels.

For bigger brands Sirclo found that the online distribution model works best. In addition to Levi’s, the startup now manages the online sales for a number of products from giants like L’Oreal and Danone in Indonesia.

“I do believe there is a time for the pure SaaS model in Indonesia, but it’s just not yet,” Marshal said.

The startup raised USD 5 million in Series A funding round in March. In the first half of 2019, Marshal said, the average gross merchandise volume (GMV) processed through all services on a monthly basis amounted to USD 4 million, a 40% increase from the previous year. With the current business model showing promise, Sirclo is looking for more venture capital to expand. Marshal told KrASIA that the firm is seeking a new funding round, “this time in double-digit millions.”