Over the past year, the narrative surrounding venture capital and startups has shifted. VCs used to be focused on finding the next unicorn and achieving growth at all costs. But the recent stock market malaise has prompted them to rethink their strategy of focusing solely on growth-focused startups.
As a result, wider questions have also been raised as to whether there are alternative ways to structure and grow businesses to achieve steady business growth while addressing local needs.
At the recent Deloitte Southeast Asia Innovation Festival, we showcased several startups in the region that have redesigned their business models in innovative, new ways. Below are five startups from diverse sectors that leverage technology-enabled platforms to develop sustainable, hyper-localized, and personalized solutions.
Empowering underserved communities
According to the Asian Development Bank (ADB), there is a marked increase in the number of people in Southeast Asia who are now living in extreme poverty, defined as those surviving on less than USD 1.90 a day. This is due to the COVID-19 pandemic, which has led to a reversal of gains made in the war against poverty in the region.
To address the poverty issue, in Indonesia, homegrown startup Aruna is working with various stakeholders in the fishing industry to empower local fishing communities. According to Utari Octavianty, Aruna’s co-founder and chief sustainability officer, many local fishermen are facing challenges such as direct access to global markets and unfair fish trade practices. To help tackle these issues, Aruna’s integrated fishery and marine platform aggregates demand and streamlines processes for local fishermen to gain wider market access.
The aquatech startup not only works with local fishermen in coastal communities but also employs women, children of eligible working age, and fresh graduates. ‘Pickers’ help to select and process the seafood, while ‘Local Heroes’ help to manage Aruna’s databases and support its digital initiatives. The firm also built Kios, a network of kiosks that provide traditional fishermen easy access to necessities and financial services.
In the Philippines, another tech-enabled startup is helping to empower neighborhood convenience stores, known locally as sari-saris. Through the provision of services that range from demand aggregation to microfinancing and remittance, GrowSari has been able to transform sari-sari stores into comprehensive service hubs, bringing about positive change for their owners and the communities in which they operate.
For instance, by aggregating demand from individual owners, GrowSari can make bulk purchases from larger fast-moving consumer goods (FMCG) companies, which translates into greater cost savings for sari-sari businesses. GrowSari’s co-founder and CEO ER Rollan said, “Sari-sari stores play a significant role economically and culturally.”
Building a circular economy and championing sustainability
The climate crisis has shone the spotlight on companies and their sustainability practices. The need to embed sustainability into business strategy is increasingly important to meet shifting requirements from stakeholders including consumers, investors, and regulatory bodies.
As a region that is prone to climate hazards, Southeast Asia has much at stake. Densely populated cities such as Jakarta and Bangkok are at risk of flooding due to rising sea levels caused by global warming. In a bid to tackle climate change, several regional startups are recognizing sustainability as a strategic priority.
For example, Thailand’s moreloop is working closely with garment factories, SMEs, and fashion designers to prevent surplus fabric from ending up in landfills. Leveraging the circular economy, the textile startup aims to connect buyers to factories that produce surplus textiles. Such an approach is perhaps critical for the fashion industry, given its (unsustainably) fast cycles, high carbon footprint, and large amounts of raw material waste.
According to the startup’s founders, Thamonwan Virodchaiyan and Amorpol Huvanandana, there is a need to cultivate strong ecosystem partnerships because it “sets the right expectations from the start, creates the right vision together, and communicates that we want to get things right.”
The environmental impact of the fishing industry has also raised alarms over its unsustainable fishing practices. Indonesia, the second-largest fishing nation after China, is seeing a rapid depletion in fish stocks due to overfishing. To tackle this, Aruna is embedding environmental, social, and governance (ESG) initiatives in its business processes.
Octavianty said, “If we take something from Earth, [we] have to give back.” Leveraging technology to gather valuable data to monitor fish behavior and track fishermen’s catches, the aquatech startup can facilitate the traceability of seafood to ensure sustainable sourcing. Besides improving the livelihoods of small-scale fishermen, Aruna is also involved in educating them on the importance of sustainability practices in the marine industry.
Southeast Asia comprises diverse geographical regions with distinctive cultural practices. With such regional diversity, hyper-localized solutions are needed to address the unique issues faced by Southeast Asian consumers. For startups looking to develop solutions in traditional industries, it is imperative that they tap local knowledge in order to gain traction.
One such traditional market segment is the neighborhood mom-and-pop convenience store, which can be found all over Southeast Asia. For example, in Indonesia, such stores are known as warungs while in Singapore, they are called mama shops.
Notably, for sari-sari stores in the Philippines, the unique local cultural fabric is woven into their business operations and networks. This is a major reason why GrowSari has been successful at digitalizing sari-saris. The startup’s co-founder, ER Rollan understands the pain points of sari-sari operations, having grown up in a neighborhood with a sari-sari.
Indonesian unicorn Bukalapak has also achieved much success by digitalizing warungs. The company recently expanded into the Philippines with its digitalization program for sari-saris. To date, however, Bukalapak is struggling to gain traction in the Philippine market, as GrowSari has already captured a significant market share. This highlights the need for new entrants to understand the nuances of the local market, especially for more traditional segments such as sari-saris.
Likewise, moreloop’s Thamonwan Virodchaiyan and Amorpol Huvanandana were well-aware of the need to acquire local knowledge to successfully circularize the textile industry in Thailand, also a traditional sector. The duo designed a business model that suited the manufacturing activities in Thailand’s textile industry.
Through their personal interactions, the founders were also able to develop strong partnerships with local garment factories and homegrown designers. The pair was cognizant that their business model might not be suitable for the textile industries outside of Thailand. This explains why moreloop focuses on the domestic market and has plans to expand its circular economy business model to other industries in Thailand.
Notably, these two startups are also operating in some of the largest domestic markets in Southeast Asia. Thailand and the Philippines are two of the most populous countries in the region, and house the region’s largest consumer markets. Hence, their domestic markets are big enough to support and sustain the growth of homegrown startups.
It’s all about you
Besides hyper-localizing their solutions, the startups that were featured in this year’s Deloitte Southeast Asia Innovation Festival also adopted user personalization as a key business strategy.
These startups personalize their offerings to cater to the needs of their users, allowing them to mix and match the services they require. This form of mass personalization is known to be effective for user acquisition and retention. More commonly found in B2C business models, mass personalization involves the use of customer data and analytics to develop solutions tailored to each user.
Vietnam-headquartered online learning platform eJOY utilizes customer feedback to shape its product development, according to its founder and CEO, Diep Bui. When its platform users suggested using eJOY to study on YouTube, Netflix, Udemy, and Coursera, the startup configured its product to be compatible with these sites.
Malaysian healthtech startup, Naluri, also adopts a user-centric approach to provide its customers with personalized healthcare and life-coaching services. According to Dr. Clara Teo, head of care delivery of Naluri, the startup has a team of data analysts and scientists who analyze health data, and provide personalized health and diet-related advice to its users. The platform’s app also leverages AI and nutrition-tracking tools to provide dietary advice to its customers. Besides providing health-related services, Naluri also connects its users with financial professionals as well as life coaches, to provide users with a holistic solution.
Hence, by prioritizing the needs of their customers, these startups have developed custom-made products with mass production efficiency. At the same time, by creating products and services that respond to diverse customer needs, the companies have developed a business strategy that can promote greater inclusivity.
We’re all in this together
In all, the growth trajectories of these startups showcase how innovative business models, thoughtfully designed for their target segments, can lead to positive commercial and social outcomes, heralding the development of a new impact-driven business model.
This article is co-authored by Richard Mackender, Tan Shuo Yan, Teo Zhixin, and Michelle Ng.
Richard Mackender leads the Deloitte Southeast Asia Innovation team, a cross-function, cross-country unit dedicated to driving innovation as a long-term value creator across Deloitte’s Southeast Asia operations. Tan Shuo Yan, Teo Zhixin, and Michelle Ng are members of the team.