Just out of a very long relationship, Phua wanted to create an online platform to meet new people. It was back in 2013. Tinder was there but it was not of much help since the online dating honcho had no operations in Southeast Asia back then.
So Phua was “forced” to create a dating app to fulfil his personal needs. Paktor, the app he launched in 2013, is now the largest dating app in Southeast Asia.
Over its seven years of existence, Paktor has raised a total of US$52 million in funding from about a dozen investors and acquired five companies, before being merged with Taiwan’s M17 Media to form M17 Entertainment. In May this year, Kollective Ventures acquired Paktor Group from M17 Entertainment.
Phua recently stepped down as the CEO of M17 Group to assume the role of Chairman.
Phua talks about his startup journey, challenges faced, lessons learned, M17’s failed IPO, and his plans.
Edited excerpts:
Accidental plunge into entrepreneurship
I was interning at McKinsey during the summer of my MBA and was going to join it in its Singapore office after graduation. I would have been working at McKinsey back then, had I not started Paktor.
Indeed, I never thought of becoming an entrepreneur when I started Paktor in 2013. I created the app as a platform to meet people but it ended up becoming something that people would use.
After developing the app, we slowly started recruiting people who can help further develop it and manage the demand.
I started a dating app not because I anticipated a boom in the industry. The company took birth from my personal experience.
The story is that I had just come out of a very long relationship of eight years. I was single again and finding it hard to meet new people. I was using Tinder but back then it didn’t have operations in Southeast Asia. I found a need to build something to meet people here.
And that’s how Paktor happened.
The beginning was tough because nobody knew us
The beginning was difficult because we were not established and nobody knew us. We didn’t just want to build a team but an international one because we wanted to see ourselves in multiple markets around the world.
So we had to hire people across different markets. It took a lot of calls and interviews, and thankfully we got a good bunch of people who were willing to come on board.
They believed in us and in what the team was trying to build. We eventually managed to get the first core team to join us.
Facing the many hurdles
Of course, we faced many challenges with regards to fundraising, finding a sustainable business model, expanding globally, overcoming cultural differences and learning about the different markets.
As you know, Southeast Asia is a fragmented market with many different cultures. Even within one country, there are different cultures in different regions.
The other thing was that since I was not a software engineer by education, I had to learn app development. In that sense, every process of starting a business was difficult.
We didn’t plan to become just a domestic company but a global company at the beginning itself. We thought to ourselves ‘why just one market and why not all’. Then we started expanding into different markets but there were still many more markets to be explored.
But our ignorance made things complicated. I didn’t know geographical expansion was expensive; there were so many different markets. We expanded into eleven markets but it was expensive. We didn’t think about this and we realise it was a mistake.
Trying everything to onboard early customers
We used different methods to onboard customers — from digital marketing to public relations to other standard ways.
Seven years ago, it took a lot of efforts to convince the customers of the benefits of mobile dating.
And then we had our first set of users, who would tell others about this. We would also try word of mouth marketing.
Meeting the first institutional investor
In 2013, at the beginning of our company, Vertex Investors’ Investment Manager reached out to us, but we were not ready to raise capital then.
However, we went back to them a year later. Raising money from Vertex was challenging because we had to show them the metrics but we weren’t there yet and we were still fresh. What is more, it was our first set of institutional investors, so you could imagine the process.
If starting a business is a learning process, fundraising itself is a learning process.
I am saying that because you were new to the process, we didn’t understand how difficult it was to keep going because we assumed it was just part of the process.
But when looking back now, we realise that it was so difficult; when you were in that process, you didn’t think about it.
By the way, we raised one round of funding from family and friends. Later, we raised a seed round from two angels based in Singapore and Hong Kong. This seed money helped us build/allowed us to last until we had enough product/metrics to raise from Vertex.
The first potential buyer and a fully-paid trip to London
Back in 2014-2015, a London-based dating company approached me and my partner Ng Jing Shen. This company was interested in acquiring Paktor because they were excited about the amount of users/traffic we had back then.
We got in touch with them in the early part of the week — Monday or Tuesday. And then on Wednesday, we were on a flight out to London.
It was a business class trip and was very exciting for us because the entire trip was funded by this firm. It was like a mini holiday for us.
In London, we were put up in a very nice hotel. And later, we had a meeting with its CEO. We went through all the business details and we were like Alice in Wonderland. It was an amazing office with a very cool check-in counter. And it was all glass and lofty.
After six hours of discussion, they realised that our average revenue per user (ARPU) was very low. While we had a lot of monthly average users (MAUs), it was not worth as much as they thought it was.
So they were not able to give us what we needed from a price perspective and the deal didn’t get through.
We were upset and we left the office dejected. But that didn’t prevent us to make the full use of the trip. We were paid for two nights’ stay in London. So Shen and I would go out sightseeing and made the most of it.
Ran out of money but not gave up
There were several situations wherein we ran out of money but we never thought of shutting down the business. I would say that even if our company had been left to myself and my partner, it would not have changed anything. It cost almost nothing to run the company, there had never been a need to wind up the business; it never crossed our minds.
For any company for that matter, I don’t think there is ever a need to shut it down. A company itself is a shell; what gives life to it are the ideas and the beliefs behind it.
You believe in what you’re trying to build and you never have to shut down. You will shut down only when you lose that belief.
You can always pivot if you don’t have a product-market fit; you can always switch if you don’t have or are unable to find alternatives.
Even if you go bankrupt, there is still no need to shut down a company because you can always restructure the business. That’s why people go into bankruptcy protection because you want to restructure it so that you can pay off your debts and continue. You will shutter only when you give up.
My advice for the companies in the hospitality and travel sector is that bite off as much as you can chew. If the market is not doing well, you can always furlough employees. You cannot afford to pay them now but you want them back because this is your team. So everybody takes a break and you wait for the demand to pick up again.
Definitely, the travel sector will come back. So if you continue to believe in what you believed in the first place, there is no reason why COVID-19 can change it. It is a temporary situation, it could be a year or two years. If you believe in what do you do, why would you shut down the company?
If you believe in your idea, you should just continue to build for the future and build for what you think.
Having said that, there is nothing wrong in giving up. You give up when you decide that this is not what you want to do.
But the key question here is this: ‘are crises and challenges the only reasons why you to shut down a company?’ No, you shut down only when you give up.
Pivoted and restructured many times
Over our seven years of existence, we have pivoted many times. We had to change our strategy and restructure the business and had to let go of people.
We first laid-off employees in 2013 and then again in six months after we expanded into 11 markets.
I remember clearly back in 2013, our monthly burn was around US$250,000. By the end of the year, we ran out of money raised from family and friends.
We had to quickly control the situation. We couldn’t raise money because we didn’t have enough metrics. So we cut down almost 70 per cent of our workforce. We had to let go of 70-80 people.
Then we had to move from being a free service to a paid one. We started charging money. We had to explore different business models around charging for charging a service like this.
In the Chairman’s role
Our core mission has always been to empower artists and entertain the world. But before answering your question about my role as Chairman, I think we need to first define Chairman.
A chairman is somebody who sits on the Director Board and who represents the collective interests of all the board members.
What do board members and directors represent? They represent the interests of significant shareholders. In every round of fundraising, you would generally add a director to the board and this director will represent the class of shareholders from that particular round of investment.
So the board is made up of the collective interests of all the shareholders. As the head of the Board, I represent the collective interests of all our shareholders. I become the interface between the shareholders and the management team.
My role as Chairman is to make sure that the company continues to grow in the direction that the shareholders would like it to grow by interfacing with the management. I do so by making sure that we make the right calls and set out the right targets for the management to push forward to.
Key lessons learnt from failed IPO
TechInAsia recently wrote a detailed article on our IPO failure.
Anyway, I can give you three key things that I learned trying to get out of the difficult situation.
In the last two years (from Q3 2018 to Q2 2020), I took away two key things trying to pull ourselves out of this mess.
The first lesson is that it is always going to be the darkest just before light or at the end of the tunnel. What my years of experience have taught me is that when you’re closest to giving up, you are closest to overcoming it.
For example, our fundraising round took seven months. It was frustrating but eventually, we made it.
The second learning is that running a business is all about its people. You must know how to lead like a person. Sometimes you forget about this in your rush to get things done and achieve results. Sometimes you don’t treat your people the way they should be treated.
But over a while, you would learn how to deal with this every day. It is difficult but if you’re able to continuously improve yourself to be a better person, you will have a stronger team behind you.
The third key lesson is that you should be grateful for everything you have. It gives you a lot of power and energy. You will stop complaining about what you don’t have.
That’s important because in times of difficulty, if you keep comparing and keep looking at what you don’t have, then you will kill yourself.
New IPO plans
So I will leave the questions for IPO of M17 to the management. So I cannot answer on behalf of them. I would say that this has been covered quite extensively also in the recent interviews that it did.
So I think the answer they provided to the press about a month ago was that we are always open. We are always speaking to the different parties involved. We are always exploring all the different possibilities. And so it remains a possibility.
Good time to start a business
There is nothing like a ‘good time’ to start a business. Nobody got rich when the water is hot.
For example, when the equity market is hot, you will see everyone getting in and you also want to get in.
This is relevant to the whole COVID-19 situation. This is a good time to start a business just like any other time. If it’s something that you want to do something you’re interested in doing, why not?
There is always a crisis happening in all the situations and all industries. So like today, COVID-19 has hit all industries. But aren’t there any industries that are booming?
Yes, life industries are booming. So is it a good time to start a business in the life industry? Maybe, a bit too late. But is it a good time to start a business in travel? Maybe, because everybody is suffering here, so maybe there are opportunities here.
All I’m saying is that in every crisis, there is always going to be an opportunity. But I think you don’t have to wait for a crisis for an opportunity there.
COVID-19 is a major crisis. But before COVID-19, there were multiple crises. In March, oil prices crashed. Also last year, there were other issues in the market where it was difficult to fundraise.
No right time to step down as CEO
I don’t think there is ever a right time to step down from the top post. Every situation is different and different founders will face it differently.
What I believe is that everybody in any company is dispensable. If I feel that someone else can do the job better than I do, I should be replaced. My journey of finding a replacement and transitioning from the CEO to Chairman has lasted close to a year.
This year, our business has boomed and it is growing significantly. We have become immensely profitable and as this transition has happened, I see the current leadership with Hiro (Hirofumi Ono) at the helm is getting stronger in many ways.
He knows how to scale a business with 10,000 people much better than I do. Can I do this job well? I definitely can. But can I do it as fast, quick and effectively as he can, the answer may be no. I think if he takes two years to do the job, I might take two-three years.
So, it is all about finding the right person and putting him/her in the right position to achieve what the company and stakeholders want/need to achieve.
Will I return to the startup world?
I don’t think that you can ever say no to starting a business again but you never know what’s going to happen in the future.
I don’t have plans for it for now but I wouldn’t say that it is not something that I will say will not happen.
Source: e27
