Raising funding for a startup is tough. Doing it in emerging markets is tougher still. Just ask Frédéric Lévy, a serial entrepreneur who just bagged a $2.25 million Series A round for CashCashPinoy, his Philippines-based e-commerce startup, from Singaporean PE firm Hera Capital.
“Not only are you working to pioneer and shape a new industry within your country, but you need to sell the location that you live in to investors, before even selling the value of your business or yourself,” he told TechCrunch in an interview.
Lévy is certainly in a position to know. The Frenchman moved to the Philippines seven years ago, after selling his stake in Rouge, a France-based digital agency that he co-founded. After starting a successful advertising business and watching the growth of social media, he decided that increasing numbers of Filipinos (who call themselves ‘Pinoy’ — hence the name) were ready to shop online, and CashCashPinoy was started.
Launched in 2010, it is a membership-based online retail site that uses a flash sales-style model. The site offers of a range of goods with a focus on fashion, home deco, kids and electronics. Customers sign up for daily email roundups, and can pay for goods in a range of ways (including bitcoin and cash-on-collection), while items themselves are shipped to homes or can be picked up from a physical CashCashPinoy collection point.
An important moment for the startup, the deal also marks a significant milestone for the Philippines market. CashCashPinoy is one of the highest-funded startups in the country — the latest round brings the company to more than $4 million raised to date — plus Lévy himself is particularly prominent as the founder and VP of the Digital Filipino Commerce Association.
Fellow entrepreneurs will hope that a comparatively high funding round from an overseas investor can shine a spotlight on the country’s other players in its nascent startup scene.
No Premature Expansion
Lévy claimed that CashCashPinoy has over 1.5 million registered members, while more than half of its traffic comes from smartphones and tablets. The new money raised will be used to super-charge operations — interestingly, the company handles all aspects of its business in-house — but not to expand overseas.
“This money takes us to a different level,” he said. “The level of expectation will be different, but the level of support from our new investor is different too.”
As one of the country’s preeminent startups and one that aims to disrupt the national retail industry — which, as in most of Southeast Asia, is dominated by a handful of offline incumbents which move slowly — Lévy said he receives enquiries from investors and potential suitors on a weekly basis keen on a regional play.
He’s not interested in exiting though, since believes that there’s far more to come, and he needed to find the right partner to help pursue this opportunity.
“There’s an appetite [to invest in e-commerce], but we don’t want to rush our international development. Some investors proposed that we open in a few nearby markets over six months, gain some traction, then IPO. But, with more than 40 million consumers online in the Philippines, we see lots of potential to grow here — it was harder to find an investor that shares that vision.”
Not Exactly Rocket Speed
Certainly, the much-trumpeted arrival of Rocket Internet in 2012 has set a precedent for regional e-commerce businesses in Southeast Asia. The German incubator operates Lazada and Zalora, two retail sites that serve more than six markets across the region. While it has pumped an estimated $500 million or so into these two operations since 2012, Lévy shared that he has been underwhelmed by Rocket Internet’s performance thus far, particularly in the Philippines.
“When Rocket Internet arrived, I was a happy digital entrepreneur — believing that they could help evangelize the market for us. But I’m still expecting them to bring much more, particularly by pushing new consumers to buy online, they could definitely support stronger and faster growth in the industry,” he said.
Lazada and Zalora both anticipate that they will reach profitability next year, despite many skeptics (including this reporter) believing that their cost-heavy operations are still to make a significant dent in the market.
With a smaller footprint and a single-market focus, Lévy said that CashCashPinoy is on track to be profitable next year. In the busier second period of last year, the company recorded a profit, he added, but the first half of the year is typically slower for retailers in the Philippines.
For now, Lévy wants to make the Philippines market a “beautiful cash cow” for the company, and then assess overseas market opportunities at a later date.
“I really think that the appetite for online retail is just starting now,” he said. “I believe that the next three to five years will be good ones for the Philippines and the rest of Southeast Asia.”