Estimated reading time: 5 minutes
Dennis Nguyen has an interesting observation about companies in Southeast Asia.
“This region is a hot bed of entrepreneurial talent,” this board chairman, founder, and CEO of Society Pass said.
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But despite all these amazing companies that exist in the Southeast Asian ecosystem, about 90-percent of those companies aren’t going to be able to get the venture capital (VC) funding they need to scale and grow.
“Why? Because they are too small.”
According to Dennis, even if these companies come up with good technology, good business plans, and/or good ideas, their revenue base remain small; in the hundreds of thousands dollars up till USD10 million. Anything below a USD25 million revenue threshold is basically ignored by international VC firms.
That is if they even get to enjoy the fruits of their labour because Dennis observed that many companies have run out of cash, by the time they bring their technology solution to market.
“And so, they are either going to go bankrupt, or they are going to sell to someone like me,” Dennis said.
It focuses on five verticals – lifestyle, food and beverage, travel, merchant software, and travel – and is actively looking for e-commerce companies that sell in the first three verticals.
E-commerce aggregator and Internet e-commerce holding company – How Society Pass works
Society Pass is not acquiring companies like Vietnam’s Leflair, Philippine’s Pushkart , and others , for the fun of it.
Its current form is that of an e-commerce aggregator, a platform that rolls up and aggregates other high growth and successful retailers into one powerhouse portfolio of million dollar companies, Dennis had described.
It focuses on five verticals – lifestyle, food and beverage, travel, merchant software, and travel – and is actively looking for e-commerce companies that sell in the first three verticals.
For example, it purchased Vietnamese lifestyle e-commerce provider, Leflair in 2021, after Leflair went bankrupt in 2020.
But despite all these amazing companies that exist in the Southeast Asian ecosystem, about 90-percent of those companies aren’t going to be able to get the venture capital (VC) funding they need to scale and grow.
“From a revenue base of zero, we relaunched Leflair into the Vietnam marketplace and within 3 and half months, we generated over USD630,000 in sales, with growth of 20 to 75-percent sales per month.”
Society Pass has also recently acquired a leading grocery delivery app, which Dennis fully intends to invest millions of dollars into, to create Southeast Asia’s Instacart.
Cash discounting vs loyalty points
As these companies are acquired and integrated into Society Pass’ ecosystem, Society Pass will introduce loyalty points to e-commerce platforms, which at end of day will reduce if not eliminate cash discounting, going forward.
The whole rationale basically is: Instead of implementing cash discounting, why not issue loyalty points?
Dennis pointed out how cash discounting is economically unviable, not matter how one slices or dices it.
Even if platform aggregators (like Grab Food or Food Panda or etc) come in to subsidise these merchants or product/service providers (provided certain revenue and customer numbers are met), it just becomes a race to the bottom, Dennis said.
“You could get 20-50-percent off as a consumer. But here’s the issue. If you are a well-running restaurant anywhere in the world, your typical margins are somewhere between 10-30-percent.”
Even if platform aggregators (like Grab Food or Food Panda or etc) come in to subsidise these merchants or product/service providers (provided certain revenue and customer numbers are met), it just becomes a race to the bottom, Dennis said.
Consumer freedom to try new things
“What we are saying to these merchants/entrepreneurs are, you don’t need to do that anymore. What you need is to focus on your business, focus on your product, and use our Society Pass loyalty points as additional marketing avenue for you to bring on additional consumers and foot traffic into your establishment,” Dennis explained.
In this way, and in allowing consumers to take loyalty points to be redeemed at any merchant that is part of Society Pass’s growing platform ecosystem, he believes that they would have created a more sticky consumer.
According to Dennis, even if these companies come up with good technology, good business plans, and/or good ideas, their revenue base remain small; in the hundreds of thousands dollars up till USD10 million. Anything below a USD25 million revenue threshold is basically ignored by international VC firms.
“We currently have over 3500 merchants and brands on our platform, and over 1.6 million registered users on our platform. So, as we grow bigger, the synergies, the cost savings, the revenue generation will only grow bigger and bigger,” the CEO shared.
Growing the ecosystem, stickiness, and cost efficiencies
“By the end of this year I expect to complete 20 acquisitions in those five verticals.”
He explained that his business model differs from that of a SPAC or special purpose acquisition company, because Society Pass is actually acquiring these companies, integrating them into its ecosystem, as well as bringing on their revenues, users, and merchants.
They also have the benefit of Dennis’ experienced hand, and do not have to worry about raising capital to scale out and scale up their business.
“We incentivise the enterpreneurs as they come into our loyalty points ecosystem, to go and do what they are good at, which is generate more revenues, more users and more merchants,” Dennis said.
And the key is that they can do this, without worrying about how to run a company with business functions like HR, finance, operations, logistics, legal etc, already taken care of.
They also have the benefit of Dennis’ experienced hand, and do not have to worry about raising capital to scale out and scale up their business.
