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TradeGecko sale validates exit potential of similar Asean startups

Source: Business Times

Ecosystem

THE sale of Singapore startup TradeGecko to Intuit Inc validates the exit potential of South-east Asia's Software-as-a-Service (SaaS) startups, showing that there is substance to the hype, venture investors tell The Business Times.

On Tuesday, Bloomberg reported that California-based software giant Intuit has agreed to acquire TradeGecko for over US$80 million, in one of the largest exits in the region since the Covid-19 outbreak. The deal is expected to be completed in September.

The eight-year-old startup provides inventory and order management software to small retailers and wholesalers in over 100 countries. Its founders, New Zealand brothers Cameron and Bradley Priest, will join Intuit.

TradeGecko has raised a relatively lean sum of about US$20 million from venture investors, of which half came from a 2018 Series B round led by TNB Aura and Aura Venture Fund.

Going by regulatory filings, the entity Tradegecko Pte Ltd posted a S$7.2 million loss after tax for the year to March 2019, with S$9.1 million in revenue.

Notably, Tradegecko Pte Ltd was in a net liabilities position of S$9.3 million as at March 2019, with S$10.5 million worth of convertible notes that would be due if it did not list on the Australian Securities Exchange by March this year.

While TradeGecko did not go public in the end, its investors said that they are not only satisfied with the trade sale, but also believe that this sets a hopeful precedent for other SaaS startups in South-east Asia.

Shane Chesson, founding partner at Openspace Ventures, noted that TradeGecko has clear synergies with Intuit, as the startup had already been integrated with Intuit's Quickbooks accounting solution since 2018.

"The integration allowed TradeGecko customers to automate accounting processes, manage warehouses, currencies, and e-commerce channels all on one platform.

"During Covid-19, the acquisition case became even stronger, as both parties couldn't pass up the opportunity to accelerate their long-term mission of building the leading commerce platform to power millions of SMEs," Mr Chesson said.

To be sure, TradeGecko's journey has not always been smooth; it laid off a quarter of its staff in January this year amid challenges in revenue growth, TechinAsia reported.

But investors point to how despite the challenges, TradeGecko has persisted in scaling up, with its growth mirroring the rest of Singapore's startup ecosystem. The firm was a graduate of JFDI.Asia, one of the earliest startup accelerators here.

Hugh Mason, chief executive of JFDI.Asia, expressed pride at having seen TradeGecko mature from its early days, when the brothers would start work at 4am to make hundreds of calls to potential customers.

"Often people think about startups as being about crazy ideas - those are one- hit wonders but not something you can build an economy on. And that's why this is so important for Singapore - it's a clear example of a repeatable approach (for other startups)," he said.

TradeGecko was also a bet for many local venture firms in their earlier days, including Openspace Ventures, Jungle Ventures, Wavemaker Partners, Golden Gate Ventures and 500 Durians, the regional fund of 500 Startups.

For Paul Santos, managing partner at Wavemaker, the deal shows how far the ecosystem has come. "Back in 2012, not too many people would have imagined a Singapore-based SaaS startup providing order and inventory management for SMEs to win over thousands of customers . . . Against the odds, the co-founders and team made it happen," he said.

Intuit's acquisition is "positive proof" that regional SaaS startups can shine globally. "We are hopeful that there will be more who will follow in their footsteps as our tech ecosystem matures," Mr Santos added.

David Gowdy, managing partner of Jungle Ventures, describes the deal as "transformational", not just for SaaS startups, but also for venture capitalists here.

"It's a huge validation that we can build globally scalable companies out of Singapore and South-east Asia. For all the SaaS companies based here that are wondering whether they can compete on the global stage, I think this is a deal they can look at," he said.

Vicknesh Pillay, managing partner at TNB Aura, expects more interest from global giants to scoop up South-east Asian SaaS startups.

"There has been increasing interest from North American and North Asian companies to gain market share in South-east Asia, with Singapore being the epicentre of SaaS and other tech companies in the region. With TradeGecko, we are witnessing the start of many more exits to come," he said.