Interview with Shaun Heng of Eatsy – on lessons from building and closing down a startup
“Building a super strong team – the best team that you can get, is on hindsight, what I didn’t do enough of.”
Why Eatsy?
When I started Eatsy in 2017, the food delivery guys were already creating an impact on the whole F&B ecosystem. Merchants were also getting comfortable adopting technology.
There was a big enough opportunity. F&B is a huge industry and a space many want to crack. It was also the right timing – riding on the wave of F&B food delivery players.
So, I jumped in….
What were the challenges you faced with Eatsy?
Two main things. Firstly, the biggest challenge for any entrepreneur is really being true to yourself and asking: Are we really solving a problem? And is the problem a big enough one to solve?
Many times, we have an idea and we try to force-feed our idea as the solution to the problem, whereas the problem may not be present or it may not be a big enough problem. That was the situation we had for the longest time.
I always like to compare vitamin versus Panadol.
A vitamin is a good to have. Whereas Panadol is something you take when you have a headache – it is solving a problem.
But many times, we are building a vitamin hoping it will become a Panadol eventually.
While that can happen, and I am sure some companies have done it before, the probability is very low. And the chances of you making that happen is very low.
My advice to entrepreneurs:
If that is the case, go back to the drawing board and see if there is really a problem you are facing right now. Because that becomes 10 times or 100 times more valuable. And people can see it. You want to get users to start using your product, getting feedback and improving on the product.
Secondly, the competitive landscape also plays a big picture when you are first starting your business. And as you can already imagine, we were building a product in a hugely competitive space both in Singapore and in Jakarta.
In Singapore, we were fighting against Grab and Fave. In Jakarta, we were fighting against Grab and Gojek.
Every single market that I go into, I’m competing against someone who has 100 times, 1000 times more capital than me.
That is also something that you must be very mindful of, especially if you are hugely passionate about the space, and you think that you have what it takes to beat the giants.
At that point, we were, on one hand, building a vitamin hoping it becomes a Panadol. And on the other hand, we were also building a product in a very competitive space. That just compounded the challenges and difficulties.
It definitely made fundraising a million times harder. Every single investor I talk to is: Why can’t Grab come in? Why can’t Gojek come in?
And true enough, when we went into this space, these guys (Grab and Gojek) took note and thought: let’s just build something on our own.
That’s something you need to be very mindful of as well.
It is very important to be forward-thinking like: How can my product help the market? But you also have to look in the rearview mirror and look: What are our competitors doing?
Those are the kind of lessons & challenges along the way that made building Eatsy a lot harder.
What led you to say “enough is enough”?
I think it was a very practical decision.
For the longest time, we had been trying to raise our Series A round.
The point when we said we had to stop was the point where we were fairly close to closing a round in the Feb/March period. We were trying to raise funds from F&B entrepreneurs in Indonesia.
But Covid struck, and these F&B operators were badly impacted. They started ghosting me.
I knew that it was probably too late to start fundraising again from new investors. And my existing investors have already contributed a lot to the company.
I spoke to our lead investor, and we decided that enough is enough. No one knows when Covid will recover. And rather than burn more money – because there was a lot more going back to the drawing board and figuring out things out – we decided that enough is enough.
I also looked at the team, and saw that everyone was very jaded, and very tired from the entire journey.
The running out of cash became a push factor for me.
Because I knew that if I stopped the business at that point, all my employees in Singapore, Jakarta and Vietnam will at least get one more month of payroll. Whereas, if I dragged the progress a bit more, and if I couldn’t raise, everyone will leave without at least one more month of salary.
So that was a very conscious effort on my part to make a snap decision and end it.
Friday, we decided.
Then Saturday, Sunday, I drafted an email and a message to all my investors – I informed them first.
And then, on Monday, I announced to the team – in Singapore and Jakarta. I couldn’t fly to Jakarta because of Covid so my General Manager in Jakarta had to help convey it.
It was done in a very professional manner and I think everyone understood.
They were all being very professional. And I am super thankful that even though they knew that they were going to lose their jobs in a month’s time, they focused on coming up with a game plan of how to offboard merchants and customers. And just seeing it through.
And once the dust had settled, I took it upon myself to help these employees find their next job. I contacted people I knew from other startups, and also some F&B operators. Eventually, some of my marketing people went to Cedele which is one of our clients.
So there was these different offboarding of employees that we tried to do during that entire period of time.
That’s the journey.
How did you handle the “winding down” of the business?
Communication was key. Firstly, I needed to let the investors know because they are the shareholders of the company.
Then comes employees, merchants and eventually customers.
Simply because whatever decision that we have to make, the investors have to buy in. For all we know, when we say that we need to wind down, they might say: “Hey, don't do that. I have some extra cash somewhere.” We will never know. So I think it's always important to be very transparent with the investors.
With employees, I think it's just a matter of how you treat them on a day to day basis. If you are a bad employer, a bad boss, the repercussions would be a lot worse. So I think a lot is really dependent on how you run the business.
I am very thankful that the employees in my team were very understanding and knew that this is happening. So they were just: What now? What can we do to help offboard the merchant? And that means going to every single merchant out there, explaining the situation and collecting back the devices and standees etc
Obviously, the hardest conversation is with the investors because they put money in you. There will definitely be some pushbacks. But if you have always been communicating very transparently with them, the pushback will be kept to the minimum.
If I had kept quiet and all of a sudden just announced that we are going to close the company, there would be a huge backlash. You took their money, so there is an obligation to at least inform them of what's happening.
For me, having a monthly newsletter to update them was important. It also became a power reflection of my journey and that was helpful.
Any tips to new entrepreneurs, apart from having a good product & knowing your competitors?
Fundraising!
Having come from the banking world, I naturally thought that I was good at fundraising. But without a product, without a team, all I had was a bag in my hand.
I failed very badly in the first two months. That was a good wake up call.
I was hearing the same feedback:
Shaun, you are a very nice guy but you haven’t built a product before, you haven’t built a team before, how can I trust my money with you?
Fundraising is by itself a strategy, a tactic.
My advice to fellow entrepreneurs is:
Start by really talking to your customers.
And finding a problem that you want to solve.
Get feedback, get traction.
Then, go to investors.
What was really helpful is this saying by Mark Suster, a venture capitalist: “Investors invest on a line, not on a dot.”
What it means is that every meeting with an investor is putting a dot on a chart for you.
And if you meet the investor long enough, and the dots on the line forms an upward trajectory, that implies that this company or this founder is growing. That creates more confidence for the investor to want to give this money to you.
Fundraising is a long-term game. You are not going to get money from every investor you talk to, if they don’t know you at first.
The reason why second and third time entrepreneurs have an easier time fundraising is because there is already a line there. They have already met investors before, and they have already formed somewhat of a line. It is never just about the first meeting. It is always about building the momentum.
So, what I did after every meeting is to send these investors a monthly investor newsletter. That is basically a pulse check on my company, and on my progress as a founder as well.
Creating that newsletter became a differentiating factor from a lot of other entrepreneurs and founders. It creates additional points on the chart. And eventually, if I meet them again, they will remember that I’ve sent them a couple of newsletters.
That creates a line, that is hopefully on an upright trend. Then, it becomes a line that they are more willing to invest with.
What are the precautions that can be taken to cope with unexpected crises?
I can narrow it down to 3 factors – team, product, and also fundraising.
As founders, we tend to underestimate the power of building a very strong team. We always want the best investor. But what we fail to do more of is to find A-players to join the team.
Because when you have a very strong and solid team, these are the guys that will work with you to push through the different challenges. Whether it is during the Covid situation or not. So I can never emphasize hard enough that building a strong team is more important than finding strong investors.
Having a strong team and a good product is more than enough for you to get a good investor to join you.
Because the product itself will always evolve. There's always going to be new technologies that you can adopt, but you need a strong team to be able to spot these products or these advancements in technology and cater it to the market. So I think for me it's always about building a super strong team – the best team that you can get. I think, on hindsight, that's what I didn’t do enough of.
When I started Eatsy, I started alone and then I started building a team – bringing in my tech co-founder, bringing in the sales guy etc. They are strong people and we got from zero to 1. But as we grew from one to 10, I didn't spend enough time on recruitment and hiring the right people. We struggled and went into a plateau for quite a long period of time.
Photo: Team Eatsy with Shaun Heng, Ex-Founder of Eatsy
It might be cliché to say this, but for me or for any entrepreneurs, you are always trying to hire people who are smarter than you. So both of you will push each other, and you will keep getting smarter and better at what you're doing.
Because the point where you start hiring a B-person, things will start to go downhill. The B will hire a B-minus person, and the B minus person will hire a C-person. It becomes a downward trajectory. What you want is to always be hiring an A-plus person and just keep breaking the barriers on that front.
These are the guys that will amplify in multiple folds. Because if you believe in yourself as an entrepreneur and as an individual, what you are then doing is that you are amplifying the effect of hiring 5 or 10 more of yourself. And that itself is a very powerful kind of network effect.
And I’ve kind of seen it first hand after moving on from Eatsy, and talking to more people in my new career in a multinational company now. When you work with really smart people, it just opens your eyes to a lot more. It makes you think of doing things in very different ways, in a much faster and better way as well.
So I think having a strong team is definitely one of the key criteria.
Is this a case of once bitten, twice shy?
No. Eventually I still want to go back to building my own company. I think what’s stopping me right now is that I haven't found the right team yet.
That's something that is very clear to me. And I am intentional about it – I want to meet and build relationships with as many smart people as I can, and with people that have skill sets that I don’t.
So the point where I know that I have an idea that I want to work on, I can call on these guys to join me. And the relationships have already been built, so the conversation becomes a lot easier.
I also probably need to save up on capital first. So at least I can start on boot strapping and starting something without raising money from day one. Because the day you start raising money from investors is the day where the clock starts ticking. You are racing against the clock.
On hindsight, this is what I have in mind: Finding the right team and building my own capital. And then let’s see where that takes me.