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everything you need to do your next capital raise
We know that raising capital for your technology company is a tough gig. But even once you have investors that you like on the hook, there is still a lot of hard work to come before the money hits your bank account.
Explore our venture capital resources to understand the mechanics of raising a funding round in southeast Asia.
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read our case studies
Malaysian point of sale (POS) startup StoreHub is on a mission to help businesses execute better, through innovative technology and great design.
Wai Hong Fong, StoreHub CEO and co-founder, recently talked to us about his company and how he has found working with Kindrik Partners on their Series A capital raise.
the storehub story
Wai Hong refers to himself as an accidental entrepreneur. Most of his family are professionals and he says that it was a combination of kind of stumbling into opportunities plus being frustrated with a problem and wanting to solve it, which led him to where he is today.
After completing his BA in arts, media and philosophy at the University of Melbourne, he co-founded and became Managing Director at OZHut a lifestyle online retailer, where he did everything from writing code, web development and design, search engine optimization and even running the packing tables at the warehouse.
After 5 years at OzHut, he moved to China to study Mandarin and met a friend running a small retail store who asked him to look at his POS given Wai Hong’s e-Commerce background. He realised how terrible it was and not only wanted to help his friend fix this but other small to medium businesses that required offline and online sales support.
Wai Hong knew that the iPad POS was taking off in the US but there were no alternatives in Asia. With the belief that it was time for technology to revolutionise the traditional POS industry in Asia, and to help build better businesses, he co-founded StoreHub in 2013, along with current Chief Technology Officer, Congyu Li.
In the first 12 months of development, they bootstrapped the company then received a small investment from an angel investor, as well as a grant from Malaysia’s Cradle Fund. Wai Hong says that this initial funding allowed them to grow their product quickly and we’ve been cashflow positive and profitable since late 2015.
StoreHub is now a cloud-based iPad POS with inventory management, reporting and CRM, accessed via a mobile responsive backend, with over 850 retail stores paying a monthly subscription and customers in Malaysia, Philippines, Thailand and Indonesia.
In addition to the POS product offering, StoreHub supports its product with exceptional customer service based on the business to consumer experience which is not commonly offered by the industry.
In 2016, StoreHub announced a partnership with Malaysia-listed payments giant GHL Systems to deliver a fully integrated mobile point of sale (mPOS) credit card terminal and iPad POS solution. They also secured USD$850k in their Series A capital raising round from 500 Startups, as well as investors in China, Singapore and Malaysia.
Wai Hong says that StoreHub now plans to grow at least another 5 times its current size in the next year, add complementary products to their core offering and also enter new South East Asian markets, such as Thailand and Philippines.
challenges
Wai Hong notes that the biggest challenge for StoreHub is hiring and managing people, especially on a shoestring budget, talent acquisition and management is key.
The POS market is also highly competitive however StoreHub manages to differentiate because of their broad offering and leveraging their customer service focus which is generally seen as an afterthought in the industry. Being product and tech obsessed has also helped them stay ahead of the pack.
working with Kindrik Partners
Wai Hong primarily dealt with lawyers for the angel investment which involved local lawyers but it unfortunately turned out to be a painful and expensive experience.
He was then introduced to Kindrik Partners partner Lee Bagshaw through former Kindrik Partners lawyer, now investment analyst at tech VC Monks Hill, Lucy Luo. Lee supported StoreHub through the Series A capital raising, including drafting all of the documents which is unique for a deal like this, as investors usually provide the first round of documents.
Wai Hong says that it was our first serious cap raise and it was a refreshing experience given the angel investment round, knowing if I had an issue I would be getting sound advice. It made a huge difference that Lee thoroughly understood the South East Asian venture capital landscape, particularly as they had to negotiate with the investors.
Given Lee really understood StoreHub’s business, Wai Hong would work with him again on further corporate governance work like an Employee Share Options Scheme. He has also recommended both Kindrik Partners and Lee to a whole bunch of startups.
He says not only was Lee fast at delivering the work which helped StoreHub maintain their professionalism with investors, but he gets the space, market standards and provides valuable industry insights. Wai Hong thought Lee’s wealth of experience showed specifically when he advised on the all important term sheet, his advice and guidance was spot on.
Wai Hong also thinks that the Kindrik Partners Templates are also pretty cool, providing good information and learning points, and are a good starting point for legal work.
summing up
StoreHub’s growth is a testament to the company’s commitment to building a product and providing outstanding customer service. Kindrik Partners can’t wait to see what Wai Hong and the team have planned for their ambitious next steps.
Explore StoreHub.
[Note: The firm’s name was changed to Kindrik Partners in July 2020 and references to the firm’s previous name have been updated.]
about X0PA.AI
Singapore-based X0PA.AI is a SaaS talent hiring and recruitment platform that uses AI and data science to match applicants to roles, as well as predict issues such as attrition, loyalty and performance.
CEO Nina Suri has scaled the team over three years to twenty-five employees, located across Singapore, India, and the UK, with plans to start in the UAE.
X0PA recently implemented an employee share option plan (ESOP) and Nina shared her experience.
why implement an ESOP
“Having had over twenty years of entrepreneurship, I knew I wanted to build a culture of ownership and inclusivity, and ensure that our team felt involved and satisfied”, says Nina.
“An ESOP is one way that our employees can feel like they’re a part of growing something – that our success is their success”, says Nina.
putting the ESOP in place
The company originally drafted some ESOP paperwork when they first incorporated, but as they grew, X0PA’s company secretary recommended that it be replaced with something more robust and market standard.
“We learned that the ESOP needed major amendments in order to be more in line with what is typically seen in the market in Singapore, and reflect what investors are likely to expect”, said Nina.
Nina reached out Kindrik Partners after the firm was recommended to them by their company secretary. XOPA worked with Sarah Yen in Kindrik Partners’s Singapore office, who was able to create the right framework for the startup.
“We were looking for a firm who advised a lot of startups in Southeast Asia. Sarah took the time to explain and really make sure that we understood the mechanics of how the ESOP operated. This made it easier for us to communicate that to our employees.”
“It’s important when putting together an ESOP to consider several different factors”, says Sarah. “What works for the company, what is standard in the market to attract quality talent, and what your investors and most importantly a future potential buyer might expect to see.”
about the ESOP
A X0PA employee is invited to participate in the ESOP once they have been with the team for twelve months, and if they’re considered a ‘high performer’.
“At the moment we have a rockstar team, and 100% of the people who we have hired have been invited to join”, says Nina.
“In my previous venture I also felt strongly about letting my employees be directly involved – but I gave them straight equity. It was a more traditional business with a partnership model.”
“This time, an ESOP seemed more appropriate – it was a more scalable model and more appropriate for the type of company we wanted to build.”
X0PA’s management team put aside 10% of the company’s equity towards the ESOP, with the expectation that this allocation would last at least five years. They set the exercise price by the valuation of the company at the time of allocation.
Allocations were not standardised per employee but were allocated according to the contribution and importance’ of the employee’s role in the organisation, according to Nina.
The X0PA team also included an acceleration clause in the ESOP – if the company exits before the vesting period, their employee’s options fully vest.
advice for other founders
“We weren’t familiar with the nitty gritty of putting in place an ESOP – it was a new experience for us”, says Nina.
“My advice would be to go with a lawyer who is experienced with startups and ESOPs, so you don’t have to go through the complications that we went through as we started to scale”, she says.
Nina also stressed that it was important to familiarise yourself with the mechanics of your startup’s ESOP so that management could communicate with staff effectively about how it worked.
Nina also had some tips about how to communicate with a team when implementing an ESOP.
“We kept it very simple for our staff. We broke down into the main points – what is the ESOP, what does it mean for them, what do they get, how much do they get. We didn’t want to get them worked up about the legal language.”
Nina also made sure that she sent each team member an individual email after the scheme was introduced to the company, confirming what the ESOP meant, how that individual’s options vested, and what would happen to their options in different scenarios.
“You need to make sure your team understands what the ESOP is. If you’re giving them something, and they don’t appreciate it, and then what’s the point? It’s best to spell it out and make sure that everyone understands – then you’re all working towards a common purpose.”
what’s next for X0PA?
“We’re starting to move from startup to scale up now. We’re experiencing massive acceleration and growth, with several Government departments, enterprises, polytechnics and universities as clients”, says Nina.
“Our product is ready, and strong, and we’re ready to grow and help our clients with their digital transformation. We are focused on growth both from increasing market share in the markets we operate in as well as market expansion point of view.”
[Note: The firm’s name was changed to Kindrik Partners in July 2020 and references to the firm’s previous name have been updated.]
Explore our other case studies here, or access our full library of ESOP guides and templates via our resources section.
Sprout Solutions is a Philippines based SaaS payroll, HR and recruitment company. Sprout’s products are tailored to meet the requirements of each jurisdiction in which their enterprise clients operate.
We recently spoke to co-founder and CEO Patrick Gentry about working with Kindrik Partners on Sprout’s series seed funding round.
the sprout solutions story
Sprout was founded by the husband and wife team of Patrick and Alexandria Gentry. In 2016 Acceleprise (a US based SaaS accelerator) asked Sprout to be the first Philippines based company to join its program. Patrick says:
We were interviewed by other accelerators, but chose Acceleprise because it specialised in assisting companies that were looking to scale their sales to enterprise customers.
The connections that Patrick and Alexandria made at Acceleprise helped them to raise an angel round from overseas investors. Those funds were used to expand the company’s software engineering and sales teams. The company grew rapidly, and by the middle of 2017 it had over 75 employees and 150 enterprise clients in the Philippines.
After proving the business model locally, the company wanted to expand into other emerging markets in Southeast Asia. Patrick and Alexandria began looking for institutional investors to fund the tailoring of the company’s products for each new market, and to grow the international sales and services teams.
the deal
Patrick was well connected in the startup ecosystem after several years of bootstrapping both Sprout and a previous company. A fellow entrepreneur provided Patrick with a warm introduction to several VCs with a focus on B2B SaaS products. Sprout soon began negotiating a series seed investment round led by VCs Kickstart Ventures (Philippines), Wavemaker Partners (Singapore), and BEENEXT (Singapore).
A condition of the round was that Sprout needed to redomicile in Singapore. This type of restructure (or flip) is quite common, since many Southeast Asia VCs will only invest in a Singapore incorporated entity. There are a number of reasons for this, including taxation, minimal restrictions on foreign ownership, the ability to easily repatriate investment returns from Singapore, and legal certainty (including IP protection).
For Sprout, a new Singapore head company was incorporated and the existing company became a Philippines operating subsidiary. The terms of the restructure were incorporated into the long form investment documents and the flip was completed at the same time as the rest of the investment round. Patrick recalled that:
Some aspects of the restructure were unique. Kindrik Partners were great in this scenario as they did a deep dive to understand the specific requirements and complete the process by working closely with local counsel.
The company closed its US$1.6m series seed round in late 2017. Patrick told us that:
Completing the round was a huge deal. I knew we could accelerate this business with capital, and felt like the timing was perfect. It’s exciting to gain the freedom to stretch a bit and continue our rapid expansion in new areas of the business and market.
working with us
Kickstart recommended Kindrik Partners to Patrick as they had worked with us on the other side of previous deals.
Patrick says:
Kindrik Partners were invaluable in moving the deal forward as efficiently as possible by keeping the negotiations centred on the critical commercial points, and by providing insight as to what was common market practice in these areas. I can’t emphasize enough how important it is to have a strong partner that not only knows the process inside and out, but will also go to war for you and represent you as if they are negotiating for their own company.
Kindrik Partners even assisted with the calculation of the cap table, as the deal involved some bespoke debt conversion calculations relating to a previous round.
As entrepreneurs we pour our heart and soul (and blood and sweat) into our companies, and to have someone fighting for us as if it were their own – that’s just awesome!
Sprout is rapidly becoming a regional SaaS star, and we would like to thank Patrick for taking time out of his frantic schedule to speak with us.
[Note: The firm’s name was changed to Kindrik Partners in July 2020 and references to the firm’s previous name have been updated.]
