(Editor’s Note: The article has been updated to include the responses from Aegon, one of GoBear’s leading investors.)
Singapore-based financial services startup GoBear announced on Monday (January 4th) that it would cease operations and begin a “proper business closure”.
Failure to raise additional funds from existing or new investors was cited as the main reason for the closure, and the COVID-19 pandemic made the operating and fundraising environment “very challenging”.
Other factors included a prolonged period of weaker demand for some financial products and services, particularly travel insurance.
However, Adrian Chng, CEO of GoBear, previously said that while the pandemic had resulted in declining interest in travel insurance, insurance and other credit products had still grown.
He even added that despite the pandemic, GoBear has had a “gross margin positive” since late 2019.
$ 97 Million Raised – What Happened?
According to Crunchbase, GoBear has had two funding rounds since it was founded in early 2015.
In May 2019, the company raised $ 80 million from its main investors: Dutch venture capital firm Walvis Participaties and life insurance and wealth management provider Aegon NV
According to Aegon, GoBear – originally only had three employees – was founded as a partnership between the two companies.
Following the $ 80 million funding, GoBear invested $ 1 million in digital scorecard fintech company CredoLab, of which Chng is a co-founder and board member.
The investment is aimed at developing Easy Apply, a mobile app that creates a predictive credit scorecard for credit card or loan applications from those with under-bank.
GoBears Funding History / Photo Credit: Owler
The company then raised an additional $ 17 million from the same investors in May 2020, increasing its total funding to $ 97 million.
Since then, questions have arisen: What happened to the funds raised so far? Did they spend nearly $ 100 million growing the business?
Did you invest the money in too many markets and the pandemic had a negative impact on your diversification efforts? Or could it be that the funding round was not completed at all?
Aegon informed Vulcan Post that the funds raised earlier in the year have all been invested in GoBear’s business transformation and growth plans.
We all had great expectations and believed in GoBear to improve the financial health of people across Asia.
When we set out on business transformation, we did not see a global pandemic. This has created a challenging and unsafe operating environment that forced GoBear to make this difficult decision.
– Aegon, one of GoBear’s leading investors
The ongoing slowdown in demand for some financial products and services – particularly travel insurance, which is a “significant contributor to business” – is also a detrimental factor.
GoBear said that, as investors and board members, Aegon and Walvis were kept informed of their fundraising drives and were closely involved in the decision to begin the due process of closing the company.
The most recent funding was to expand the consumer financial services platform in Southeast Asia.
In particular, GoBear announced that it would concentrate on the so-called “three pillars of growth”:
- An online financial supermarket that emerged from the company’s financial products aggregator / comparison service
- An online insurance broker
- The digital lending business was expanded in May 2020 with the takeover of the AsiaKredit lending platform
In addition to Singapore, GoBear was active in six other markets such as Malaysia, Indonesia, Vietnam, Thailand, the Philippines and Hong Kong.
In 2016, GoBear attempted to expand its market to Malaysia with limited success due to difficulties in competing with local players.
The startup has changed two country managers since its inception, with the youngest country manager leaving to pursue other career opportunities.
Screenshot of GoBear’s Malaysia website
The comparison functions on their Malaysian website have also been removed and replaced with a blog that has not been updated since 2019.
In addition, GoBear discontinued its price comparison business in Indonesia in January 2020 after only one year of operation.
Admittedly, Indonesia can be a difficult market to conquer as its financial literacy is not yet very high, which is reflected in a credit card penetration rate of less than three percent.
It is clear to see that the regional expansion plans were already cracked and it was only a matter of time before the business as a whole collapsed.
To save itself, GoBear likely spent a lot of money on recruiting new employees. After two of its co-founders left the company in November 2019, it made a hiring hype.
In May last year, three new executives joined: Valeriy Gasratov, Chief Information Technology Officer; Chief Strategy Officer Jinnee Lim; and Mike Singh from AsiaKredit as a new major loan offering.
GoBear then hired a new CFO, Kent Huang, in August 2020.
In contrast, some cost-cutting measures were implemented by laying off some employees, but it was not a significant limitation.
In the branches in Singapore, the Philippines, Vietnam and the Ukraine, only 11 percent or 22 employees were laid off.
With the recent closure, 165 GoBear employees will be laid off in the six branches.
Will GoBear’s closure give competitors a boost?
Image credit: Owler
There are other fintech companies in Asia that overlap with some of the services GoBear offers, such as comparison platform MoneySmart and CompareAsiaGroup.
According to Owler, GoBear ranks the lowest of the top two competitors with estimated annual sales of $ 17.6 million.
Speaking to Vinod Nair, founder and CEO of MoneySmart, he said that he did not expect GoBear to “take such drastic measures,” referring to the news of the shutdown.
“When they announced last year that they had laid off 22 employees, it seemed like a minimal reduction in the workforce, so assumed they must have secured some funding to continue operations, albeit a little leaner “, he said.
He claimed, however, that previous reports have shown that GoBear “didn’t have a very strong income compared to what it was spending”.
Regardless of that, he has settled into the plight of GoBear. MoneySmart also saw weaker demand for some financial products, despite managing to create “meaningful revenue streams across multiple categories”.
The startup also shifted its focus to products that they are confident they can grow the business with.
Overall, the COVID-19 pandemic had forced them to ditch their annual plan and reassess their business plans.
Vinod Nair, founder and CEO of MoneySmart / Image Credit: e27
“As an outsider who has only raised a fraction of what others have previously raised, we had to use capital leanly and effectively,” said Vinod.
MoneySmart anticipated a challenging fundraising environment at an early stage and withdrew as far as possible through drastic cost reductions.
They were also fortunate that the entire company agreed to cut their salaries during this time so that everyone could keep their jobs during this challenging time. As their business recovers, they have gradually restored salaries for their employees.
When asked how the GoBear shutdown will affect the industry, Vinod said he doesn’t think MoneySmart will be a significant boost in terms of customers.
“To the best of my knowledge, GoBear was not very strong in our core Singapore and Hong Kong markets,” he said.
He added that it was “unfortunate and sad” to lose someone in the ecosystem, especially when everyone has worked together to help clients make smarter financial decisions about the financial comparison area.
Nevertheless, he welcomes all GoBear employees who “still believe in the mission” to apply for open positions at MoneySmart.
Ultimately, he believes that there is no right way to run a business. For him, a fundamentally solid business is built on strong income and a uniform economy.
Others may take the approach of growing quickly with venture money only to be taken over by a larger company. There is no right answer as there have been many success stories with both approaches.
It’s just that the latter is much riskier and only lasts as long as people are willing to invest in this story, which in this case ended abruptly.
– Vinod Nair, Founder and CEO of MoneySmart
Vulcan Post reached out to industry colleagues Seedly and SingSaver as well as the other GoBear investor. However, some have chosen not to comment while others have not yet responded.
Selected image source: GoBear / Vulcan Post