S1E11 | Truths About Automating And Growing F&B And Retail businesses In Southeast Asia | Fong Wai Hong

How do you build a business servicing a client base that operates on a fine line between survival and failure? And how do you ensure your business is not just client-churn proof but also emerges resilient towards funding challenges? Find out from Wai Hong, founder of StoreHub.

Discussion Topics: Truths about Automating and Growing F&B and Retail Businesses in Southeast Asia

• How StoreHub got started
• Hard Truths about F&B and Retail
• How they create a scaled marketing and sales process 
• Early days of Storehub
• Meeting his co-founder and CTO
• Meeting Vertex
• Hard truths about fund-raising
• How Vertex is different from many other VCs
• Product-Market Fit isn’t a static thing
• How StoreHub launched a food delivery business in just 48 hours
• Being resilient to funding challenges
• Building a pro sports team culture

Transcript: Truths about Automating and Growing F&B and Retail Businesses in Southeast Asia

Elise Tan: Hi, I’m Elise Tan, and I’m your host for this episode of Hard Truth by Vertex Podcast. So, today I’m really happy to have Wai Hong Fong, co-founder and Chieftain of StoreHub. Hi Wai Hong.

Wai Hong Fong: Hey Elise. How’s it going?

Elise Tan: Good. So, StoreHub is the leading operating system for over 15,000 retail and F&B businesses across Southeast Asia. One interesting fact, Wai Hong was named one of Australia’s best young entrepreneurs, as well as Melbourne’s top 100 Most Influential People by the Age.

Wai Hong Fong: It’s really good to be here. Thanks for having me on the podcast.

Elise Tan: Great. Recently, I know that you celebrated the 10th anniversary of starting StoreHub. How has been the journey for you?

Wai Hong Fong: 10 years. Wow. I mean, it’s definitely been a roller coaster of a ride. To describe it in a simple single sentence would be really difficult. But I think it’s been a really meaningful journey overall. And it’s been so much, I guess, growth over the years, so much opportunity to do something really meaningful in this region, especially for the businesses that we work with, small and medium businesses. And it’s really good to have Vertex as a partner over these 10 years. It has not been an easy journey. But it’s always better when you have good partners with you.

Elise Tan: Yeah, that’s great to hear. And at Vertex we are definitely honoured to have partnered with you, I guess, since 2017.

Wai Hong Fong: Yeah, I think we officially did the deal at the end of 2017. We’ve been working with Joo Hock, Carmen, and the Vertex team as a whole for almost five or six years now. So it’s been quite a while now.

Elise Tan: Wow. And I know that StoreHub started as a point-of-sale operating system. And it’s been growing ever since. Maybe you can share a bit about how your product has grown over the years.

Wai Hong Fong: So when we first started, we were just a simple iPad point of sale. And the iPad point of sale was our entry point into the businesses that we’re working with. It’s the most basic system that most of these businesses need.

But over the years, we’ve really been able to dive deeper into the challenges, into the needs of specifically small-medium retail and restaurant businesses. And figuring out how to leverage the fact that we have this core operating system starting with a point of sale. And we’re able to stack on top of this other ways to create value as in inventory, in customer management, in loyalty, in omni channel type work, whether it’s taking orders online, taking orders in-store through the QR code, and there’s so many different things that we’re able to support a business in doing.

And so really today we’re no longer just that simple iPad point of sale that we started with. We’re an operating system for the businesses that we work with, almost as essential as Windows is for your PC or Mac OS is for your Mac.

Elise Tan: Can you tell us an example where maybe a company that used your product was really young at that point, and then they grew bigger and bigger and used more and more of your products along the way?

Wai Hong Fong: There are so many examples of these companies that have started out with us as a single product or single store to be more specific and have grown. I mean, Flash Coffee is one of them. They started with their first store and now they’re over 300 stores. We’ve got a whole bunch of other businesses, whether that’s in retail as well.

I think we have a business called Bora Korean Mart. I think they started in the middle of the pandemic, one store now they are over 50 stores. One of the most interesting Korean grocery stores in Thailand. So I mean, there’s just so many examples of businesses. We’ve started out very similarly to very humble, single stores, small but with big ambitions to really serve the market that they are aiming for.

Elise Tan: I think one of the things Vertex has always been excited about is how our companies are enabling MSMEs and SMEs in the region. And definitely, StoreHub has been doing that. But I know that it’s been really a journey of ups and downs. What are the Hard Truths you actually experienced while providing to the F&B and retail business?

Wai Hong Fong: We are just looking at kind of like stats globally, SME businesses, restaurants specifically, and even retailers. A lot of them closed down in the first two years and we’re talking about high double-digit numbers or high double-digit percentages. And so I think the first Hard Truth is that we’re serving a market where the struggle to survive, the struggle to build a successful sustainable business is very real.

That’s the first Hard Truth. And of course, the question is therefore, before you’re even worrying about so-called competitors, the first most important challenge and of course, most confronting thing is how do you support these guys to even be successful?

So I think that’s really the first Hard Truth, I would say it’s the challenge of sustainability in this sector. And it’s about 10 years being in the market because of our experience in a market, we’ve seen certain patterns emerge from supporting these businesses over that period of time.

And so a lot of technology that we’re building automates a lot of the critical kind of opportunities that SME businesses have to build sustainable businesses that they have historically struggled with in the past because of a lack of skill, talent, and ability to hire the right people in the organisation. So I think that’s something that’s really interesting for us to have discovered over that journey. And then to solve for the hard truth, hard solution, but very meaningful outcomes.

Elise Tan: Yeah, I love that, you are almost like an incubator for the F&B and retail business, and that’s a key, even in Singapore, I want to look at the number of F&B businesses that are registered in one year. And at the end of the year actually, at least half closed. So it’s really challenging as a sector. We recently actually published our monthly column in the Business Times on assessing F&B businesses, and understanding what kind of models can be VC backed.

So I also want to kind of understand, because you mentioned the challenge of serving a sector due to the high kind of churn in a way, then discovery becomes very important, the discovery of your product. So how do you make sure that happens? Someone starts up a new restaurant, and they know that, hey, you StoreHub.

Wai Hong Fong: So I think for us, the first and foremost thing is, we have a very strong process when it comes to engaging these businesses. And there’s a really important distinction that we have made between how we built this process, as compared to say an enterprise SaaS or enterprise software business.

Typically, in enterprise software, you have really experienced or qualified salespeople who have very long sales cycles, and who take a while to build relationships. And that’s generally the path that many businesses have walked down in the past.

But for us, we recognize that because we’re serving primarily the SME layer, we have to structure our process and our approach very differently. That approach starts with a very holistic view of marketing because channel attribution these days is not as simple as the last person or the person who visited Google and went to your website, and the website is the best channel, right?

And the truth is, it’s not necessarily your website that’s doing all the work, it’s oftentimes, there’s an ad that you showed a couple of months ago that they saw someone told them what something a couple of weeks ago, and depending on where a person is at their customer buying cycle, they would engage with you on the different channels appropriately, and it feeds into our obsessiveness, about the sales processes, like everything from the first call to the deck to the way that we bring on people and the way we resource and train our people all of that is very intentional, I would say it’s almost not even almost I think we’re obsessive about that kind of process.

I think one of the biggest distinctions we’ve seen, or at least the feedback we’ve gotten from VCs or investors or the startup ecosystem as a whole, is that a lot of startups, especially in the B2B SaaS space, often don’t build a strong focus on selling, because they are resourced. So it’s easier to sell by giving stuff away than actually demonstrating meaningful value. And so if a startup is resourced very heavily, its discounts, it’s very, very low barriers to entry.

But I think for us from day one, I’ve always felt that it’s really, really important that we demonstrate value, that we bring people on a journey, and tell them the story that we want them to be a part of. That for me has been super important for us from the beginning.

Elise Tan: I love that obsession with the process, the data-driven approach. I want to understand what led you to start StoreHub. and then who did you bring on your ship?

Wai Hong Fong: I grew up as a really geeky kid. I was hacking computers in school. I was playing a lot of computer games. I failed five subjects at university because I was playing too many computer games. And so after I did all of that I ended up in Shanghai, studying Chinese, because I was a typical Malaysian banana who could not speak Chinese even though I looked very Chinese.

And when I was there I got a chance to meet some really interesting people. And I met people who are working with Jack Ma very closely as strategy folks. And they were sharing with me specifically about the interesting transformation journey that China went through in the last 20 years. And the role specifically that technology played in that kind of transformation. And I met an entrepreneur who was running a chain of lingerie retail stores in China.

He showed me this system he implemented and I was oh my God, it’s like Windows 95. It’s so clunky. And I was like, really connecting the dots between that experience of, I guess quite like a holy discontent. I was so frustrated with the experience of looking at this guy suffering through this expensive but painful system with these bigger ideas of where commerce goes.

Where is it heading? Right now, it’s dichotomized, between online retail and offline retail, and they’re separate worlds. But eventually, they all amalgamate into just commerce, powered by technology. The question for me was, wow, as a technologist, the opportunity to stand in a gap and support these businesses in this transition was a really exciting opportunity.

And so for us, even the name StoreHub was birthed out of this kind of like, melting pot of all these different ideas, where we see ourselves as that kind of like the center of the store, enabling these businesses to transition meaningfully into this inevitable future. So that’s really how StoreHub started.

Elise Tan: Well, it is such an incredible journey. I don’t have the chance to work in China yet. But I can imagine how quickly China has been transformed through technology. It is amazing. And I know that your co-founder, Congyu, is very geeky as well. She is the CTO of StoreHub. How did you both meet?

Wai Hong Fong: I met Congyu in Shanghai at a Christmas party for start-ups, she was invited by a common friend, and I was invited as well. And then in our first conversation, our first meeting, I think we spoke for almost three hours. So it was really kind of like that, a connection that you have with someone that you’ve never met before and it was really meaningful.

So about a week later, she would send me an email saying, Hey, Wai Hong, I really enjoyed our conversation. And I would love to work on some of these ideas that you were sharing with me at the party. And by the way, here is some background about me, and that’s where she goes on about, oh I won two national programming competitions in China. I was in the top 1% of employees at Microsoft globally, and I was the chairperson of the Women at Work at Microsoft. And, of course, it came across as really someone who’s really impressive.

But at the same time, I knew that she was incredibly smart and incredibly intelligent. So that’s really how we started working together. Just out of my apartment in Shanghai, that was where we started coding. I remember I would say that I quoted something like 30% of the original first version of StoreHub, she would argue maybe a bit less. That’s the first time we agree to disagree. So I think that’s really how we met and then started working together. And she continues to lead our engineering team in Shanghai.

Elise Tan: We actually wrote about Congyu, during the National Woman’s Day last year. I recall how both of you met, and how she’s really strong in her programming. And she’s really one of the rare CTOs who is a female.

Wai Hong Fong: Yeah, and she’s also not a typical CTO. She’s like, personable, very likable, super high EQ. And I think really, at the core of if you care so much about the product, so much about the customer it just really, really one of the only female CTOs I know in the startup world.

Elise Tan: Yeah, nice. How did you both meet Vertex?

Wai Hong Fong: So I remember quite specifically getting a LinkedIn message from Joo Hock. And he was like, Hi, Wai Hong, I’ll be in KL and I’ll be looking to talk to startups and you are one of the startups that were recommended to me would you be free? And at the time I think we were really struggling with trying to figure out a meaningfully good investor for our Series A and we’ve got a couple already, but they were generally the smaller investors.

And so when Joo Hock sent me that LinkedIn message I remember specifically telling Congyu, hey, Vertex is interested like, they are investors in all these other companies. And then she said, okay, that’s really cool. And so I met with Joo Hock. I think we got from our first meeting to the term sheet in about two weeks or something like that. So very, very quick. And it’s been an interesting journey since.

Elise Tan: I’ve been with Vertex for nearly two years now. My colleagues and I, are always talking about how impressed we are with Joo Hock Tentacles. Somehow, besides his heavy workload, he knows who to reach out to. So that is just his secret sauce. And to let, we actively invest in different hubs around southeast asia. And in Malaysia, you must be one of the bright sparks.

It’s so great to have invested in StoreHub and partner with you on our journey. I also want to kind of go back to the finding investor’s bit, because definitely South Asia is still very nascent compared to other ecosystems, for example, Silicon Valley. What are some of the Hard Truths that you experience while fundraising? And what would you tell a new entrepreneur?

Wai Hong Fong: I guess, it’s very easy for founders to get caught up in optimising for the wrong things. And in this case, a lot of the wrong things are things like price or valuation, or I guess the brand names of the partners of the investors they have. And while those things are technically important in the sense that at the end of the day fundraising is, optics plays a big part of that process.

At the end of the day, you are running a business and you’re running a business and you’re looking for in the fundraising process partners to journey with you. And so I think for me, that is the Hard Truth that I’ve had to work through. I had a chance to talk to a lot of my fellow entrepreneurs about that we have had to learn the right partner is infinitely more important than the price of the investment, or the optics of the name of the investor. And so I think that’s definitely one of the big ones. The other Hard Truth is realising that investors don’t invest just because you’re a good company.

There are so many reasons for an investor to invest. But there are even more reasons why they don’t invest. And half of the time it’s kind of like it’s not you, it’s my kind of situation, where an investor does not invest, not because of what you are, but because of what they are, or what they have a thesis around. And so pulling all these things together over the years, having met hundreds of investors, hundreds of calls and pitches, I’ve come to that very absolute clarity, not to take anything personally. I think someone mentioned that at the founder’s gathering, it was the founder’s job to ask and get said no to, 95% of the time, but continue to ask. And that is something that I recognize is absolutely true.

Elise Tan: I agree. We talk a lot about investor-founder fit, which is especially true for Vertex Ventures because we actually invest in very few companies. If you were to compare one of our fund AUM with other funds how would you describe an investor founder fit for Vertex?

Wai Hong Fong: I was just talking to an investor earlier today. And I was describing Vertex and specifically, I guess, Joo Hock as the kind of investor that has no other motivation but to see the company succeed. I think what Joo Hock and Vertex bring to the table is a very long view, a very mature view of how they see value creation in a really new or nascent ecosystem.

And I have great appreciation for that specifically because as founders, the reality is that we’re fundamentally about creating meaningful value. And that fit of values, that we’re here on this journey together to create value not just for ourselves and our brighter careers and better CVS and nicer LinkedIn profiles. But for the customers that we’re serving for the LPs and investors that we are offering a return for, not just financially, but in the kind of impact that they are creating in the world because they are putting money alongside VCs like Vertex and founders like us.

Elise Tan: That’s really nice to hear. And we are really glad to invest in companies like yours, which are mission-driven, have customer-centricity, and always focus on the dream value. How did you know that you’re getting to a product market fit for StoreHub? Do you remember that moment? how would you describe it?

Wai Hong Fong: I think; the question of product market fit is defined so differently for many different people. I think when we came into the market, first, we had less of an issue with product market fit, and more of an issue of scaling, the process of engaging enough people around a product, and I would say that that is really our journey.

It’s always been less about overall product market fit, and more about how we actually execute on scaling the process. And I think the other consideration also about product market fit is it’s a dynamic thing. The market is not a static entity that just sits there waiting for you to create a fit, right?

There is a massive amount of change that’s happening in the industry, in the market, and in the needs and demands of these businesses. COVID, for example, was massive for F&B businesses and retail businesses, the shift of adoption of mobile technology and the infrastructure that supports these devices, all plays into the market.

So I would say product market fit is an ongoing journey that we have continuously improved on and we see fit as really not so much a one-time thing. But how efficient are we at that first part of connecting what we are doing with our customers? And so for us, I would say that having been around for 10 years, we’ve had different journeys.

From the beginning it was, we were simply solving for the fact that people couldn’t even get data off their own premise devices, and in the middle of the pandemic, it could be delivered. But today, we’re seeing a lot more opportunities with labour shortages. And we’re seeing opportunities to connect better with your customers. So there’s so much that the market is shifting on a constant basis.

Elise Tan: You mentioned about COVID, I was going to ask you about that, how did you come up with the product to enable F&B businesses to continue to deliver the food to the customers in Malaysia? Tell us more about it.

Wai Hong Fong: When the first lockdowns were announced, top of mind for me was the reality that if businesses are not allowed to have people come into their store, what are the ramifications? So there was so much literature going around the working capital, and reserves that SME businesses had, and it was measured in days, 21 days, 30 days.

And so what that means is that if revenue is basically cut off completely, which was happening in that way, these businesses were going to have to sort of scramble to figure out how to survive. And so for me, as I was putting all these together, what was clear to me, especially for the restaurants is that okay, the first thing we’re going to do is going to figure out how to continue to sell, by doing delivery.

But then, of course, the marketplaces are going to be swamped with requests from all these businesses who have not done it before, plus the fact the structure for an environment where food delivery was a secondary or an extra thing. Thus their pricing structures will also be structured in a very similar manner. There were 30% take rates on the entire value of the product. F&B businesses are not businesses with massive margins.

They are working on really thin net margins, usually closer to 10%. And so when you take away 30%, that is like, these businesses are just, it’s just waiting to die even though you’ve got revenue from delivery. And so the natural tendency, and that we expected was for businesses that want to do direct, kind of like delivery, where they are taking orders on WhatsApp from their customers, and they’re trying to find a rider themselves and if there are any issues in the process, they have to solve all these issues.

So your business owners, like they will show us pictures of their home office looking like a call centre, because they will be coordinating all these different things. And so we were like, no, no, we need to step in, and help them with technology, solve for the ordering process, the payment process, the logistics process, and the customer service process.

This is a typical B2B SaaS company that basically overnight turns into, like all our different teams we mobilise them to build for this experience. The first thing we did was launch the platform, our team’s product and engineering teams, and actually everyone, not just product engineering teams put together within 48 hours.

So we scrambled into our war rooms and worked almost 20 hours a day for those couple of days. And that was essentially what we did. So that was when deep delivery started in the middle of the pandemic. And it was a critical part of supporting businesses.

We have businesses come to us later on saying, my accountant was telling me if not for big delivery, you guys shut down already, and there were just heartwarming stories for us to hear and feel like the connection between what we’re doing and the real survivability of these businesses.

Elise Tan: Yeah, it’s definitely very heart-warming. And it’s incredible how you and your founders managed to bring your whole team together, organise them, and be able to produce a product that’s usable in 48 hours. I think that’s really hats off to you guys.

Wai Hong Fong: We’re talking about F&B business owners burning through their entire savings, personal savings. So I mean, it’s really difficult. It was a really difficult time. But we’re just really grateful for the chance to support these guys in such a time as that.

Elise Tan: So I guess, now that we have the pandemic behind us, there’s a lot of changes in the capital markets recently, due to I guess, the rising interest rates, of course, what have you seen Wai Hong, in terms of the changes to maybe the fundraising environment?

Wai Hong Fong: To be honest, I felt like the people that are most affected negatively by these changing capital markets were the ones that were riding the COVID wave, I guess, in a positive way. So there were a lot of startups that were really doing very well in the middle of COVID because capital markets were also kind of like, going climbing upwards in that way, and those companies have struggled.

I think for us, it’s kind of the reverse, where the COVID years were really, really challenging years because we were working alongside not other tech startups, but more underground F&B retail entrepreneurs. And then COVID like we were kind of like growing as well. And I think to some degree when it comes to fundraising, because we’ve never really pursued growth at all cost strategy, we’ve never really pursued incredibly, kind of, like difficult to imagine multiples of revenue.

It’s not actually been as bad as I guess, people putting it out to seem. For us as a company, every single round that we’ve raised in the past, we’ve had the discipline to say, Alright, we’ve got this money now. But what is our plan to get to cash flow breakeven in 18 months, from the time that the money hits the bank from that particular round.

So we’ve had this discipline since 2016, since our first-ever round. I came from a Bootstrap background, so it is just this part of my DNA, that always felt that no, no, if we’re going to have validation for the value that we’re creating, it needs to lead us towards a kind of efficiency about running a business that doesn’t require reliance on the next round, to survive, to thrive to continue to grow meaningfully.

So as a result, I think, we raised a round last year, we are on track to cash flow breakeven, and by the end of the year, and so I think, to some degree, it’s, I wouldn’t say we shoot it, but I would say that we had less so-called frantic about the changing capital markets because of our approach towards how we see capital being utilised in a business.

Elise Tan: Yeah, I think in terms of investor philosophy, that’s definitely an alignment in terms of being disciplined, and not choosing growth at all costs. And then I think the other part is how founders navigate their leadership, and building a culture that is strong, that is unique. So tell us more about what you do at StoreHub.

Wai Hong Fong: Culture building was a journey that I started, even before StoreHub, I started thinking a lot about as a young entrepreneur in my first business, what it means to build an organisation that is meaningfully considering the important things that we say are important in the company, and today, we have this word to define our culture.

But in very, very simplistic form culture is simply the things that we do or don’t do, and the things that we reward and don’t reward. And so for us, at StoreHub, one of the biggest shifts that we had to make in forming for defined language of our culture is this idea of moving away from what we call the family culture, to what we call the pro sports team culture.

I think for a company of our nature as an organisation, which has ambitions to build a platform to enable businesses to survive to succeed in this kind of changing environment, we actually have a very growth-oriented, performance-oriented culture. But we needed to have language for that.

Someone once told me that if you want to change culture, you change the language. Because the words that we use effectively form the behaviours. And so we thought very hard about this. And we’ve spent years formulating the words, rethinking thinking, working together, and I felt it wasn’t something that you funnel off to your head of HR, it’s something that I as a founder, personally, feel a great amount of ownership is required.

So I spent a lot of time writing up our culture code, the words, the values, and the way it all connects together. Today, we say StoreHub is a place where we want to see people thrive. And that means growth and meaningful work. And then we will translate that and we will say like, okay, what does it mean to have a growth culture?

Well, okay, it means that when we do monthly performance and reflection ratings if a leader is not giving good feedback, HR will pull them aside and like, for example, say how do you think this person could improve next month? And maybe the Manager goes, not much. They actually get pulled aside, because, for us, feedback is a huge part of our culture.

And reflection is a huge part of our culture. And so for me, it’s an end-to-end consideration of what the language, pro sports team, we are here to win together, and so on and so forth. But also how does this language translate into actual practices, actual things that we do? Another thing that we also talked about quite often is the idea of meaningful work, how do we work well together? How do we see our work as an important part of the bigger picture of what we’re all doing together?

For many companies, employees, sometimes talk about toxic culture. But the reality is that this idea of a toxic culture is sometimes linked to the reality of people not having the skills to work well together. And so I think for us it’s something that’s really important, that we go down to the basics, how can we help people understand that to translate it into a meaningful way to run culture.

So in a nutshell I think culture is, it’s not just words, it’s not something you farm off to HR, it has to come from the top, in defining it, but also empowering the processes and structures to make it a reality. I think it’s a combination of all these things.

Elise Tan: Yes, it’s really not easy. I used to work in Procter and Gamble. So they had a very strong culture and they call it Procterization, whenever somebody new comes in. And I will call yours  Huborization.

Wai Hong Fong: Well, we have a session that I run called cultivate. Every single month, I would sit down for two hours with new joiners of the company. So every month, I will run this session. And it’s the point of communicating the language in unfiltered kind of like, unwatered down terms, and then that’s something I still do to this day I’ve been doing for 10 years. And I think it’s a very important part of not so much Huborization, but I guess cultivating the right culture.

Elise Tan: Yeah, and I think that makes being a founder tough, but at the same time, you are a really important piece of the whole business. I really enjoy the conversation with you Wai Hong, you have been through such an amazing journey. And there are so many things that we learned from you, from all your sharing. So, thanks for joining us today.

Wai Hong Fong: Thanks for having me. It was a pleasure.

Our Guests: Wai Hong Fong

Wai Hong Fong is the co-founder of StoreHub, an all-in-one technology platform that offers an ecosystem of solutions ranging from a cloud-based POS system to QR-based table ordering, loyalty, customer engagement, and many more. This platform helps restaurants and retailers throughout Southeast Asia automate and grow their businesses. He also built OZhut, an Australian multi-niche online retailer, before creating StoreHub. In 2011, while running OZHut, he was recognized as Melbourne’s “Top 100 Most Influential People” by The Age Newspaper and Australia’s “Best Young Entrepreneur” by StartupSmart.

Wai Hong describes himself as an accidental entrepreneur, a geek, a foodie, and a gamer for life.  He is passionate about creating profitable, purpose-driven businesses and believes that the methods used to do so should be characterized by honesty, modesty, and generosity.