AVCJ Awards 2018: Deal of the Year - Early Stage Technology: Deskera

Even the most well-connected venture capital investor can still uncover a booming company hiding right under its nose. Jungle Ventures discovered such a gem late last year when Shashank Dixit approached the firm to invest in Deskera, the Singapore-based cloud-based enterprise resource planning (ERP) software developer that he had founded in 2008.

Targeting Southeast Asia and India’s small and medium-sized enterprises (SMEs) and generating little fanfare, Deskera had gone unnoticed by the region’s VC investors. But the company was a powerhouse, with revenue growing from S$1.1 million ($807,000) in 2012 to more than S$71 million in 2017.

“We were very surprised there was a company that was generating revenue of S$70 million in Asia,” says Anurag Srivastava, a co-founder and managing partner at Jungle. “The company was profitable and had existed for some time – it’s rare to find a company like that which had not previously gone in the market to raise funding. It had just continued to execute for nearly 10 years.”

Jungle was impressed with Dixit’s accomplishments, and seeing potential for further explosive growth in the estimated 100 million SMEs estimated to be present in India and Southeast Asia, it agreed to invest $15 million alongside Tembusu Partners. The investors have brought their international resources to bear, with the aim of building Deskera into the business services provider of choice for SMEs in Asia and, eventually, worldwide.

Fragmentation factors

Growing a company in a famously fragmented region like Southeast Asia has always been a challenge. While individual markets like Malaysia and Indonesia offer more room for domestic expansion than smaller nations like Vietnam, sooner or later entrepreneurs run up against political and economic barriers that their counterparts in China and the US lack. 

“Even a very small SME in Singapore which has any kind of work with inventory will probably want to have a back office in Jakarta or Johor – it’s just a five-minute drive away,” says Dixit. “But that five-minute drive crosses two countries. If you’re shipping stuff across Malaysia, there are two currencies, and if you have to store it for a few days and the currency fluctuates, you’ll take a hit on that inventory.”

Even India, while politically united, has historically placed barriers on nationwide expansion for businesses in the form of a cumbersome system of intrastate tariffs. Efforts like the recently-passed goods and services tax (GST) have helped ease these pressures somewhat, but the country remains a difficult place for entrepreneurs to build scale.

A rising generation of well-educated, tech-savvy entrepreneurs might turn to technological solutions. But traditional ERP software solutions like SAP, Oracle, and Salesforce have been less than satisfactory; since they are typically designed for large enterprises with inhouse IT teams, they are complicated to set up, priced per module rather than with a flat fee, and require paid upgrades.

Deskera aims to be the opposite of these providers in every way, offering a platform that is easy to use and charges a fixed annual subscription regardless of how many modules are used or of upgrades – which, as a cloud service, are invisible to the end user anyway. The company even partners with internet service providers to bundle the service with their corporate clients’ broadband packages, allowing them to access Deskera for no additional charge.

Jungle and Tembusu were fascinated when they saw this innovative approach, and even more so by the fact that Deskera had spent years essentially creating a market for SME-focused business services software from scratch, having grown to more than 14,000 subscribers by 2017. It was clear the team had the determination and expertise to take the product all the way.

“Shashank is an incredible founder and a product visionary – you can’t fool around with him when it comes to product, he knows it inside out,” says Jungle’s Srivastava. “And he had a very big vision on where he wants to take the company – he wanted to go public and create a significant, large business, and he had a clear, well thought-out plan.” 

Adding value

Since their investment Jungle and Tembusu have brought in global venture and strategic investors while bringing a broader focus to the company than Dixit and his partners could provide on their own. These efforts include recruiting new talent to the company – for example, Jungle introduced the former CEO of Microsoft India, who now sits on Deskera’s board, as well as helping to recruit the company’s regional managing director for Southeast Asia..

Deskera still faces a number of challenges as it seeks scale in the region, and the investors are focused on bringing the financial resources and strategic connections to complement Dixit’s entrepreneurial drive. One of the focus areas is building a marketing network to improve outreach to potential SME clients, which by their nature tend to lack the resources to proactively stay up to date on the latest technology trends. The backers are also helping with Deskera’s efforts to make the product even easier to use and thereby drive adoption further. 

Even with this support, the market leadership that Dixit envisions is likely to take years, if not decades to achieve. Oracle, SAP, and Salesforce all took more than 20 years to reach their current levels of success, and despite the availability of internet distribution channels, Deskera’s leadership team doesn’t expect growth to match the explosive pace of an Amazon or Alibaba Group. However, while consumer businesses come and go, Dixit believes that focusing on enterprise customers is the way to build lasting value.

“This market is driven by momentum, unlike B2C and consumer software, which are driven by euphoria and personalities,” Dixit says. “We think this is the right time for this software and for the region – governments here are getting serious about taxes and structures, and there’s also a perfect storm of online commerce and payments happening now.”   

Pictured: Amit Anand (right) of Jungle Ventures with Baker McKenzie's Kelvin Poa

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• Topics
• Southeast Asia
• Early-stage
• Technology
• Jungle Ventures
• Venture
• Tembusu Partners