📈📉 Growth killed this startup (not failure)

Hey Founders,

Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.

In today’s story, I got the opportunity to have a founder interview with Yien Yee (co-founder of AVANA) to learn about her startup journey, how AVANA got started, and why AVANA failed. Let’s get to it! 🚀

🚀 The Rise of AVANA

🇲🇾 Founded in 2016 by Yien Yee and Luqman Adris in Malaysia, AVANA helped local businesses grow with social commerce in Southeast Asia.

Their mission?

To revolutionise social commerce by transforming social media platforms from mere promotional tools into full-fledged transactional marketplaces.

• The Problem — 😣 Many SMEs struggled to afford the high costs of setting up a robust e-commerce platform to sell their products.

  • Because of that, they often relied on Facebook and Instagram for promotion but managed sales manually, leading to inefficiencies.

• The Solution — 🛍️ AVANA provided an affordable platform that allowed SMEs to integrate their businesses across various channels (i.e. Facebook, Instagram, and WhatsApp) and manage their entire online business from a single dashboard.

  • This integration enabled merchants to manage customers, orders, and payments all in one place, effectively automating their online business operations.

  • By subscribing to AVANA's packages, SMEs could sell on the web, social media, mobile, and tablet platforms, streamlining their sales processes.

  • No more frantically switching between apps or losing track of orders. It was like having a virtual assistant who never slept. 🤖

Their crazy traction attracted significant investments.

💰 At its peak, AVANA raised $1 million pre-Series A funding round in March 2018 led by Gobi Partners, along with TH Capital and Cradle Seed Ventures. This funding aimed to help AVANA reach the 70% of Malaysian SMEs yet to embrace e-commerce.

🌏 It seemed like the sky was the limit for AVANA as it became the leading social commerce platform in Southeast Asia.

📉 The Fall of AVANA

Despite the promising trajectory, when the COVID-19 pandemic started, AVANA faced challenges that led to its unexpected decline when its rapid expansion into Indonesia market backfired and the business model wasn’t sustainable.

📌 Here’s what happened to AVANA:

In summary, AVANA's journey started with a promising idea and early success, but the company ultimately succumbed to the challenges posed by the COVID-19 pandemic, financial pressures, and the personal tragedy of losing a co-founder.

Despite the heartbreaking end, the experience has made Soh Yien Yee a wiser and more resilient entrepreneur, ready to embark on her next chapter at EasyStore.

💟 By the way, If you’re running a retail or e-commerce business, you should check out EasyStore as their Unified Commerce Platform has been helping many businesses increase customer spending and retention rate.

Want to learn more about AVANA’s downfall?

• This M’sian Platform With A 400% Monthly Growth Rate Streamlines E-Commerce On FB

• Their Technology-First Approach Just Got M’sian Startup Avana US$1 Mil USD Funding

⚠️ 2 Mistakes

Mistake 1: Expanded into Indonesia market too early

As shared by Yien Yee during our interview, they underestimated the complexity of entering a new market, even though it seemed like a logical next step for AVANA.

🛍️ The differences in consumer behaviour, payment methods, and logistics between Malaysia and Indonesia proved to be a rude awakening:

While expanding into Indonesia market allowed AVANA to capture a bigger market, it added complexity and cost to their operations, further straining their resources.

Mistake 2: Unsustainable business model

😎 Before the pandemic happened:

• AVANA's business model was centred around a SaaS subscription plan, with pricing ranging from as low as RM399 (around $90) to RM1,399 (around $320) per year.

  • The pricing was kept low to cater to their target market of micro-sellers and small businesses.

• Besides, funding was easy to get.

  • Growth at all costs was the game.

  • More money, grew fast, high burn, high CAC, and hired more headcount.

  • With the money, many e-commerce businesses (including AVANA) offered free shipping to attract customers and compete for market share.

• 📈 Low price + High burn + More customers = Growth

😳 After the pandemic happened:

• E-commerce volume dropped significantly due to a dramatic shift in consumer behaviour.

• People were more interested in in-person interactions and experiences and not buying stuff on social media.

• As a result, high CAC, high burn, and high churn rate led to the company’s financial struggles.

• Luqman Adris (co-founder & CTO) passed away due to a severe illness, leaving Yien Yee to run the business alone.

• Too many things happened at once, and Yien Yee struggled to focus and couldn’t move fast enough to pivot to a new business model.

In short, before the pandemic (good time), the unsustainable business model worked when funding was easy to get (can burn money). However, after the pandemic (bad time), reality kicked in and the business couldn’t survive (no more money to burn).

🧠 3 Lessons Learned

Lesson 1: Seek advice from the right people

This was shared by Yien Yee during our interview, and it hit hard to me because I faced the same problem last time.

For example, when Yien Yee was struggling to save the company, some people would just give advice like reducing team size to save costs. While that was true, it was easier said than done as it involved legal and financial considerations across 2 countries (Malaysia, Indonesia).

Lesson 2: Approach expansion with deep market understanding

Yien Yee shared that AVANA's rapid expansion into Indonesia was a major misstep.

They underestimated the complexities involved in entering a new market, from differences in consumer behaviour to the fragmented payment landscape and logistical challenges.

Lesson 3: Don’t tie your identity to the business

As a founder, emotional investment is a common trap that many entrepreneurs fall into, especially in the early stages of building a startup. When you pour your heart and soul into a venture, it can become an extension of your own identity — which is what happened to Yien Yee.

When AVANA was facing mounting challenges, it was hard for the founders to make rational decisions as they were too emotionally involved in the business.

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That’s all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.