💸 FashionValet lost RM43.9 million from Malaysian government

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Today at a Glance:

• ☠️ 1 Failed Startup → FashionValet

• ⚠️ 2 Mistakes → Spreading too thin with aggressive expansion

• 🧠 3 Lessons Learned → Balance growth with profitability

• 🔗 The Runway Insights → 6 things startup founders should avoid doing

• 💰 Southeast Asia Funding Radar → Chickin, an Indonesian agritech startup, raises $20M for expansion

  • Side note → I recently covered their competitor (Pitik) in my post on why and how Pitik failed. It’d be interesting to see how Chickin is going to capture the market share.

💃 The Fashion Days

• 2010 — FashionValet was founded in Malaysia by Vivy Yusof and Fadza Anuar with RM100,000 (50% was a loan from Vivy’s father).

• 2014 — 🤺 Zalora entered the market, introducing aggressive pricing strategies that began to impact FashionValet's relationships with designers.

  • Why? Because Zalora offered better consignment rates, leading some designers to break contracts with FashionValet.

  • Besides, FashionValet also struggled with supply chain issues, as they could not dictate terms to third-party suppliers who often failed to deliver stock on time.

  • So they started exploring exclusive collections with designers to regain control over inventory and improve supply reliability. However, this model led to cash flow challenges due to high minimum order quantities (MOQ).

• 2015 — 💰 Secured Series A funding from Elixir Capital and expanded to over 500 brands with physical stores in Malaysia and Singapore.

• 2017 — Launched in-house brands (dUCk, LILIT) and went viral.

• 2018 — 💰 Secured RM47 million investments Malaysian state funds at a post-money valuation of $104.5 million.

  • RM27 million from Khazanah Nasional

  • RM20 million from Permodalan Nasional Berhad (PNB)

🥺 The Reality Hit

• 2019 — 🤔 The founders noticed that their in-house brands (i.e. dUCk and LILIT), were outperforming the multi-brand marketplace.

  • dUCk became immensely popular, not only driving most of FashionValet’s revenue but also starting to overshadow the platform itself.

  • FashionValet’s marketplace model, which relied on thin margins, made it financially unsustainable.

  • Meanwhile, the cost structure and marketing demands of dUCk and LILIT proved more profitable, highlighting a fundamental conflict in FashionValet’s business strategy​.

• 2020 — 🦠 COVID-19 pandemic severely impacted operations and supply issues became worse.

  • Many local brands scaled down their businesses, causing low supply on FashionValet’s marketplace.

  • FashionValet needed significant new capital for continued operations.

• 2021 — Based on 2021 filings shared by Asia Tech Review:

  • Revenue — grew 34% to RM113.52 million (US$23.8 million)

  • Losses — slashed to RM9.6 million (US$2 million), 22% better than the previous year.

  • Term loans — grew 125% to RM6.3 million (US$1.32 million), as the company likely turned to loans to weather the downturn of the Covid pandemic.

• July 2022 — 🪓 FashionValet was shut down and pivoted entirely towards its in-house brands — dUCk and LILIT.

  • This decision came after years of operational challenges exacerbated by competition from Zalora and others.

• Late 2023 — 🤯 Bumiputera firm NXBT Partners offered to acquire Khazanah’s and PNB’s shares in FashionValet and inject the required capital to sustain the business.

  • 🤝🏻 Khazanah and PNB accepted the offer and exited with RM43.9 million of losses (recovered only RM3.1 million).

  • The Ministry of Finance described the sale as a responsible exit for Khazanah and PNB, transferring their stakes to strategic investors.

  • Based on SSM reports, NXBT Partners owns 51.25% of FashionValet, after paying some US$1.1 million for those secondary shares (bringing FashionValet’s valuation down to around US$2.1 million).

  • 💸 For the financial year ending 31 December 2023, FashionValet has an accumulated loss of RM127,576,371.

• Nov 2024 — 🙏🏻 Due to public backlash over the company’s significant financial losses, the founders announced on social media to take full responsibility for Khazanah and PNB’s losses and resigned.

🌟 Key Takeaways:

• 📈 Plan for sustainable growth

  • Before opening a new location or launching a major initiative, ask yourself, “Can my business survive six months of low revenue?”

  • Build a "growth buffer" before expanding, which means setting aside funds to handle unexpected downturns without cutting essentials.

  • Before scaling, conduct a thorough analysis of your current operations and market conditions.

  • If possible, create a phased growth plan that allows for adjustments based on real-time feedback and performance metrics.

  • Lastly, read this book (Traction) on how to run and scale a profitable and frustration-free business (Tyler, the Founder & CEO of Beehiiv, uses its framework to grow his business to $10M ARR in 2.5 years)

🌟 Key Takeaways:

• 💰 Profit > Revenue

  • Focus on creating positive cash flow early. Ensure that any growth initiative (like adding a new store) has a clear, short-term path to profitability.

  • Regularly review your financial health, focusing on profit margins rather than just revenue figures. Implement cost-control measures and ensure that any growth initiatives are backed by solid financial projections.

  • Basecamp, a software company, has prioritised profitability since day one.

    • Instead of burning cash on rapid growth, they focused on steady, sustainable profit, which has given them stability during economic ups and downs.

    • Aim for this kind of sustainable, healthy growth.

🌟 Key Takeaways:

• ⭐️ Make mission-based decisions

  • When faced with major business decisions—such as launching a new product, expanding into a new market, or pivoting—ask, “Does this align with our mission?”

  • Consider how the decision will impact your core values and your audience.

• 💟 It’s okay to adjust the mission (but with care)

  • Sometimes, a mission needs to evolve as the business grows.

  • However, changes should be careful, transparent, and still reflect the company’s core values.

  • If you find the mission shifting, communicate openly with your team and customers about why these changes are happening.

🔗 The Runway Insights

• 6 things startup founders should avoid doing (Link)

• 9 game changing growth frameworks (Link)

• Your guide to fundraising (Link)

• How VCs evaluate startups (Link)

• Don’t waste time with an SEO audit (Link)

• How to start your $1,700/month side hustle today (Link)

💰 Southeast Asia Funding Radar

• Chickin, an Indonesian agritech startup, raises $20M for expansion (Link)

  • Side note → I recently covered their competitor (Pitik) in my post on why and how Pitik failed. It’d be interesting to see how Chickin is going to capture the market share.

• Supermom raises $14M Series B co-led by Granite Asia (Link)

• Coolmate, a Vietnamese D2C startup, secures $6M left by Vertex Ventures for international expansion and product innovation (Link)

• BuzzAR, a Singapore-based mixed reality and AI startup, raises $1.16M from HSBC to boost Saudi tourism (Link)

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