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👨🏻🔧 This $17.6M startup failed overnight
How Kaodim collapsed from a successful startup story in Malaysia
Admond Lee
June 23, 2024
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.
Today’s issue is about how a successful Malaysia’s startup collapsed. Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → Kaodim
⚠️ 2 Mistakes → Flawed business model
🧠 3 Lessons Learned → Customer retention is everything
🔗 The Runway Insights → 32 rules for being a founder (from a 8-figure founder)
💰 Southeast Asia Funding Radar → Zepto, a 10-minute delivery app, raises $665M at $3.6B valuation
☠️ 1 Failed Startup: Kaodim
🚀 The Rise of Kaodim
Founded by 2 litigation lawyers (Choong Fui Yu and Jeffri Cheong) in 2014, Kaodim was an established Malaysian online home services marketplace that connected people with service providers like handymen, contractors, personal trainers and more.
🚚 In short, Kaodim is the Uber for home services.
🏠 The vision was simple → To create a platform that would revolutionise the home services industry in Southeast Asia.
The Problem — People struggled to find reliable home service providers.
The frustrating part? They often relied on word-of-mouth recommendations or spent hours searching online, with no guarantee of quality or reliability 😣
The Solution — Kaodim created an online home services marketplace where users could easily find, compare, and hire the best home service providers 😍
🏠 For users — They could just post their service needs and receive quotes from multiple service providers.
This transparent process ensured competitive pricing and quality service while saving users’ time.
Users could also make informed decisions based on reviews and ratings.
👨🏻🔧 For service providers — They could find new customers easily on Kaodim to grow their businesses.
Kaodim solved a real and painful problem that most people faced. Right after its launch in 2014, It hit USD 10 million in sales in 4 months. By 2015, it had fulfilled over 150,000 transactions and expanded its operations to Singapore, Indonesia, and the Philippines.
We became the leaders in the home services space and were privileged to be backed by some of the best regional and international investors.
The company raised a total of USD 17.6 million in funding and became a leader and a household name in the home services space in Southeast Asia.
🇲🇾 At its peak, Kaodim was seen as a success story in the Malaysian startup ecosystem. But this success story didn’t last long…
📉 The Fall of Kaodim
🦠 When the COVID-19 pandemic hit in 2020, everything collapsed.
Suddenly, the prolonged lockdowns and fear of virus transmission killed the home services industry overnight. Kaodim faced operational disruptions, labour shortages, and high running costs.
📌 Here’s what happened to Kaodim:
2014 — Kaodim was founded in Malaysia 🇲🇾
It hit USD 10 million in sales in 4 months.
2015 — Then, Kaodim grew and expanded to Singapore, Indonesia, and the Philippines, fulfilling over 150,000 transactions 🌏
2019 — With the high-growth traction, it raised USD 17.6 million in funding from 500 Startups, East Ventures, and Venturra Capital.
However, cracks began to show as competition intensified.
Rivals like ServisHero and Recommend.my started gaining traction, eating into Kaodim's market share.
2020 — Suddenly, the COVID-19 pandemic hit and Kaodim’s business was disrupted overnight.
People didn't want to book home services on Kaodim to prevent the spread of the virus.
Because of inflation, customer demand dropped, and so did Kaodim's revenue.
2021 — Kaodim faced significant financial and operational challenges, labour shortages, and rising costs due to the prolonged pandemic.
Jul 2022 — Kaodim announced it’d shut down as founders shared they couldn’t grow the business meaningfully in the long term.
From a successful startup story in Malaysia to the collapse of Kaodim, it shows the importance of adaptability and resilience in the face of unforeseen challenges.
In fact, after diving deeper, the biggest reason why Kaodim failed, in my opinion, is its flawed business model. Here’s what I mean 👇🏻
Want to learn more about Kaodim’s downfall?
⚠️ 2 Mistakes
Mistake 1: Flawed business model
Being an online home services marketplace, the biggest issue is that service providers can always do business with customers off the platform after connecting through it.
Screenshot of comments on Facebook
For example, if someone finds a handyman on Kaodim, he can call the handyman next time without paying the extra fees to Kaodim again.
This means customer loyalty is not there at the very beginning. Without customer retention, Kaodim had to keep attracting new customers by running costly marketing campaigns, further increasing its customer acquisition cost.
⚰️ With that, the COVID-19 pandemic was probably the final nail in the coffin that triggered the collapse of Kaodim.
Mistake 2: Lack of diversification in services
Kaodim heavily relied on home services, which were highly susceptible to disruptions like the COVID-19 pandemic.
When the pandemic happened, it caused a drastic drop in demand for in-person services, and Kaodim had no alternative revenue streams to cushion the blow. It was a huge blow to Kaodim’s business.
🧠 3 Lessons Learned
Lesson 1: Customer retention is everything
The services marketplace always has an inherent problem, which is low customer retention. Not to mention customers have plenty of choices to choose from in this highly competitive space.
Do I know how to solve this? Nope.
But one thing I’ve learned is this → In business, you can acquire 1000 customers. But if 999 customers don’t use your service after that, you’ll still suffer. Retention is key.
🌟 Key Takeaways:
♻️ Build an ecosystem where each party needs one another for a long-term partnership, especially in incumbent industries like home service and transportation.
For example, if Party A needs Party B for help, you need to have a system to ensure Party A won’t leave the ecosystem after Party B has given the help.
🤔 Ask yourself this question, “What value can I provide to my customers such that they won't leave because they couldn’t find this value anywhere else?”
Lesson 2: Diversify revenue streams
It’s okay to focus on a niche and not diversify when your business just got started. However, once you’ve gone deep, you have to go broad.
Don’t put all your eggs in one basket. Diversify your services to mitigate risks. This is especially true if your core niche would affect your entire business if “black swan” events happen (i.e. COVID-19).
🌟 Key Takeaways:
🤑 Launch subscription services for predictable revenue.
For example, Superside offers a monthly subscription service for customers to subscribe to their creative services.
Personally, I’ve seen more and more service-based businesses are launching this pricing model.
🤝🏻 Leverage partnerships with other businesses to win together.
For example, if you’re running a marketing agency, you can form an affiliate partnership model with other agencies.
When other agencies bring you clients, you share a certain portion of the profit with them.
The best part? Customers come to you, not the other way around.
Lesson 3: Stay agile and adapt quickly
Nobody expected the COVID-19 pandemic could happen. And when it happened, businesses died because they couldn’t move fast, pivot and adapt quickly.
No matter what size your company is, it’s safe to prepare for potential disasters ahead.
🌟 Key Takeaways:
Continuously monitor market trends and customer needs.
Be ready to adapt your business model or introduce new features quickly. Embrace a culture of innovation and flexibility within your team.
Be transparent with your team to share the good and bad things.
People collaborate better together when they know they can trust the leadership team to do the right things.
When mutual trust is established, things get done easily.
🔗 The Runway Insights
💰 Southeast Asia Funding Radar
Zepto, a 10-minute delivery app, raises $665M at $3.6B valuation (Link)
ArrowBiome raises $1M to use microbiome tech to transform your skin (Link)
Peak3 raises $35M to build SaaS products for the insurance industry (Link)
Notti Pet Food secures $500K seed funding to elevate pet health & nutrition standards In SEA (Link)
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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
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Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.
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