With ringgit woes, NeonRunner aims for next funding round in USD
By Lum Ka Kay October 27, 2015
- Pre-seed round had big names investing in same-day delivery startup
- To sustain its fleet, it aims to ‘professionalise’ the ‘despatch boy’ profession
KUALA Lumpur-based hyperlocal logistics company NeonRunner intends to raise US$3 million in its next round of funding, and having learned its lesson from the plunge of the ringgit, is seeking it in the greenback.
Founder and chief executive officer M. Kanashan said the company, founded in September 2014, made the mistake of initially raising funds in Malaysian ringgit instead of US dollars.
The ringgit has been in freefall since last year, becoming Asia worst-performing currency over the past year, and breaching the RM4 mark against the US dollar to hit a record low.
The fluctuating price of the ringgit makes it difficult for NeonRunner to talk to global investors on how much it intends to raise, Kanashan told Digital News Asia (DNA) in Kuala Lumpur.
“So for this time, it’s in USD – easier for investors to grasp the value as well,” he said.
Kanashan declined to say how much NeonRunner raised in its previous round, except to say it was a pre-seed round “north of US$500,000” sealed around April.
Nine investors participated, including 500 Startups (via its 500 Durians and Mobile Collective funds), as well CMY Ventures, the venture arm of CMY Capital. “We are honoured to be its maiden investment,” he said, referring to CMY Ventures.
The others were angel investors, including Darius Cheung of 99.co, he added.
The next round will be focused on growing the company, said chief operating officer Arvind Patmarajah.
“We’re actively seeking funding now, and our theme for this round is growth,” he said.
NeonRunner operates a fleet of motorcycle couriers to deliver and pick up goods, perform tasks and errands, all within the same day.
Its services cover various areas in Kuala Lumpur like Bangsar, Sri Hartamas, Mont Kiara, Damansara Height, Taman Tun Dr Ismail, as well as the city of Petaling Jaya. It has started to offer its services in other parts of the Klang Valley, including Subang Jaya.
The startup also plans to explore new markets in the region. “We intend to strike up regional partnerships and go where our customers are,” said Arvind.
“Some of our clients are pushing us to other markets like Hong Kong and Singapore.
“Take one of our customers Be Malas for example – it has a presence in Singapore and is pushing us to go there,” he said.
Be Malas is a Kuala Lumpur-based on-demand concierge service.
Arvind declared that NeonRunner hopes to be top-of-mind when it comes to same-day services.
“We just started and we are nowhere near that, but we hope to achieve that in the near future.
“We would like people to think of us as a utility, that we’re part of the ‘same-day economy’,” he said, claiming that NeonRunner is recording at least 25% growth on a monthly basis.
Its core business is business-to-business (B2B), according to Kanashan, which came about during its market validation process.
“The markers that were given our investors were to ‘de-risk’ our proposition. The first was to get runners. You need to de-risk an investment in every stage. The biggest risk back then was to build a fleet.
“The second is to validate the market. We approached law firms, real-estate agencies, and e-commerce merchants, and we realised that they do need the services that we offer,” he added.
NeonRunner views the business-to-consumer (B2C) front as a marketing strategy for its B2B penetration.
Kanashan said that when consumers first use NeonRunner’s services in their personal capacities, they would realise that they can use it for their businesses as well.
Saying that all delivery services in Malaysia only manage to complete customers’ delivery orders the next day or later, NeonRunner sees same-day logistics as its core focus, according to Arvind.
This is the differentiating point that sets the startup apart from everybody else, he declared.
“Unlike the usual delivery method, ours is a door-to-door service where our runners pick the item up from point A and deliver it to point B. No stops in between – unless it rains, as our runners travel on motorcycles,” he said.
NeonRunner now has 200 motorcycle couriers or ‘runners’ in its fleet.
Runners are the ‘economic unit’ of NeonRunner, said Arvind – as long as they have enough orders, each of his runners is profitable.
This means that when NeonRunner “hits maturity and begins to meet market demands, we will be cash-flow positive,” he claimed.
Putting runners in pole position
Society often has a low regard of couriers or ‘despatch boys’ as they are known in Malaysia, but NeonRunner aims to change that, according to Arvind.
He said the people who are in these kinds of jobs are usually sitting at the bottom of the wage pile, but eager to set a baseline standard for its business, NeonRunner would very much like to “professionalise this profession.”
Its solution is to pay them better wages, train them, and provide uniforms to make them feel part of a ‘tribe.’
“We also micro-financed their licences so they now have full valid licences,” he said.
Many of its runners wanted to speak English but were not confident in doing so, so NeonRunner provided training for that too, according to Kanashan.
“With the training, we give them confidence to interact with customers,” he said.
The runners are also taught how to leverage technology to help them travel from one place to another.
A typical delivery person would be attached to a certain zone, said Arvind, but that model does not apply to NeonRunner runners.
“It’s impossible to say that you don’t know how to get to that place when you have navigation tools like Waze and Google Maps,” he quipped.
Each of its runners earns up to at least US$471 (RM2,000) per month, and that is just good business sense, said Arvind.
“I want a sustainable fleet; I want my runners to stay here for the long term because that’s the way to build a sustainable business model.
“I don’t want to build a transient marketplace – I want to build an infrastructure, a utility that cannot be displaced from the economic model.
“What we want to do within this same-day space is to be a deep part of this economy model where we power businesses, restaurants and e-commerce merchants.
“And to do that, we need to have a sustainable fleet,” he added.
Technology as a business enabler
It was easy to manage when NeonRunner had a fleet of only 10 runners, but as it grows, keeping track of runners has only gotten harder.
“This is where technology comes in,” said Kanashan. “At the end of July, we came up with a runner management application – we outsourced development from India – to track our runners’ locations and their delivery progress.”
The company also soon expects to launch apps for the Android and iOS platforms.
When asked why its services were currently only available via a web platform and not through a mobile app, Arvind said it is because NeonRunner is still waiting to see the ordering patterns from its website before launching a mobile app.
“From the web-app’s data, we would be able to determine the crucial points when it comes to ordering our services, so our mobile app can be improvised … to make it simpler and leaner,” he said.
Arvind argued that NeonRunner was operational even before its portal was launched.
“Our service isn’t the app nor is it the website. Those are enablers. The core of our service is the delivery business,” he said.
NeonRunner ran its business entirely via the WhatsApp app till the end of September, when it migrated to the website, he added.
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