Dear Investors,

Hope you had a restful weekend! For those in Singapore, we hope you made the most of the long weekend to recharge as we head into the remaining months of 2024.

We took some time to take stock of what we have done. Reflecting on our achievements over the past 1.5 months, we’ve significantly refined our business model and are now very close to achieving product-market fit for our equity investors. In the coming weeks, our focus will shift to the debt side, specifically term loans and bridge financing. Given that our previous work experience had primarily been in equity fundraising, we have much to learn about the debt world. We’ve scheduled meetings and calls with several bankers and private credit funds, and would greatly appreciate any contacts in your network that you could share with us!

Operational Thesis (3/3): Growing and Scaling the Business In the final installment of our Operating Thesis, we'll build on the considered transition and foundational work completed in the earlier stages of the business takeover. The pathways outlined below offer various strategies to scale the business, though not all may be applicable. The relevance of each will depend on the specific context, business type, market conditions, and consumer demand.

Growth Channels and Engines We want to be where our customers make their purchase decisions, and we want to acquire them as efficiently as possible. Our immediate priority will be to collect and analyze data on existing consumer/customer satisfaction and behavior, market trends, and our sales efficiencies. These efforts enable data-driven decisions guiding our sales and marketing spending. The idea would be to gradually increase expenditures in channels yielding highest returns while sunsetting investment in areas which are already crowded by competitors to optimize our customer acquisition costs. In an increasingly digital Southeast Asia, we will also establish social media presence (where appropriate) and actively manage them to improve our searchability and credibility especially when our prospective customers are researching about us. In addition, we will explore entering new channels which may have been overlooked, so long as the gross profit from these new channels exceeds the cost of delivery by our cost of capital.

Equally important, we need to establish customer retention initiatives as a form of low-cost acquisition engine. Tools like the Net Promoter Score will serve as a leading indicator to help us understand how we are doing in important accounts. We will also set up referral programs welcoming loyal and happy customers to bring in their friends to do business with us.
New Product Extension Product extension is an effective way to target an adjacent customer segment with minimal risks. Back in the days when Zachary was operating his chain of juice bars, his company bought inventory of various fruits to convert them into different permutations of juices. He wondered if it was also possible to offer a variety of healthy fruit salad options by using the same ingredient list without changing the work process. The outcome was an instant hit with a consumer segment that wanted to consume a variety of fruits to detox, away from their typical lunch routines! In addition, he was able to standardize the salad menus and prepare them in advance to reduce the processing time during peak lunch hours. Through this product extension, he increased hourly sales without incurring a corresponding increase in manpower nor significantly altering core operations.

Many times, the idea of coming up with new product offerings will emerge from casual conversations with customers, where a Eureka moment spontaneously strikes! Forward-thinking customers will hint at exploring a different value proposition compared to what has been traditionally offered, which could be a beginning of a new market trend. Therefore, it is imperative to keep our customers close, not just in formal reviews and business development calls but also through spending time with them to understand the broader market context and trends to uncover early market shifts and gaps which could grant us the first-mover advantage.
Venturing into New Markets We anticipate that our first business venture will be deeply rooted in Singapore for reasons explained earlier (e.g. clearer rule of law and the availability of debt capital). It is clear that Singapore is a limited market and a clearer path to further growth would be expanding into new geographies. For a SME, such international ventures are inherently risky, and would usually be funded by a large portion of our available free cash flow. This makes careful planning and execution absolutely essential. Southeast Asia is a fragmented geography with each country boasting different languages, culture, economic status and business practices. Hence, it's crucial that we first attract international customers prior to our international expansion. Such experience will provide valuable insights into the needs of global/regional clients and allow us to refine our offerings accordingly. As this customer base grows, we'll be able to gauge whether there is organic demand from these new markets to greenlight a market-launch team. This team will be responsible for navigating market access, adapting our product, marketing, and branding to local cultures, and ensuring regulatory compliance. To mitigate risks associated with international expansion, we will explore a local partnership, whether it is a potential investor, reseller or distributor, before we start hiring in local markets. Any efforts to internationalize would likely take place, at the earliest, towards the end of the third year post-acquisition. Malaysia is likely to be our second market, given its similarity to Singapore in terms of the legal system and our familiarity with their way of doing business.
Diversification At some point in time, we will need to diversify our offerings to develop other growth engines while establishing the necessary sales and operating synergies with our core business. This would allow us to accrue the already invested sales & marketing expenditures while reducing the marginal cost of providing the incremental offering. Hence, we would be able to offer our new product/service more cost competitively while our in-depth customer understanding would grant us an added advantage. Providing a more comprehensive suite of services would also have a secondary benefit of further customer integration, locking them in and preventing them from churning.

We already have some ideas on where our focus should lie in our diversification strategy across the 7 sectors of interest. In areas like corporate secretariats, we could develop other value-added services like accounting, automation or legal. When serving restaurants, we could look at areas like pest control, cleaning services and fire safety, which are also services that F&B outlets require. A financial services company can offer different types of loans such as unsecure personal, auto financing or even be a channel partner for insurers. As we explore diversification efforts, it is important to keep in mind the synergies between the core and the new offerings and to move in line with our overarching vision. Without these synergies, it will look like we are tackling the space haphazardly while getting distracted from our core business.

Acquisition as a Growth Lever As we also operate a search function on top of an operating team, inorganic growth strategy is a core competitive advantage to GenCap. We will almost certainly come across high quality, relevant and synergistic assets which will offer us the aforementioned levers of growth - i.e. (1) new channels, (2) product extension, (3) international expansion, and (4) diversification. This inorganic growth provides a close to immediate access to new resources, customer base and expertise from the acquired company which in turn, saves us the time and effort from reinventing the wheel.

Our current view of pursuing inorganic growth is an opportunistic one, with key considerations being external uncertainty and internal readiness. Both factors have to be aligned for an acquisition to be successful###-###-#### there must be a quality and relevant asset on sale at a reasonable valuation and (2) our organization must be ready to manage a new company, made of an entirely different organization and culture. Having the stars aligned is rare. In an event that it is possible, the decision to proceed will be taken by our BoD, rather than just the 2 of us, to prevent it from being just an empire building exercise. In all likelihood, the new asset will be managed separately for the 1st 2 to 3 years until the ship is stabilized, before both businesses are fully merged and we can focus on growing them in tandem.


Final Wrap-Up: Merging the Phases of Our Operational Thesis Our journey through the three phases of our Operational Thesis — (1) Transition, (2) Strengthening Foundations, and (3) Sustainable Growth — is our roadmap to sustained success. We estimate that the time for this “S” curve growth would take 6 years, which forms the minimum holding period for our asset. The Transition Phase (year 1) emphasized the importance of empathy, cultural understanding, and careful observation to seamlessly integrate and stabilize the business post-acquisition. This sets the stage for the Strengthening Foundations Phase (year 2 and 3), where we focus on fortifying the business’s core operations, refining processes, and ensuring readiness for scalable growth. Here (year 4 to 6), strategic decisions, such as re-optimizing sales channels, creating product extensions, international expansions, strategic diversifications and pursuing inorganic growth, are necessary for creating an enduring, resilient and efficient enterprise.

In unison, these three phases represent a cohesive strategy that not only navigates the challenges of business acquisition and integration but also drives carefully deliberated, forward-looking growth. This comprehensive approach ensures that each stage of our journey builds upon the last, creating a solid foundation for long-term success and opening the door to a strategically-timed and lucrative exit when the time is right.

Organization Update: Welcome Chris Madiam for Joining us as Board of Advisors! Pak Chris is the co-founder and CEO of Social Bella, Indonesia’s leading beauty and personal care company. With a mission to accelerate the Indonesian beauty industry, Pak Chris and his leadership team has since transformed Social Bella into a top integrated beauty technology company. Initially started as an e-commerce platform, which brings in overseas cosmetic and personal care brands into Indonesia, Social Bella now works with all major brands to curate content through its community of beauty influencers and to carry their products on their ecommerce platform. The company also operates more than 60 physical stores across major cities in Indonesia and Vietnam. Over the past nine years, Pak Chris has expanded the team to over 2,000 employees. His success has attracted prestigious global investors like Temasek and L Catterton.

In addition to his role at Social Bella, Pak Chris holds a management position at PT Graha Insan Sejahtera, a leading seafood supplier in Indonesia. His professional journey began at Kellogg Company, where he worked in the supply chain division in Australia from 2003 to###-###-#### Pak Chris earned a Bachelor of Computer and Information Systems from Macquarie University in 2003, a Master’s Degree in Commerce from the University of Sydney in 2004, and an MBA from the University of Technology, Sydney in 2006.

We have known Pak Chris since 2018 when Zachary led EDBI’s investment into Social Bella, and has since worked together to help grow the company. Zachary also assisted Social Bella in hiring its first Chief Business Officer and facilitated numerous introductions to strategic and financial investors. We hold Pak Chris in high regard, admiring his achievements with Social Bella and his navigation through challenges like COVID-19 and, not forgetting, the multiple rounds of VC funding winters. Through our partnership with Social Bella, we have found Pak Chris to be a highly strategic and empathetic entrepreneur, with an impeccable level of integrity, unmatched tenacity and fighting spirit. He embodies all the necessary traits we value in an operator, partner, and friend. Pak Chris will be an excellent mentor and advisor for us and our operators, especially as we consider expanding into Indonesia.

We are truly excited and humbled to be able to work with Pak Chris on this journey. Please join us to welcome him as our Board of Advisors!

Our Key Asks: Thank you for looking out for us If you have made it this far, thank you for reading. We would very much like to stay engaged with every one of you as much as we can. Please reach out to Zach or me if you:

Have any questions on our operating thesis or even a related topic in mind that you would like to hear our views on in the future, Understand the corporate secretariat sector well, Know of any potential debt providers or investors keen in private companies.

Upcoming update next week: Risk Management: What won’t kill you makes you stronger

Have a stellar week and see you soon!

Best Regards, Eric and Zachary