I used to be a fan of the Handy smartphone service. Mainly I used it for its wifi hotspot, even though it meant carrying two phones around. I fiddled with the content but never found it compelling enough to get me to book anything through it.
In recent times, I have used it less and less as data roaming charges have come down. My mobile service provider now gives me unlimited roaming for a small fee a day, or a monthly data passport through which I can use my local data for roaming with a subscription fee – which has reduced my need to buy local SIM cards, rent pocket wifi (as I used to do in Japan) or use Handy hotspot services.
My colleague Arnie Weissmann, editor in chief, Travel Weekly, has a similar view. “As a user, I thought the hotspot feature was enough – I appreciated it. It was in three accommodations I stayed in Japan last month (one was a home rental), and I put it to good use as a hotspot, though that did mean I had to carry two phones; the only annoyance was that I had to reconnect to it every 30 minutes. I didn’t need to use it in Hiroshima, however, where (most of) the city has city-provided wifi. Had it thrived, urban wifi nets were probably its greatest threat going forward.”
I recall interviewing an executive from Tink Labs about three years ago if they saw their service as primarily a hotspot enabling travellers to access hotel and in-destination content but clearly, they saw it as more than that, having raised US$160m at that time to exceed a valuation of more than US$1 billion. My question then was, what would happen to Handy if roaming charges came down?
It was hailed as one of Hong Kong’s success startup stories, along with Klook, in a city that hadn’t seen a lot of “superstar” tech startups. In November 2018, it was reported to be raising another round of US$300m – a deal that would have given the startup, founded in 2012, a post-money valuation of at least $1.5 billion.
The article reported, “The company has 17 offices worldwide while its website claims it has deployed phones in over 1,700 hotel locations worldwide, predominantly in APAC and Europe, with over 12 million customers using them. It said in March that it plans to reach one million hotel rooms by the end of this year — half of which will be in Europe — and this new money is likely earmarked for further global growth.”
The pitfalls of geographic expansion
Early this month, news broke that Tink Labs was terminating its services in several markets amid staff layoffs. It informed hotels in markets, such as Morocco and Thailand, that it would no longer be providing its Handy smartphone services and that mobile services to the handsets would be terminated within hours.
Other markets identified included China, Denmark, Indonesia, Philippines and South Africa. According to the article in South China Morning Post, “Handy, however, will continue to operate in its home market of Hong Kong, Singapore, as well as for some hotels in the UK, according to emails and internal documents reviewed by the Post.”
Tink Labs’ difficulties serve as a cautionary tale to startups with ambitions to scale geographically. Just because your business model works in your home market does not mean it will work in others. Even giants like Booking Holdings’ Open Table have talked openly about the challenges of geographical expansion – the lesson being perhaps you dig deep first before you spread wide.
The problem is when you have raised serious funding, you have to have serious scale and digging deeper in small home markets may not necessarily yield the results needed fast enough.
And if your home market happens to be Hong Kong, which is undergoing the most serious test to its future, that makes it doubly challenging – not that what happened with Tink Labs is directly tied to what’s happening in Hong Kong but it is somewhat linked. The ongoing protests have severely dented tourist arrivals and retail and disrupted flights. The airport is the eighth busiest in the world and its closure sent ripples across the globe.
In Singapore, another small market, another startup has floundered – in May, Honest Bee, once hailed as Asia’s fastest growing food and grocery service, announced it was shutting down in five countries – it “halted services” in Indonesia and Hong Kong and its food vertical in Thailand. Services in Japan and the Philippines were also suspended.
In an article headlined, “Honestbee went from raising S$20 million in funding to owing S$247 million in just 4 years”, Mothership.sg reported that as of August 2, 2019, Honestbee owed S$247 million to creditors, with its management now seeking protection from creditors and trying to restructure its debt.
Other than geographical expansion, the company invested in a massive retail space called Habitat by Honest Bee, described as “a multi-sensory, tech-meets-food grocery and dining experience like no other.”
Lesson? It’s not that easy to do offline even if you’re good online.
It is easy to get delusions of grandeur in an online world. So many likes, so many fans, so many reviews, and you start to believe it is real. Then you move into the physical world and you find your fans are not as many nor as loyal nor as gushy as they are online. Real-life is messy.
The signs are all there of an economic slowdown. Investors at last year’s WiT Singapore had warned of a meltdown in the tech startup sector. Honest Bee and Tink Lab’s woes prove that even unicorn status is no armour. “I’m wondering what other unicorns are headed for the same fate,” one investor told me. Another investor in a South-east Asian unicorn said, “The worry is if they can’t raise more funds.”
Stay strong.
