During the cryptocurrency frenzy of the mid- to late-2010s, the HelloGold gold savings app was launched in Malaysia to a curious public. Allowing savings in gold for as low as RM 1, many wondered if this alternative business model would actually empower financial inclusion for low- to medium-income users.
Officially launched in 2017, the HelloGold app outlasted many expectations and was recognised for its innovative application of blockchain, becoming the world’s first Shariah-compliant certified online digital gold platform.
But HelloGold announced late last month that it was shutting down its consumer app unit in both Malaysia and Thailand – and that users had until February 2nd to withdraw their funds.
Robin Lee, HelloGold CEO who co-founded the app in 2015 with Ridwan Abdullah, spoke with Fintech News Malaysia’s Vincent Fong on the latest episode of the Fintech Fireside Asia YouTube channel about the challenges they faced, what led to the shutdown, and what’s next for the company.
B2B2C and back again to B2B
Robin noted how the company had always intended to be a B2B2C platform, yet had to pivot to a B2C pureplay when corporate partnerships proved difficult to land. HelloGold slowly began gaining traction during the pandemic, but business “started falling off quite dramatically” as the world was coming out of lockdown.
“And so you know, much as we tried to keep it going, it just made sense to stop the B2C and pivot back to the B2B to see propositions,” he detailed. “So we’re now just focused on the corporate angle and putting all our eggs into that basket.”
Robin said consumers spent less during the lockdown months, with some of that discretionary funds being channelled into their gold. End of enforced lockdowns meant people started spending again, but now with the added issue of inflation, so goods were costing more. “They were taking money out of our gold. The positive to that was that the gold kind of did what it was supposed to do, you know? Unfortunately for us – it was our revenue, too.”
Processing payments and refunds
Since the shutdown, over RM30 million has been returned to customers, with about another RM10 million to be refunded, while around 50,000 users have yet to provide their account details to HelloGold. Robin says daily refunds processing will continue until the end of the week, before reverting to weekly processing, to be followed by monthly processing “until it goes to zero.”
Aware of the vulnerabilities of their business model and the fact that around 90% of startups fail in their first year, Robin emphasised that his partners and himself were always thinking about what to do in the event of a failure.
To avoid the startup fallacy of either listening to naysayers or believing in their own hype, Robin believes one can have backup contingencies, “from Plan A to B to Z”, but have to face reality at some point.
“But I think once you run out of ideas, and you’re kind of hoping, as opposed to planning, then I think is when you probably have to take a hard look at life,” he mused. When asked what he would do differently if he were to repeat the HelloGold app business, Robin pointed out that the benefit of hindsight is wonderful, and that they made decisions based on the available information at the time.
He laments not sticking to the B2B2C strategy and going B2C, but the company had a watershed decision to make at the time. “Either we just do nothing, and just sit there, or we go for it. And it was a call we made because, you know, we roadmap, and had a plan and milestones to achieve for our investors.”
Robin noted that funding, and therefore strategic thinking, were very different for corporations as compared to startups.
When the HelloGold platform was being developed in 2016, the innovation-driven financial services in Malaysia, including digital wallets and the ability to integrate with corporates for B2B investing, were still in their relative infancy.
Corporations likely have fallback capital, or can defer repayments – startups often don’t have those resources. Robin said HelloGold spoke to many corporates about strategic partnership and integration opportunities, but if the corporation decided not to follow through, there was not much that could be done.
“So I’m not saying that B2B2C is easy, because it has a set of challenges of which you’re getting corporates across the line, to sign a deal, and then start building the platform or integrating with you,” said Robin. “In hindsight, I guess I was naïve. I thought that if you ink the deal, everything is done. That was clearly not the case.”
Vincent highlighted the chicken and egg dilemma of corporations not being ready with their decision, and startups might consider entering the B2C sphere to generate revenue and to show potential investors that they could generate the numbers.
Would HelloGold go the ICO route again?
Robin highlighted how with traditional investing, an investor would have to know someone at a company like Alibaba in order to get in on the ground floor of pouring in funds. But with an ICO, investors big and small globally could participate in something akin to a seed round.
But the ICO’s strength of being able to raise capital quickly and with minimal interference is offset by the inherent instability of the tokenisation ecosystem. Knowing what he knows now, would Robin still raise capital through an ICO, as HelloGold did in 2017?
Robin acknowledged that in hindsight, ICO fundraising was “the Wild, Wild West” and added that he was unsure if he would repeat the decision. “At a personal level, no. As a company going out to raise money — yes. But there’s a huge — less so now, I guess, but certainly in 2018-2019 — there was a huge chat about the whole thing when we talk to partners, banks, etc … Is that happening in the space? People think twice.”
Pivoting to B2B the path to success?
One advantage for HelloGold when it comes to targeting its app and services for businesses instead of consumers, was its network of business partners it had built up. The company plans to integrate HelloGold into other platforms and whitelabel the gold savings component according to their corporate partner.
“So with a low burn and also without the need to look at the retail space and divert resources there, we can really focus on [B2B] and see where that takes us,” Robin exclaimed. “What’s interesting is that over the last week or so, since we announced the closure of the retail business, we’ve had a number of parties come to us, or partnership discussions.”
Robin compared the new B2B strategy to microprocessor makers like Intel and AMD, who work with multiple hardware partners and whose solutions are found in all sorts of electronic devices. And interestingly, partnership opportunities in this space keep presenting themselves.
“It’s interesting that, you know, new B2B business, these are coming out as a result of the closure of the retail business,” commented Robin wryly.
Vincent asked if these corporate partners had expressed apprehension about the digital gold method, to which Robin replied, “I fundamentally believe it is not difficult if you have a large installed customer base that you can tap into, and you can then acquire customers at a very low cost.”
Lessons from loss
He says that people like gold, even institutions, and would want to save in gold for its financial benefits over holding Malaysian Ringgit or equities. HelloGold has the added advantage of experience in the whole gold platform “and we continue to have a pipeline of opportunities from Malaysia, all the way to Africa.”
Robin says what remains is to activate some of these business relationships. It is in the interest of many of these institutions to leverage HelloGold’s expertise and built-out technology in the gold investment space, rather than building their own solution from scratch.
HelloGold is still focused on paying back its former retail app customers, to maintain its credibility with investors and potential business partners that this was not a ‘rug pull’. But it’s topline revenue has evaporated, and the startup was forced to restructure and slim down its team.
At the same time, Robin points out that the picture might not be as dire as it sometimes appears: the company was originally built with B2B business in mind, and that there are no operating costs presently associated with running that aspect.
Ultimately, Robin says entrepreneurs “with an itch to scratch” will still need to pursue their dream with resilience and confidence, to make it through all the highs and lows of building a business. “So you kind of need something to hold on to, and for me it was trying to do this thing and getting it out there. Do it for the right reasons.”
To check out the full interview, head on over to our Youtube page
