Business

SMU489

This case was written by Professor Kenneth Goh and Dr Cheah Sin Mei at the Singapore Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2019, Singapore Management University Version: 2019-02-10

THE FOUNDING OF FLIPZ: LIVING THE ENTREPRENEURSHIP DREAM?

It was January 2016; Lee Ju Ning had graduated from university six months earlier and was now fixated on growing Flipz, the start-up she co-founded, into a revenue-generating peer-to-peer platform for selling second-hand items. Turning an idea into a reality had taken Lee and her business partner Caden Chan only a weekend, but commercialising it into a profitable and scalable business was undoubtedly more challenging. It was even more complex in a small and saturated market like Hong Kong.

During the first one-and-a-half years, the entrepreneurship journey had been akin to a roller coaster ride for the founders, with the highs of successes quickly followed by the lows of what appeared at times to be insurmountable obstacles. They faced numerous hurdles, ranging from parental disapproval of their career choice, numerous rejections for funding, technical difficulties in app development, and slow user adoption. Despite a successful launch, downloads for their app had slowed down considerably after just three months.

Confronted with these setbacks, a disheartened Lee mused, “Perhaps it is time to move on and get a job in the corporate world.” Was it really time to abandon Flipz?

Hong Kong: A Thriving Start-up Scene

Hong Kong was a Special Administrative Region under China with a population of 7.4 million people occupying a land area of 1,104 square kilometres. It was the fourth most densely populated city in the world in 2015.1

Consistently ranked among the top five countries for ease of doing business for the period 2011-2016, Hong Kong was a highly conducive place to start a company.2 However, its start-up ecosystem was barely existent in the early 2010s.3 In the years that followed, as the government and venture 1 The Statistics Portal, “The Top Fifty Countries with the Highest Population Density Worldwide in 2015”, https://www.statista.com/statistics/264683/top-fifty-countries-with-the-highest-population-density/, accessed August 2018. 2 Euromonitor International, “Business Dynamics: Hong Kong”, 2018, via Passport database, accessed August 2018. 3 Jay Kim, “Hong Kong’s Startup Ecosystem Is Thriving – But This Is How It Becomes A Global Hub”, Forbes. May 19, 2017, https://www.forbes.com/sites/kimjay/2017/05/19/hong-kongs-startup-ecosystem-is-thriving-but-this-is-how-it-becomes-a-global- hub/#7ec724ddb52f, accessed 7 June 2018.

For the exclusive use of s. penupothula, 2020.

This document is authorized for use only by suresh penupothula in THE FOUNDING OF FLIPZ: LIVING THE ENTREPRENEURSHIP DREAM? taught by NAÏMA CHERCHEM, HEC – Montreal from Feb 2020 to Aug 2020.

SMU-19-0005 The Founding of Flipz: Living the Entrepreneurship Dream?

2/6

capitalists started pouring in funds to support innovation, Hong Kong soon became the hotbed for start-ups.

As of 2016, there were about 2,000 start-ups employing more than 5,000 people, at an estimated value of US$32 billion, and as the fifth fastest-growing ecosystem, the start-up scene in Hong Kong had finally taken off.4

Drawing Inspiration on Starting Up

Immersion in Silicon Valley

In 2014, Lee and Chan were in their final year of university in Hong Kong. As was the case with most of their peers in business school, their post-graduation plans were to pursue a career in professional services, such as finance, accounting, and consulting. However, a one-year work-study stint in Silicon Valley was an eye-opening experience that steered them towards a career in technology entrepreneurship.

During their stay, they were immersed in Silicon Valley’s innovation culture and the vibrant start-up ecosystem. In addition to attending classes as part of an exchange programme, they also interned at a start-up where they took on major responsibilities such as managing the entire company’s operations. They also had opportunities to network with well-known entrepreneurs and venture capitalists, such as Jack Dorsey, the founder of Twitter, and Mark Zuckerberg, the founder of Facebook. As Lee shared,

It was not just meeting Mark that inspired me to start a technology business. I was also energised by the intense passion, creativity and innovation in Silicon Valley as a whole.

From this experience, they began to see technology entrepreneurship not just as a viable career path, but also as a way to make an impact by using technology to solve societal problems.

A Lucky Break at a Hackathon Competition

Upon her return to Hong Kong in January 2015, Lee explored ideas with Chan that they could work on together. One of the ideas that most excited them was a quicker and simpler way for people to sell their used items. The impetus for this idea stemmed from their own experiences in selling their personal items like electronic devices, clothes, and accessories.

They found the current way of buying and selling used items through online classified advertisements to be a frustrating experience. It was difficult to list items for sale and to search for items. Few sellers took down their listings even after the item had been sold, so buyers never knew if an item was still available or not. Bargaining with potential buyers and sellers was a big turn-off as well. Lee recounted an incident when a seller had turned hostile and had called her personal mobile phone number several times a day to harass her.

4 theDesk, “theDesk’s Guide to Hong Kong’s Startup Ecosystem”, January 27, 2018, https://www.thedesk.com.hk/thedesk-guide-to- hong-kongs-startup-ecosystem-facts-and-figures/, accessed June 2018.

For the exclusive use of s. penupothula, 2020.

This document is authorized for use only by suresh penupothula in THE FOUNDING OF FLIPZ: LIVING THE ENTREPRENEURSHIP DREAM? taught by NAÏMA CHERCHEM, HEC – Montreal from Feb 2020 to Aug 2020.

SMU-19-0005 The Founding of Flipz: Living the Entrepreneurship Dream?

3/6

“There has to be an easier way for people to buy and sell their used items!” insisted Lee. Despite acknowledging the problems of online classifieds, Chan had his reservations that these problems could be resolved through technology. Hong Kong, after all, was a status-conscious society and there was a general aversion towards second-hand items. Furthermore, online marketplaces like eBay had been around for more than a decade but had never become mainstream in Asia.

Lee and Chan decided to resolve this dilemma by taking part in a hackathon, hoping it would allow them to develop their idea and get feedback. The competition was held over a weekend and involved 80 teams vying for a prize of US$10,000. Teams would pitch their idea to a panel of judges on a Friday evening. The top 20 teams would progress to the next round where they would have 48 hours to build a prototype that was to be demonstrated on Sunday evening. Despite their best efforts, Lee and Chan’s idea for Flipz was placed 22nd.

Fortunately for the duo, two of the finalists merged with two other teams, which boosted Flipz to the last spot in the first shortlist, allowing them to progress to the next round. Lee and Chan worked very hard on developing a prototype of an app that would showcase what they thought were the most distinctive features of their idea – simply snapping a photo and uploading it using a mobile phone would ease the process of listing items for sale and communication between buyers and sellers. The judges were very impressed with their prototype and Lee and Chan’s idea was selected as the winner of the competition. This win convinced them to formally set up Flipz as a company, with the prize money of US$10,000 as seed funding to further develop the prototype.

Disapproving Parents

Despite winning the hackathon, Lee had trouble convincing her parents to support her decision to become an entrepreneur. Lee came from a middle-class family and had grown up in a comfortable environment. But given the competitive education system in Hong Kong and the rising cost of living, her parents expected her to get a well-paying job after graduation, either in professional services or with a multinational company.

At a family dinner to celebrate her father’s birthday, Lee broke the news to her parents about her decision to join Flipz full-time after graduation. This news was met with confusion and disappointment by her parents. As Lee recounted,

My parents did not take this well. My father was clearly disappointed with my decision and quite upset that I had ruined his birthday celebration. But I reassured my parents that this was just a project I would work on for a year and would join the corporate world after that.

Navigating the Rocky Path of Entrepreneurship

Funding Rejection

Lee and Chan spent their prize money from the hackathon on further developing the prototype. Although they had some coding skills, they needed a development team with stronger coding expertise and decided to outsource development to another software company. Three months into

For the exclusive use of s. penupothula, 2020.

This document is authorized for use only by suresh penupothula in THE FOUNDING OF FLIPZ: LIVING THE ENTREPRENEURSHIP DREAM? taught by NAÏMA CHERCHEM, HEC – Montreal from Feb 2020 to Aug 2020.

SMU-19-0005 The Founding of Flipz: Living the Entrepreneurship Dream?

Order now and get 10% discount on all orders above $50 now!!The professional are ready and willing handle your assignment.

ORDER NOW »»