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In order to live up to the expectation of the market and its investors, Paktor needs more than just a superb business execution as it expands regionally and improves/creates products, says Shing

Singapore’s online matchmaking startup Paktor’s US$32.5 million funding round was a shocking surprise for many in the Southeast Asian startup industry. Some even put the startup in the league of Carousell and Ninja Van, both of which have raised significant amounts of funding within a short span of time.

The deal also took JobsCentral Co-founder and CEO Lim Der Shing by surprise. An industry veteran and keen follower of the happenings in the SEA startup industry, Shing feels that Paktor’s is a lot of funding for a proven S$1M (US$720,000) revenue.

Also Read: Paktor raises US$32.5M to boost social entertainment features

“This one pipped my curiosity as it’s the third US$30M-plus deal for a Singaporean company that I am aware of this year alone! Ninja Van, then Caurosell and now Paktor,” he says in a blog post.

Paktor was founded in 2013 by Joseph Phua, Charlene Koh and Ng Jing Shen. It runs a combination of various dating apps and offline dating services in four countries. To date, it has raised around US$18 million from Vertex, Majuven, Yahoo! Japan, and other investors.

The firm earned revenues of S$21,500 (US$15,500) in 2014 and S$1.05 million (US$760,000) in 2015. This rapid growth is impressive, and it perhaps shows that there is demand for social dating-related services in the market, Shing says. However, this growth came with an expense of S$9.1 million (US$6.57 million) in 2015.

“So I think any reasonable person would say the jury is definitely still out on whether their current business model makes sense. The strength is that they claim to have 22 million users. So that is a cheap S$0.5 (US$0.36) per user acquired, if I just use their last two years’ costs. Not bad, and if these users are very engaged, then that is a reason for optimism,” he adds in the post.

Also Read: Will tech startups play a greater role in Singapore’s future economy?

In order to live up to the expectation of the market and its investors, Paktor needs not just a superb business execution as it expands regionally and improves/creates products, but also the market wind behind for adoption via subscriptions or advertisements to grow fast enough to justify its spend and valuations.

If Paktor, which is looking to make profit by Q3 2016, grows revenue 10x for 2016 to S$10 million (US$7.6 million) without increasing costs, it would have justified the round already, simply because the speed of revenue growth is screaming at demand.

While the matchmaking space offers massive opportunity, it takes longer for the industry to mature, Shing says, citing the examples of Match.com (US) and Jiayuan (China) and Lunch Actually, an offline dating company that recently ventured into online services.

Shing, who is an internet entrepreneur, an angel investor in 14 startups, and Venture Partner at Jungle Ventures, also says the dating revenues in ASEAN will be lucky to approach US$50 million in the next five years. Paktor will therefore need to find some scalable new product within this dating and social space that is radically different from Jiayuan or Lunch Actually, in order to grow well to justify this kind of round and deliver for its investors.

Shing also believes that if more such deals happen and set the benchmark, we are going to see larger deals with even less fundamentals, moving forward.

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