Strong appetite among Indonesia’s retail investors for startups: Kioson CEO

Kioson founder and CEO Jasin Halim.

As Indonesia’s first ever publicly listed startup, Kioson was entering into uncertain territories when it decided to launch an IPO in 2017. Now, as its share price remains at a steady high, the company believes it can be an example to other startups that are cautious about making the big leap.

Kioson was listed in October 2017 after raising Rp 45 billion ($3.4 million) in its IPO. At just below Rp 3,000, Kioson’s share price on the Indonesian Stock Exchange (IDX) is currently over six times higher than its debut price of Rp 450 apiece. After seeing its shares oversubscribed 10 times during the bidding period, trading in Kioson’s stock was halted twice in a week due to a significant cumulative price hike.

According to Kioson founder and CEO Jasin Halim, its successful IPO and the subsequent stock performance can be attributed to a business model that combines online-to-offline (O2O) e-commerce and payment services as well as high interest from retail investors. As the only startup available for public investment, investors flocked to buy Kioson’s shares, he said.

“This is simply supply and demand. We see that retail investors are yet to have the opportunity to invest in startups. Only big investors like VC and PEs invest in startups and their (startups’) valuation grows much bigger. Retail investors are desperate to take part,” he said in an exclusive interview with DEALSTREETASIA.

Kioson’s stock market success is widely expected to inspire other startups to go down the same route. Both the Indonesian government and the IDX have repeatedly urged startups to go public. The Communications and Information Minister Rudiantara has asked the IDX to roll out a red carpet for startups to IPO amid fears that Indonesia’s big players with foreign backers might decide to get listed overseas.

IDX director Tito Sulistio has stressed that profitability is not an IPO requirement for startups, which are generally known to be vulnerable to extensive early losses. The only requirements are “clean legal administration and true and trusted five-year plan”.

However, as of this moment, only one other startup – digital distribution firm M Cash – has gone the IPO route, as others have opted to stick to the tried and tested private fundraising options.

In an interview with this portal last month, Indonesia’s newest unicorn Bukalapak said that IPO is a possible option for the company, but admitted that one of the factors of consideration for the startup is the “greater responsibility and less flexibility” that comes with becoming a listed company.

Kioson’s Halim admits that being a listed company was not part of the startup’s initial objective. Like other startups, its plan A was to raise funds from private investors. However, Halim said he eventually decided against going the conventional route after lengthy talks with potential investors who “offered little but wanted lots”.

Launching an IPO has enabled the company to not only raise funds but also remain in control of the business. With the $3.4 million raised through the public offering, Kioson has managed to drastically expand its agent base.

Despite often being compared to Kudo, Kioson claims it has no direct competitor in its role as a purely O2O platform, which serves as a bridge between under-served markets and digital services. Kioson mainly targets mom-and-pop shops as its agents and looks to aggregate them by giving them tools to enable them to carry out transactions and earn additional income.

Kioson’s acquisition of agents is a costly operation as, unlike others, it is done purely offline.

“We have to educate every single store, KYC every single store. Our acquisition is in rural areas, second-tier cities – this is even more expensive because they are far away from the big cities,” Halim said.

With the funds raised, Kioson also acquired affiliated tech company Narindo Solusi Komunikasi. The move, Halim said, was an important strategy in the company’s efforts to win the trust of investors. Furthermore, such a move will also reinforce its position in the market, which Halim said could appeal to e-commerce players as it has happened in the US, China and India.

Halim said that after the consolidation, the company’s growth has been significant. Its revenue has grown 100 per cent from 2017, and is projected to grow another 20 per cent by 2019. Its total number of agents has also grown 100 per cent to over 30,000 as of December 2017. The target for 2018 is covering 50,000 outlets.

Having felt the benefits of fundraising through IPO, Kioson is calling on other startups to follow suit. Halim says he understands startups’ concerns about additional responsibility brought on by a public listing, but advocates that it also encourages accountability, good governance, and openness that makes the management more prudent.

Reza Priyambada, a senior market analyst at Binaartha Securities, says the move by Kioson and M Cash is clear proof that IPO is a realistic strategy for startups looking to scale. It is all now all down to the players in the scene to take advantage of the benefits on offer or remain in their comfort zone.

“If they want to IPO, like it or not, they have to be transparent and be more open. Now it is down to the startups, do they want to be open to investors?” said Priyambada. “If you want to grow, then you need to open up to investors. If you want to remain as you are, then that’s fine but your growth will be limited.”

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