Funding activity slowed & investable startups decreased in H1, Indonesia’s top VCs say

Photo: REUTERS/Garry Lotulung

VC funding activity in the Indonesian startup market slowed in the first half of 2017, many local VCs observed, noting a ‘significant’ decrement in the number of investable startups, during a panel discussion that was hosted by East Ventures, an early-stage investment firm, that was part of the recently announced $500 million fundraising round in Traveloka.

The panel included local VCs operating at early to mid stages, featuring Abraham Hidayat (Skystar Capital), Raditya Pramana (Venturra Capital), Aldi Adrian Hartanto (Mandiri Capital), Agung Bezharie (East Ventures), Steven Vanada (CyberAgent Ventures), and Kevin Darmawan (Coffee Ventures).

Bezharie, an associate at East Ventures, said the firm found a 23 per cent dip of the number of potential Indonesian startups from its database.

In Singapore, the number of startups under the company’s radar increased by 18 per cent, showing that this slowing down trend has been unique to Indonesia. “I feel like we’ve been focusing ourselves to find leads, but (the data) shows that it decreased by 23 per cent. The error factor is low, so the data is quite valid. There is indeed a decrement in new startups in Indonesia,” Bezharie added.

Steven Vanada, vice president of CyberAgent Ventures, has a similar experience. But for him, the number of investable startups seems to be growing. He admitted, however, that investors have become more careful as the ecosystem matures.

“There have been a lot of valuation cuts everywhere. From the investors’ side, we have been more careful. Yes, growth is very important, but we have now increasingly been looking at how to monetize as well, so we are now less focused on hype and product,” he said.

As Indonesian VCs evolve, and after seeing a growing number of their portfolio companies shutting down, they are now beginning to realize that growth isn’t everything. They have become more sophisticated in valuing a startup, and in the process, have become more selective, the panelists observed.

At the same time, the entry barrier has been considerably raised thanks to rocket-speed growth of Indonesian unicorns like Go-Jek and Tokopedia.

On top of all that, there is a problem with liquidity in the exit markets.

So, while there is a lot of dry powder sitting on the sidelines – $50-100 million, as estimated by Skystar Capital – deploying it has become a problem, especially when there are no true innovations, some of the panelists said.

“Frankly, there is just no innovation from the newer companies that we are seeing right now. Just bits of improvements. There are less companies that are tackling real problems,” Raditya Pratama of Venturra Capital noted.

According to a report released by Tech in Asia, there were a total of 44 funding deals in the first half of 2016 (excluding Go-Jek -Tencent’s rumored $1.2 billion deal, that has not been officially confirmed), and this is about18 per cent higher than the total number of deals in the first half of this year, which saw only 36 deals. The majority were e-commerce (27 per cent) and fintech (22 per cent).

Seed investment stands at 38 per cent and bridge at 33 per cent, further indicating that more startups are maturing and at the stage where they are trying to figure out ways to accelerate.

This trend of slow funding and deal activities is expected to continue into the second half. But Willson Cuaca, managing partner and founder of East Ventures, said that he maintains a bullish view on the country for the long run.

“Quantitatively, yes, there will still be a decrement (of new startups) in the second half. But, there remains a lot of problems in Indonesia that need to be solved, meaning there are the opportunities are still open,” Cuaca told this portal.

East Ventures predicts that M&A activities will remain optimistic, encouraged by recent acquisitions such as Grab – Kudo, Fave Group – Groupon, and Blibli – Tiket.

The panel also highlighted that creating opportunities in niche e-commerce will attract more interest as against trying to create ‘the next Tokopedia’, and it also discussed how interest in the fintech would continue to grow, among other issues such as healthtech and agritech sectors.

Also Read:

Indonesia: P2P app Julo raises seed funding from Skystar Capital, others

Indonesia’s East Ventures partners SGInnovate to create joint startup launchpad

Indonesia: Sociolla secures series B funding from Istyle, East Ventures

Blockchain startup BitX raises funds from Venturra Capital

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.