US accelerator and seed investor Plug and Play (PNP) is hoping to see more deep-tech startups and looking out for opportunities arising from agri-tech vertical in Indonesia, country CEO Wesley Harjono told this portal.
While e-commerce and fintech are certainly thriving, other verticals are still practically unexplored. “If asked personally, I would like to see more agriculture-tech within our verticals. Of course, we will still see fintech, because with the e-commerce boom we need payment. But Indonesia is a big agri country, and we need to have a dedicated vertical to solve problems in that sector,” Harjono said.
Nine startups recently graduated from PNP Indonesia’s accelerator programme after 14 weeks of training and mentoring. The nine startups – the first batch of PNP’s scheme in Indonesia – are video platform for job interviews Astronaut, financial management Brankas, online bus ticket booking site Bustiket, P2P lending Dana Didik, two-wheeled vehicles ad provider Karta, KYCK, second-hand car inspection service provider Otospector, groceries e-commerce Sayurbox, and job portal Wonderworx.
PNP Indonesia is now in the process of recruiting startups for the second batch of its accelerator programme.
DEALSTREETASIA spoke to Harjono about the early-stage landscape, the maturing ecosystem, valuations, and investing opportunities, among others.
Plug n Play entered Indonesia just last year, and your first batch of startups has just graduated. What have you learned about the Indonesian digital startup ecosystem, from your experience with the first batch?
The startup ecosystem in Indonesia is obviously still at the development stage, so there’s definitely a need for players to come together and develop the ecosystem. What we are doing at Plug and Play is that we connect to universities, we connect to VCs, corporates, even to the government. What we have seen from the first batch is that entrepreneurial spirit in Indonesia is already quite high. A lot of millennials now want to create startups after they’ve seen success stories from Go-Jek, Traveloka, Tokopedia.
So there’s a lot of potential here. We also saw quite a lot of variety from the first batch, although there isn’t much deep-tech yet like in Silicon Valley, but we are getting there.
What are the key challenges in investing and mentoring the early-stage startups in Indonesia?
One of the key challenges is finding good startups to accelerate. So the entrepreneurial spirit is there, but a lot of the startups are only concerned about creating “cool products” that nobody wants to pay for. What often happens is that when they launch their products, no one wants to buy.
Plug and Play’s presence here is more to guide them, and this is why we are working with corporates who want to go digital. The corporates have a huge market and the whole ecosystem is there. Right now, we have four corporate partners – Astra Group, Sinar Mas, Bank Negara Indonesia (BNI), and Bank Tabungan Negara (BTN) – and we help them connect with the startup communities.
These corporates can in return show the startups what the real problems are, and that will eventually guide them in building their products.
We also connect these startups to the government – the city administrators in Jakarta, for example, who are looking to find solutions to various problems in the city. And they believe most of these solutions can be provided digitally.
How did Plug and Play choose Gan Kapital as the local partner?
Our chairman Gandhi Sulistyanto was one of president Jokowi’s delegates when he visited Silicon Valley last year. Jokowi was very impressed with the PnP’s HQ and said that we needed to create something like that in Indonesia. He then spoke to Sulistyanto, who at the time represented the private sector as the managing director of Sinar Mas Group, and that was how it all started.
PnP decided to partner with Gan Kapital because they wanted to partner with an independent entity, and not with something that is related to a large corporation. We wanted to maintain our independence.
How does the JV work, who provides the funds and how big is the ticket size?
The funds come from both PnP and Gan Capital, 50:50. We allocate $50,000 per startup, and we’re targeting at least 10 startups per batch. In total, then, it’s at least $1 million (per year).
How do Plug n Play and Gan Kapital leverage each other’s network and strength so far?
For Gan Kapital, we are leveraging their know-how. They know how to pick a good startup, how to work with corporates, and they already have a proven track record of creating a mini Silicon Valley within their HQ – that’s what we’re trying to recreate here. Eventually, we want to boost the whole ecosystem, to realize president Jokowi’s vision of digital economy.
For PnP, they are leveraging our local knowledge and network. Indonesia is a big country – it’s a melting pot of cultures, and they can’t enter without the local knowledge.
There is definitely a possibility for them to tap into our network for the purpose of bringing US companies here and vice versa, but for now our focus is to develop the local startups first. There’s too much gap between here and Silicon Valley, or even compared to Singapore or Malaysia – their tech startups are way too advanced. We have just started to develop artificial intelligence, even.
When President Jokowi first invited Plug n Play into the country in 2016, founder Saeed Amidi then said that he would focus on financial technology (fintech) and mobility. Do you think there are other verticals that deserve more attention?
We do cover a wide range of verticals. In the future, we want to create some vertical focuses, like the US model which has 11 verticals – each with their corporate partners. So, for example, fintech vertical would have banks as corporate partners. If asked personally, I would like to see more agriculture-tech within our verticals. Of course we will still see fintech, because with the e-commerce boom we need payment. But Indonesia is a big agri country, and we need to have a dedicated vertical to solve problems in that sector.
We do have quite a few players in agri, although not in our batch, such as Tanihub, Crowde, and others. There has also been a bit of money going into this vertical but not much – usually angels, seed, or series A. And these are not real agri-tech in the sense of, for example, creating censor tech using drones or anything like that. We are not there yet. These agri players are mainly still solving the problems of financial access for farmers.
The vertical itself is still growing, but not as fast as it should be because there are still many stumbling blocks, especially with the fact that majority of farmers are still underserved when it comes to financial access. We have to solve this first. And then, once it does, when farmers can get funding and increase their productivity, people will start thinking to solve other problems.
Then again, because of the size and scale of Indonesia, there are still a lot of opportunities even in other verticals such as health, big data, education. There are a lot of problems in this country that can be solved through digital. For our second batch, one of our selection criteria is that the startup needs to be be able to solve real problem statements in the corporates and/or the government.
You have partnered with several corporations for your first batch – Astra, Sinar Mas, BNI, BTN, among others. How does the partnership between the corporates and the startups play out? Are the startups now under their mentorships, are they receiving follow-up funding? Do you have plans to invite more corporate partners?
We are in an ongoing process to talk to several potential corporate partners. We want to expand our consortium. Basically we are looking for any corporate who wants to really undergo the digital transformation and who is looking for a tech innovation for their business – which I think makes more sense to outsource to us rather than building their own team, because often it’s too costly for them.
Some of the corporates are now looking to invest in some of the startups, but they are not closed yet so I can’t say here.
What are you going to do differently for the second batch, or what do you hope to see differently from the second batch? What kind of entrepreneurs are you looking for?
We are satisfied with our first batch – which we think are pretty good in terms of quality. For the second batch, we hope to see more startups that can solve real problems in more diversified sectors. Again I reiterate, I believe that Indonesia offers a lot of opportunities. I want to see agri-tech, health-tech, robo-advisory, AI, and many others.
Does Plug n Play have any plan to invest in later growth-stage startups? Meaning series B and later stages?
We are open to it. Right now we invest in seed, but we are more than capable to do follow-ons and later stage fundings. We don’t limit ourselves to only seed funding forever. We’ll see maybe some of our alumni from the first batch will need follow-on fundings, and we might join.
We have just witnessed the success of the first two Indonesian startup IPOs this year – M Cash Integrasi and Kioson. What is your comment on this?
It’s a leap forward for Indonesia. It will set a precedent and open up doors for the other startups, that they actually can fundraise through IPO and that they don’t have to rely on VCs forever. Funding options have always been limited for startups.
By going public, these startups can also learn good governance practice from early on. They will need to learn how to do proper accounting, learn more about conflicts of interests, and so on. It will help them grow the business.
Do you think it will spur more startup IPOs next year?
For sure, especially because the last two were successful. We can see that there’s so much interests from investors.
Will IPOs disrupt valuations in Indonesia again?
Valuation is an art, there is no one fixed formula to calculate. If they say they are worth $2 million and then somebody takes it, then it is $2 million. The same with IPOs. If they set their valuation and then oversubscribed, it means it’s worth that much.
However, it does keep the valuation in check.
What’s relieving now is that Indonesia’s valuation is already much better. It used to be just making up numbers from selling only stories of the future. Now, the ecosystem is more mature, and thus valuations make much more sense.