Founder Spotlight: Arya Setiadharma, CEO of PT Prasetia Dwidharma, on Managing Investment Risks across industries amidst COVID-19

Amidst the market volatility globally, venture capitalists are now cautious of the promise, perils, and profitability of early-stage startups. This unprecedented turmoil, however, might lead to favorable technology investment opportunities borne out of the pandemic. Investors like Arya Setiadharma, CEO of PT Prasetia Dwidharma, a venture capitalist company based in Indonesia, is projecting a record spike of collapse for a number of small businesses. PT Prasetia Dwidharma is an early stage investor who invests in great founders, tackling a big market. 

In Arya’s interview with Techshake, he shares his insights as a venture capitalist for the industries that are currently thriving and his advice for consumer-market startups on how to mitigate risks.

Can you tell us more about yourself and your background?

I started my own company back in 2008. It's a construction for the telecommunication industry. Over the years, I see that there were a lot of inefficiencies in running my own company. That's where I started to look for technology that can solve my own problem. Aside from that, I have started investing in the US capital market since 2005. I also saw that by 2013, most of the highest market caps in the US stock market, at least back in 2013, were tech companies. Meanwhile, in India, I saw that the trend was going that way as well. I combined these findings with my own experience with running Prasetia Dwidharma with my family.

We agreed that technology will be the future, whether it's going to be enabling businesses or helping consumers access a lot of services. I think that was like the beginning of our journey of trying to find investment in technology companies. We started investing in Indonesia, but then we expanded to Southeast Asia, and then US, India, and in China.

What is Prasetia's investment philosophy?

I have to say that over the years, our philosophy has changed. We didn't really have a playbook. We invested in companies that solve problems in the beginning. For example, we invested in a cloud accounting software back in 2015 or early 2016. We invested in that company because when I started my own company in 2008, I had to purchase a desktop accounting software. It was about $2,000 US dollars. As a small and medium-sized enterprise (SME), it doesn't make sense to purchase that high price just to have a good accounting software. 

I would say, over the years, Prasetia’s investment philosophy has evolved. First, we have to be comfortable with the founders. That's our main philosophy that we invest in companies with great founders. We invest in a company that has a dream to tackle a big problem, which has a big market. That's essentially our investment philosophy nowadays. Product for us, nowadays, is not that important in the beginning. If we invest in a great founder who can assemble a great team, eventually, they can build a great product.

What kind of startups do you want to see in Prasetia? Do you have any preferred industries or verticals?  

If you go through our portfolio, most of our portfolio companies are business-to-business (B2B) startups. I think that's what we understand best. My businesses are in B2B. We understand how you grow sales in B2B. That’s mostly where we are comfortable with. I think it was easier for consumer startups to get funding back in 2015-2016 rather than B2B startups. That's where we targeted our investments early on. Eventually, with the network that we have accumulated, we have access to invest in B2B and business-to-consumer (B2C) startups. 

For verticals, we don't have specific verticals, but we have what we like. For example, edutech and logistics because these two are what we think are lacking in Indonesia. It's something that we look for. Logistics is part of the supply chain as well. I guess, something that tries to solve real world problems that goes along with online to offline. 

At the end of the day, we always think that Fintech is very niche-specific. However, a lot of startups are evolving, and eventually they can become a fintech. We also invest in fintech-enabler and e-commerce enabler startups - something that is behind the scene. We think that this kind of startup is very sticky because once you become an integral part of the business process, it is very hard for the customer to switch. It's something that we look for as well. That has a high barrier of entry and high switching costs.

Most of the companies were affected by the pandemic. Can you share how Prasetia dealt with the pandemic to make sure your portfolio companies are in good health?  

I think there are a lot of uncertainties during this pandemic. People say that it's gonna be until the third or fourth quarter, and I think everything is wrong. What we discuss with our portfolio companies is that they can survive first. I think that the theme that we tried to discuss with them is that during this pandemic, survival is the key whether you can raise internal funding or external funding. 

If they have good traction, then I think it's better for startups to raise internally. You can still increase the runway in and wait out until it is better to fundraise from an external investor.  If all options are not available, then we will suggest for them to hibernate the startup. Wait up until the market is ready. Thankfully, most of our portfolio companies are at an early stage. They were still pretty lean in terms of the size of the team, but even some of them who were quite big in terms of the team, they tried to minimize as well. If this year is still bad in terms of the pandemic, then I would predict some of them will close down.

In your view, what are some of the most important trends in the startup ecosystem in Southeast Asia this year?

A lot of companies are adjusting as well. A lot of the corporates in Indonesia require wet signatures. Nowadays, they're okay with digital signature. With this change of behavior, it also opens up a lot of opportunities. For a lot of our portfolio companies, it opens up a lot of opportunities as well. Definitely, logistics is a big thing right now in Indonesia. If you Google about logistic startups in Indonesia, most of them got funding last year - same goes for education. One of my portfolio companies, Cakap, just recently got funding as well. It's not just Cakap, a lot of education technology also got funding last year. Another one that we've seen as well is healthcare. The telehealth with Halodoc in Indonesia, and I think there are several others in Singapore. Before the pandemic, I don't think it was possible for us to get a doctor's prescription digitally. I have to say that this pandemic gave a lot of tailwind to a lot of industries as well. Logistics, healthcare, and education are some of the industries that got a good tailwind from the pandemic.

What is your outlook for startups in 2021?

I think what I can say is that this pandemic has brought a lot of problems in terms of the consumer market. It took a lot of hits. Although, it is trying to recover a little bit. For example, let's say the hotel industry. My friend who works at the travel industry mentioned that the number of bookings of hotels has since recovered about 85 to 90% compared with the pre-pandemic. That part of the consumer market has kind of recovered. I think that the lasting effect on businesses is still tough. When the pandemic happened, a lot of businesses had to size down. After the pandemic, they probably end up hiring new people, who might not be able to give the same level of productivity as your previous employees. This productivity level will carry on to 2021.

Another example would be in telecommunications. To be honest, we were not really affected, because my contract is with telco companies. A lot of the industries are B2B with long-term contracts, so they still managed to survive. I guess my outlook for 2021 is that if I look at it as an investor, I have to see whether their revenue generation is from the consumer market or from like a B2B that has a more stable revenue. If it's from the consumer market, then I have to be really careful in terms of the outlook and the projection of the founders. 

To learn more about Prasetia, click here.