Chandra Firmanto of IndoGen Capital on Supporting Southeast Asian Startups Through Value-Creating Partnerships
Chandra Firmanto of IndoGen Capital on Supporting Southeast Asian Startups Through Value-Creating Partnerships
By Paul Jorge Tagle
Southeast Asia disports an ideal place for startup businesses. The Asian region emerges from the exponential growth in the business ecosystem to varying sectors such as fintech, travel, healthcare, among others, foreseeing a thriving projection. As one of the venture capitals in the region, IndoGen Capital from Indonesia aims to not just be one of the keys to supporting startups, but also to give impact to them through value-adding partnerships. Finding new business opportunities, new talents, and industry-leading advisors in their networks shed the light on their successful strategy execution on expanding Southeast Asian markets.
Giving the venture capital’s overview, Techshake talked to Indogen’s Managing Partner Chandra Firmanto to get his take on the growing business industries in the Southeast Asian region along with their goals and missions.
Can you tell us a brief background of yourself and your role in IndoGen?
I went to school at USC in Southern California. Afterward, I worked for two years in Accenture in Los Angeles. In 2004, I came back to Indonesia for good. I am coming from an Indonesian-Chinese traditional family and like the typical Indonesian-Chinese family, we have family businesses. My father started a family business back in 1970. We distribute Yamaha motorcycles, Dunlop tires, spare parts brands, and fast-moving consumer goods like Unilever products, Walls ice cream, and Yili dairy, a leader between the dairy industries in China, including their ice cream product named Joyday.
When I came back, the family business was run very traditionally. Slowly, I needed to spend time to scale it up and to expand to new businesses, but also in the meantime, to incorporate using professionals in the family business. Eventually, in 2015, we were pretty successful to be able to move with my father to the chairman position and professionals have fully run the company.
In 2016, I moved myself to become the non-active chairman and I started to think about the next move. I realized I missed all the big startups’ stories such as Gojek, Grab, Lazada, and Tokopedia. I missed all those. I also experienced working at Accenture before as a business analyst. We helped a lot of corporations with the due diligence process and when they were acquired by all the big tech companies as well back in the days. From that experience, I realized that it is probably going to be good to start doing tech investment.
I started as an angel [investor] but there is a limitation in terms of what you can provide to the startup. As well as if the startup is on the growing stage, they will be very reluctant to accept angels. Unless you are a very high-profile person like a founder of Facebook, then probably, they will cap the slot. Otherwise, then it will be difficult for you to do angel investment. I decided instead to find an angle to lead with my strength which is in the localization factors. We know how to run businesses in Indonesia [and] we have pretty good business networks. Then I found my partner: Henry. He also came from a family business and started the family business by himself as well—doing shipping and logistics, applying logistics business in Indonesia. From there then, we decided to start IndoGen Capital with an angle to help startups and other VCs to win the Indonesian market. If other VCs have a plan to enter Indonesia and we have a startup probably successful already, then we'll be able to help in the expansion not only in Jakarta and greater area but also in the secondary and tertiary cities.
For the first fund, we only raised 10 million but from the high-net-worth individuals of Indonesia located outside Java. We did that on purpose because we wanted to expand our networks to be able to help startups better.
We helped Carsome from Malaysia to expand it to Indonesia who eventually became the number one used car platform in Southeast Asia. We also helped Venteny, a company from the Philippines, to expand to Indonesia, and they have recorded three times the revenue from the time when they were in the Philippines. So from there, we're quite comfortable with our approach to investing in the potential industry leaders and only the industry leaders. We are looking for startups that work for me, have enough capital, and then looking to expand into Indonesia, maybe get super awesome traction. From the end of 2016 until today, we have made 19 investments so far and we have recorded four successful exits. And we just recently raised our second fund. We have done the first course of ten million, even during COVID, and we are planning to reach 50 million.
What makes Southeast Asia an interesting space for innovation and tech investment?
If you look at the populations combined in Southeast Asia, we have more than 550 million people—demography-wise and a very young population. Given that, the average age across Southeast Asia is only 28.3 [years old] the last time I checked. The economic growth has been quite steady. We have enjoyed double-digit economic growth outside of the COVID situation. Because during a pandemic, everyone gets affected. But post-pandemic, I think that area has been recovering well. If you look at the political standpoint as well, we have a pretty good relationship with China. I know, there is a standoff between the Philippines and China, but still not as serious as the one happening in, say, India. I think our region can work with China. While examples like North America, they will have difficulty working with China, and China will have difficulty working with North America. We have that as our advantage.
We can work with most of the regions with ease. That will play a prominent role in terms of decision-making about whether to expand businesses in our region. I think consumption also if you look at the consumption base of Southeast Asia people. I think because we just transitioned from the developing countries to more developed countries, so we like China maybe 10 years ago or the US maybe 20 years ago, where the consumption level is quite high. So, we can see that many businesses, especially related to consumers, have been thriving. You can sell products, like for example, like even just drinks and become very successful in Southeast Asia.
I believe that 2021 is going to be a foundation year for Southeast Asia in terms of strengthening the startup ecosystem. And 2022 will be the boom year where all the foreign investors will come here, and then try to establish positions for their expansive plan. whether they want to come here to get revenue or transactions, or whether they want to find an angle for exits because there is a rise in SPAC as well, the special purpose acquisitions company that is at least getting hotter and hotter in the US right now.
Some of the startups are very keen on scaling up this time, as you have mentioned, so can you give us some insight on how to fundraise successfully in Southeast Asia?
I think for Southeast Asia, you must get good revenue. That is key. But again, as a founder, you need to be a good fundraiser. Meaning if you are to be a good fundraiser, you must be well connected. This is the area where many of the bad fundraisers lacked. They try to fundraise, but they do not know anyone. That is difficult. For starters, they need to for example, like to be involved in the startup community for quite some time so they know all the big players, investors, offices, big corporations that can work with, paying their dues to work with corporations with all these investors spending time with them, then then you have built your networks. For probably you can also get the experience working for a big VCs or probably with the big investment companies as well, then you will be well connected. Then you can be a good fundraiser. If you can be a good fundraiser, then you can be a good startup founder.
The next one is a matter of executions which is critical, most especially if you start in one country in Southeast Asia, and become quite successful, but you're thinking about doing expansions for growth. That part is the area where we want to fill in. Meaning, we will work with good founders, who are good fundraisers and have enough capital and to execute the expansions. We cannot do magic. We will not be able to help startups that are struggling to do fundraising. I believe that to be successful in fundraising, you have to build your networks, you have to pay your dues to agree, to know all the people in the community, go to different events and events like even, for example, if TechShake doing another event in the Philippines then it's probably a good idea to go there that to know that in all the investors. From there, then you will have the chance to pitch about your business ideas and to show your growth. In Southeast Asia, pay attention first to the growth rate but there is a bit of adjustment, we must pay attention to profitability as well. Through the pandemic, the investors are paying attention to startup founders that is, I think, more disciplines, in terms of spending. They want to see [that] you can get, I mean, like an outstanding growth rate, but again, the spending rate—you must be very responsible with your spending as well. If you can, forecast or show when you are going to achieve profitability would also be a help.
In your opinion, do you think it's wise for the Philippine startups to take longer and expand their market in neighboring Southeast Asian countries or especially in Indonesia? So if so, how can they start?
We have had this experience before, so we helped Venteny from the Philippines. What they do is provide loans for call center employees. By doing that, they can create, acting as a credit card with an interest rate that is affordable and manageable, unlike the typical P2P while at the same time, acting as a perk for the employees, along with the booming call center industry in the country. There is a competition going on between all the players and then you do hijack as well so you can provide better products for your employees, then probably the mistake. That is what Venteny angle was—they tried to help the call center employees. [They] did pretty good in the Philippines market and decided to do the fundraising round that they needed a bigger story. I will say, it will depend on your strategy. Of course, number one, you must be able to prove that your product model can be successful in your own country.
It happened to us because we are also the official Venture Partners for JETRO, Japan External Trade Organization. We were approached by a startup that was not successful in Japan and planning to expand to Indonesia. We were very shocked. Junia oversaw the call I remember last time. You're like, “What? You are not successful in Japan, right? how come you can think that you're ready for expansion.” This is one of the situations where we must break the hearts through to the founders that we will not be able to help you. We cannot do magic. We want to help everyone, but we cannot do magic. We will have to come back to you again as a founder. You must be successfully doing execution in your own country, then once you are successful, and you are looking for the next jump, we can help you.
If you are looking for our next jump, for example, in the case of Venteny where they want to grow another 3X, it is easy to do it in Indonesia because we have a massive number of blue-collar workers. Then when I try to help, for example, the founders of Venteny, I analyze his strengths and his weaknesses as well. His strength is being Japanese, a good fundraiser, and on top of that, the compliance of the company is very good. Compliance is very important as well especially if you are a FinTech company. From there, then, I tried to make it easier for him. When I got introduced to him by SBI and KK Fund. I explained to him about the commercial landscape first. I explained why the commercial landscape, what the challenge is about the competitions, what it will take to start with the expansions, and checking his capital as well for expenses. Because he needs to have about, maybe at least 16 months runway to operate. I checked that, and everything turned out. He got everything because he is a very good fundraiser as well. The company has been invested by SBI, by RELO Club, a listed company in Japan focusing on employees’ benefits. we are quite confident with what we then need to be able to succeed with the expansion.
We started by connecting Jun to the Japanese corporations in Indonesia, easier because they can speak the language. We connected Jun to the Japanese corporations and then they started a collaboration with Rubini which is a big corporation in Indonesia, where they operate an industrial town - a low-hanging fruit for Jun to work with. And to talk well then you must find local talents. This is the area where we are helping the startups, I think, the most. Because we will not be able to execute without talents. We identify from our networks good people, with good hearts and good work ethics which is very important to introduce to the founders and the founders decided to hire, and from there, then they can get started with the expansion strategy. From there, they can hire more people to the team. Then we started by helping the local connections to the corporations that can help using their product or services. From there, then the rest because the founder himself is ideal, he could execute the rest. Again, we will be able to open the doors for you, helping the connection, to close the cooperation that will go back to the founders and the team. That is what happened with Venteny. We are very fortunate that they were good as well, from the executions, they have recorded 3X from the previous revenue back in the Philippines. Right now, even they are considering doing an IPO in Indonesia, and we have been helping them with that as well. We only invest in Venteny eventually, after we realize that their execution is good. That is why we decided, we have been helping them as well. We love the team, the founder, and the executions. Why don't we invest?
We pitch to all the VCs that we will please open your performing startups to us so we will be able to help them. We have proven that we can help them then probably we can also become an investor there. For us, it is a good strategy in terms of we will be able to analyze the executions and the industry as well, of course, while helping them, our team will work side by side with the founders and we will be able to understand the industry better.
Meanwhile, we also can analyze whether there are good executions, not only good fundraisers because that part has been taken care of because if they want to expand then, of course, they have enough capital. I think this is an angle where we have been thriving well. We have been helping other VCs become a track for them. If you are a VC looking to expand your portfolio to Indonesia, then we welcome you to connect to us, to contact us and we're more than happy to help for free. Also, for corporations, we have been helping Japanese trade organizations right now to help corporations from Japan to find good local partners in Indonesia. Because one of the corporations will struggle, they will try to connect to the biggest cooperation as possible to avoid problems with the BOD presentations because when you do presentations with your BOD, then just imagine if you are Japanese professionals, you want to present your BOD then, of course, you will try to bring as big corporation as possible, which is a challenge because the corporation is probably not without failure relationship, the quality is as big as your failure. that will become a problem. Eventually, you will become second options, not first options, and you will feel neglected, and then the business expansion will probably not be successful. What we do is analyze from the networks which business partner is best for you.
The one that will value the relationship and will fight to the death to make sure that you are successful. This business model has been quite successful. If you look at the product from Japan that has been very successful in Indonesia. Pocari Sweat, for example, is not connected to the biggest corporations, distributors in Indonesia, and UC 1000. They are doing well as well in Indonesia. But they connected to not the biggest corporations. It does not mean that you must go with the biggest Corporation possible and doesn't mean that we cannot connect you to the biggest cooperation possible in Indonesia. We can do that but probably not going to be the best business partners for you. For example, if we break the idea to the BOD or the high-level directors of those big corporations and the respondent was weak. We probably will not introduce them to you anymore. We will find people that get excited about your business opportunity. That is what we do. That’s why JETRO has been enjoying a good relationship with us. We have been helping them with the expansion of some more Japanese corporations in Indonesia.
Would you share if you have upcoming events or plans exploring the Philippine startup scene? And would you mind sharing it with us?
Yes, I am very interested in the Philippines tech landscape as well investment landscape, because I got the information from Jun. We are investors in Venteny. The Philippine base, and then they did well, they have been doing well in Indonesia. And eventually, they plan to do an IPO in Indonesia probably in 2022. Of course, there will be many, many gems, probably hidden gems in the Philippines. your startups that are ready for expansion looking for Indonesia for expansions, please reach out to us. If you are probably interested in the investment landscape of Indonesia, or probably just corporations looking to expand your business to Indonesia, you can reach out to us as well. That is what I want to do.
I am looking forward to supporting TechShake better, I'm very happy to have the opportunity, very honored as well. I am looking forward to supporting you guys to make sure that we, as a region, can be I think as the best region for tech investment in the world in 2022, maybe probably not 2021, or we will be 2022.
Would you give up three key traits of startups that you are looking for?
One, they must be a good fundraiser. That is the area where we will have difficulty helping the founders if they are not a good fundraiser by themselves. Then number two, I'm looking for as a startup the execution level. coming from traditional companies that I pay attention to the way that they spend money. not only getting the growth but how they spend the money to get the growth. Does not necessarily mean that you must be profitable, because I understand that you sacrifice current profit and revenue for growth and future growth as well. But you can be responsible while being there. It is critical as well. Then number three, I think is the dynamics of the team. You cannot be a good founder for everything by yourself.
Basically, you need to have support from your team. We are looking at the team. I think the breadth of the team, whether they have a strong team to support with the future growth, your future play. Maybe you currently play, you are good but how about the future play. Because you must continue to grow. maybe from 100 million companies to 300 million to become pre-unicorn and become a unicorn company. That is how we project. We usually will project for two to three years more to see whether they can execute with what they have. Or if not, then what is the plan to incorporate new talents into the team.
What is your outlook on the startup ecosystem in 2021?
I think that Southeast Asia as one region is going to be the prime region for the world to come here, foreign investors will flock in soon. If you are a corporation, I will suggest that if you want to do digital innovation, you must do it this year, because probably next year, most of the big corporations from overseas will come here and then look to collaborate with local startups to start the expansion strategy. Perhaps, there will be not enough room for the leading startups to help you. Because the problem in Southeast Asia is the number of startups, not that. The number of startups is even less.
Right now, we are enjoying the time when there are not many competitions from big corporations coming here to look to collaborate with the local startups. But that will change. Why? Because if you look at the stock market situations, you can see that the tech IPOs have been very successful, they are flush with cash, they are looking for the next strategy as well. Like what I mentioned at the beginning that so is each year, obviously in terms of so they will come here, they will start a collaboration, they probably will expand using SPAC as well for IPO purposes, or they will do strategy acquisitions. When they do that, then if you are a local corporation, and you haven't done anything until next year, you will miss out on the opportunity, at least to strengthen your company positions. As if you are a corporation owner, I will suggest for this year, start your digital innovations as soon as possible, looking for collaborations with startups that can help with the maybe expansion around, getting additional revenue, or maybe to give you the competitive edge from your competitors.
If you have difficulty doing that, because you are relying on an internal team, then you can reach out to maybe TechShake to get maybe advice or maybe reach out to us as well to get advice. And if you are a startup, then it is a matter of being the leaders of your ecosystems. If you can become one of the leaders in the ecosystems, I believe 2022 will be the time where so many people are chasing you. This is an exciting time for us being in Southeast Asia. We should be very grateful. And we'll have to take this good opportunity to our advantage. Because I believe that this kind of opportunity would not have happened twice probably in our lifetime. make good use of this because 2021 is going to be the foundation year, 2022 is going to be the boom year for the tech investment landscape in Asia, 2022, 2023, 2024, or 2025 maybe. From there, then you must reevaluate, if it becomes super-hot, then probably there'll be an adjustment year that is normal as well. On adjustment year, people will think negatively [about] what adjustment year so but at least sometimes adjustment year is needed. If it is becoming too hot, then probably one year, adjustment year, we'll be good for the region.
I think that we have [incorporated the] cost estimate of the life of pandemic. When we do our projections, our analysis, our spending, our fundraising, we have counted COVID in everything already. Meaning that this is not something that is going to be a bit scary for us unless something else happens, which I do not predict. I mean, like a zombie apocalypse, who knows? My projection is based on what I perceive still happening right now. Of course, if there is a zombie apocalypse, then all hell breaks loose, right?
To learn more about IndoGen Capital, you may visit their website here.