JAKARTA – Southeast Asia’s most active early-stage tech investment firm East Ventures announced that it has reached the first close on a new venture fund for innovative startups in the region. The investment vehicle is East Ventures’ 8th fund to date, and the firm aims to raise no more than US$88 million from limited partners.
The new seed fund is designed for digital companies emerging in the post-lockdown aftermath of the Covid-19 pandemic.
As the world has slowed down in the time of Covid-19, businesses in the region continue to struggle and lives have been changed forever. Local entrepreneurs are forced to rethink how they operate, understand what is truly essential, and learn how to live with less physical contact. As a result, many are now accelerating to the point where they’re leap-frogging into digital transformation and bypassing years of the usual adoption process.
East Ventures’ 8th fund is attracting global and regional institutional investors.
“We are excited to continue our partnership with East Ventures. The firm is well-positioned in Southeast Asia to guide entrepreneurs to achieve their full potential,” said Tow Heng Tan, CEO of Pavilion Capital.
Sunil Mishra, Partner of Adams Street Partners added, “Adams Street is pleased to be committing to the new East Ventures fund. We are impressed with the track record of the team, their local market reputation, ability to work with young founders to guide them and hope that they will continue to generate strong returns.”
Crisis brings clarity
East Ventures’ management team believes new global conditions have provided unprecedented clarity for startup decision-makers.
“The pandemic has created a chance for a new breed of entrepreneurs to think about new problems and how to solve them in efficient ways via technology,” says East Ventures’ Managing Partner Willson Cuaca. “We remain optimistic about the future of Southeast Asia’s digital economy, and we’re particularly bullish on the Indonesian market. We feel the current situation proves our core hypothesis that great founders will find a way to make their companies thrive, even in times of crisis. Great people withstand the test of time.”
Cuaca adds that East Ventures’ eighth fund will remain sector agnostic, as exceptional founders exist across the board, in a multitude of industries.
According to East Ventures, the team intentionally seeks to keep its 8th fund under US$100 million, as this makes it easier to deploy money into early-stage companies. In turn, the fund is designed to help East Ventures more quickly achieve its key objective of being the best asset class for its limited partners.
East Ventures’ management team believes the main objective in early-stage investing is to find product-market fit as quickly as possible. As such, it makes a point of working with fledgling founders to navigate the market and neutralize biases.
By having full teams in multiple cities and understanding both Singapore and Indonesia deeply, East Ventures is able to bridge geographic and cultural biases. This is useful for Singapore-based startups looking to expand to Indonesia. It’s also useful for Indonesia-based startups that need to use global practices to become locally dominant.
The same principle can also extend beyond Southeast Asia. Over the past 11 years, East Ventures has formed a knowledge-base and playbook for tech investment success, born from one of the most advanced emerging markets for digital innovation.
East Ventures has developed a concise theory of Indonesia having a “flywheel effect.” The firm works closely with all stakeholders — local industry players, family offices, entrepreneurs, early-stage startups, and growth companies — to build a frictionless flywheel. It has formed a complete startup life cycle from investing at the early-stage, finding product-market fit, creating value and scaling, and finally exits and re-investing.
“We realized that the majority of our CEOs have never been in crisis before,” explains Cuaca. “Because of this, we are doing health checks with our portfolio companies. Instead of immediately advising on tactical business plans, we first try to help the founder understand the crisis and how severely it is impacting their company. Only after founders understand these things can they begin to cultivate their own strategy and implement it tactically. In this respect, we’re trying to convey the importance of wartime leadership.”
The bigger the market, the bigger the flywheel
Representing approximately 40% of the region’s economy, Indonesia’s internet economy has progressed rapidly — starting as a humble e-commerce-based game and blooming into an everyday staple that touches all industries.
Regionally, venture capital has become a relatively new asset class for investors. East Ventures has established an outstanding track record as one of the first movers. The firm has grown its portfolio value significantly and assisted in the successful exits of multiple companies.
Some of the firm’s deals have reached 1,000x in terms of Multiple on Invested Capital (MOIC). East Ventures claims a Distributions to Paid-in Capital (DPI) rate as high as 7x, with notable exits including Grab’s acquisition of Kudo in 2017, as well as Gojek’s more recent purchases of Loket and Moka POS. Two out of four East Ventures funds have returned beyond the amount of capital invested by limited partners.