The Art of Investing in SEA’s Fastest-Growing Internet Economy
1 November 2019
Founded in 2009, East Ventures is an early-stage fund that has invested in over 160 startups, including in unicorns like Tokopedia and Traveloka. It is one of the world’s top-performing venture capitals based on Preqin’s latest analysis. Recently, it has raised US$75 million for its newest fund, backed by prominent investors including Temasek.
In the early days, East Ventures initially focused on the entire Southeast Asia region. Recently, Indonesia has become the main focus for the company. According to Willson Cuaca, Managing Partner of East Ventures, the decision was made because Indonesia is the largest economy in Southeast Asia.
Based on Temasek’s recent E-Conomy report, Indonesia’s internet economy is on track to reach US$130 billion by 2025. The Internet population in non-metro regions is expected to grow 4x in the same time frame, creating the opportunity for startups that are willing to tap on the sector.
Willson Cuaca explained that Indonesia is a really inefficient country. The transportation system could benefit from major improvements and you have to be alert with your surroundings all the time. The experience falls under the worst-case scenario. However, because of this fragmentation and friction, opportunities arose.
“When you are living in this kind of environment, it gives you the creativity to solve problems. When you see a lot of problems, chaotic state of a country, I think that’s where all the opportunity is,” Willson said.
On the other hand, the entrepreneurial spirit of the Indonesian people to take those opportunities is pretty high. That’s why there are around 60 million Micro, Small, and Medium Enterprises (MSMEs) in Indonesia alone.
Venture capital is a people business
Willson shared that East Ventures is started as a problem solver, help the young entrepreneur from “zero” to “one”. One of the prominent examples is the birth of Warung Pintar.
“In Indonesia, there are a lot of mom-and-pop shops. One or two individuals started a business by the street, and there is no way for them to have access to technology. That’s why we invested in Warung Pintar,” he explained.
When talking about how he picked quality founders, Willson stated that East Ventures is not a tech-based business, but a people-based business.
“Everybody can write a business plan. However, the ability to execute is the key that we have to find out the first time we met. There is a lot of gut feeling, but at the same time, you can sense it. Investing is indeed an art, it’s not really a science.”
Read Also: East Ventures’ 10 Years Investing Journey
Focus is the key
East Ventures always tells its founders to win their respective market first, then they can expand. Having a laser-focused mindset is very important in running a digital startup.
“If you try to expand before winning your market, you will have a lot of problems and frictions. When you want to execute something and you hit into one country that is so big, it’s easier for you to do things,” he said.
Another thing that becomes the focus of East Ventures is making sure it can create a positive impact and has a good framework in everything that it does. The impact should touch everyone from A-Class, B-Class, all the way to the bottom of the pyramid. The best example is how unicorn startups like Tokopedia and Traveloka impacted the lives of millions of people in the Southeast Asia.
Based on Temasek’s E-Conomy 2019 report, the internet economy in Indonesia has reached US$40 billion this year. Based on East Ventures’ internal data, its portfolios have contributed to 45% of Indonesia’s internet economy and have empowered 8.5 million MSMEs in the country.