We talk to Singapore-based East Ventures about the evolution of their Southeast Asian investment focus and the Indonesian start-up opportunity.
1. How have your funds evolved over the past 10 years (i.e. fund size, industry focus)?
When we started East Ventures 10 years ago, we had a single-digit fund. Today, our latest fund size is $75mn. We’ve focused on Indonesia since our early days, meaning East Ventures’ hypothesis changes in sync with evolutions in the archipelago’s ecosystem.
We went heavily into e-commerce from 2009 through to 2013, and made our first investment in online marketplace Tokopedia in early 2010. In 2014, we started focusing on SaaS solutions to help power small and medium-sized business (SMEs) throughout the nation. We then ventured into online-to-offline (O2O) tech and fintech in 2015, along with edutech and e-commerce services that same year. In 2019, we are moving quickly towards direct-to-consumer business models.
While we have expanded into various industries over the past decade, our founder-centric approach has remained the same. We look for a certain combination of “paradoxical personality traits” to divine potential success. These qualities include a mixture of vision and realism, confidence and humility: a high-flyer who can also be mentored.
The value of our approach has been demonstrated by the success of unicorns including online travel aggregator Traveloka and Tokopedia; we were seed investors in these companies and have forged strong partnerships and friendships with the founders.
2. East Ventures previously focused on early-stage vehicles (East Ventures funds), but you have recently broadened your investment scope to include the expansion/late-stage (EV Growth) strategy. What was your motivation?
Simply put, our mission is to be an entrepreneurship platform for the tech industry at large in Southeast Asia. This means we are continuously expanding our investment thesis, pushing it to new heights to meet the needs of the industry. That said, early-stage investments make up East Ventures’ DNA –we believe our strength comes from our ability to help founders go from 0 to 1.
3. What is the advantage of Indonesia as a start-up destination?
With a population of over 261 million, Indonesia is the largest homogenous consumer market in Southeast Asia. This allows start-ups the chance to scale to a meaningful size domestically before venturing abroad. Indonesia is a good training ground for start-ups, as they must navigate the complex social, political and population issues at play to refine their business models. Tackling the worst-case scenarios here means start-ups undergo a smoother transition when they branch out to foreign, more established markets.
4. What opportunities are available for Southeast Asia’s venture capital ecosystem?
The trends in Southeast Asia typically follow what happens in China. For example, mobile phones were the driver behind the previous wave and growth has only recently stabilized there. In Southeast Asia the ripple effects of this mobile wave are just beginning, and the sector is already booming.
We see opportunities in the next wave of direct-to-consumer companies, and we expect the opportunity to grow yet further through an organic environment among private investors. We look forward to exciting times ahead as the adoption of new trends picks up the pace.
East Ventures explains how they identified “paradoxical personality traits” in the founders of two Indonesian tech unicorns in our latest report, Preqin Markets in Focus: Private Equity & Venture Capital in Southeast Asia.