‘Indonesia is entering its second phase of digitalization’: Willson Cuaca

The global economic recession continues to threaten amidst high interest rates. This became one of the factors affecting venture capital firms to disburse their investments in 2023.

Taking our long-standing investment thesis into consideration, the fundamentals behind East Ventures’ investments are two-pronged: Seed fund, which focuses on newborn startup companies, and Growth fund, which focuses on later-stage startups that have generated revenue.

“When we invest in early-stage startups, we invest in the people. Seed funds do not parallel the economic situation – they highly depend on strong, quality founders,” describes Willson Cuaca, Co-Founder and Managing Partner at East Ventures.

Meanwhile, a more prudent and careful approach needs to be taken when disbursing growth funds, as they are highly reliant on the current market and economic conditions – they affect business models, demands, and even future subsequent fundings.

In the previous period of 2021-2022, many startups try to ‘bite off more than they can chew’ – they try to execute something beyond their core competencies. Referring to Willson’s Coconut Framework, startups are advised to focus on the core capabilities of their businesses in the coming years.

2022 has been a challenging year for the tech industry. Despite that, we have managed to sail through the stormy seas of crises with US$ 211.59 million disbursed to our Seed and Growth portfolio companies. The investments were streamed into several sectors, such as E-commerce, Direct to Consumer (DTC) and Retail, Fintech, and more.

Looking at what’s ahead, Indonesia is uniquely positioned to experience digitalization, especially because of its vast market potential. It creates 3 ‘market paradoxes’ happening in Indonesia.

First, Indonesia’s valuation in the global market does decrease. However, value creation has happened, and it is staying. Second, there is a capital outflow due to the spiking interest rate, global economic condition, denominator effect, and other factors. Despite that, with mass recruitment and talent development, the capability of local tech talents stays. Last but not least, even though Indonesia’s market demand has decreased and its profit margin has been compressed, Indonesia’s market size has taken a bigger portion of the pie.

Amidst such a negative outlook, we can dig deeper and see the light at the end of the tunnel. These paradoxes allow us to realize the positive aspects during a bad economic condition and hence, become optimistic about what’s ahead for Indonesia.

Indonesia is entering the second phase of startup evolution after a decade of investing in the consumer sector. While it is crucial to invest in the consumer side as they enjoy the impact of digitalization, today, over 200 million of the population are already digitally literate.

“When consumers are already educated, they will bring this into their workplaces and companies. So, this second phase of digitalization will happen in corporations, enterprises, B2Bs, cloud services, and more. The first phase is now done. 200 million people are using the internet, but are millions of Indonesian companies using the internet? No, not yet,” said Willson.

Watch the interview below to get more insights from Willson Cuaca.

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This article is a summary of three CNBC Indonesia articles. Read the original articles at CNBC Indonesia [1], [2], and [3]