EV Founders Gathering 2022
East Ventures


24 August, 2022


How founders should navigate winter situation in sunny Indonesia

The technology sector faces global economic challenges due to the geopolitical situation and fears of an impending recession in the United States (US). This period and the media boom have pulled some digital startups down on corporate valuation and business operations and have implications for layoffs and fundraising struggles.

How should startup founders navigate this crisis? How did East Ventures position itself in this ‘winter’ situation in sunny Indonesia?

East Ventures shared our thoughts with all startup founders in our ecosystem during the latest Founders Gathering on 19 August 2022 in Jakarta, Indonesia. We also invited several capital market experts to add more perspectives on the macroeconomic and public markets. 

As the earliest Venture Capital in Indonesia, we see this situation as part of the investment cycle. Fortunately, we have an immense ecosystem with more than 250 portfolios and over 450 founders. Thus, every founder can leverage their strength to help each other during tough times. 

To all startup founders, we have to focus on the core business, increase the unit economics, and execute well, rather than be distracted by minor things, or extend the services to other countries. Specifically, early-stage startup founders should focus on finding a product market fit and be able to articulate how you get a product market fit and how you will scale it before thinking about the balance between user growth and profitability.

As an illustration, a good swimmer does not care about the weather, whether it is raining, sunny, or winter. Seasons do not take away their capabilities but they adapt. The same goes for the funding environment. If you are a good founder, whether it is winter or summer, you do not have to worry. 

As an investor, we will never slow down the investment, especially at the early stage, although the public market is not doing well or valuation has been adjusted. We only slow down if there are no good founders.  Even though we have been in the market for 13 years, there are still a lot of opportunities in Indonesia. Therefore, we are very bullish and fortunate that we were able to close our fund recently.

Capital market’s perspective of the tech scene

From a capital market perspective, the Indonesian capital market is considered one of the best-performing markets globally (YTD), thanks to Indonesia’s strong macroeconomic indicators and high commodity prices. However, perspectives and dynamics among equity investors have changed considerably regarding the value of technology companies, which is reflected in the volatility of technology companies’ share prices in global markets.

Adrian Joezer, Head of Equity Research at Mandiri Sekuritas, said public market investors are becoming more detailed in analyzing the tech companies. “The key questions have shifted, regarding the profitability path, the EBITDA margin of the business, and types of valuation matrix in analyzing the technology companies,” said Adrian.

In addition, Agung Prabowo, President Director of BNI Sekuritas, said that investors always look for opportunities to buy in every crisis. A common thing investors look for is excellent assets, namely companies that are well managed, well operated, and highly focused. Amid the market fear of recession, he underlined that the founders should be able to run their businesses super efficiently as the capital is scarce, despite he believes the market will rebound and liquidity still exists. 

During the Founders Gathering, Ranju Parambi, Head of Global Banking Indonesia at UBS, raised a question to Willson, who he referred to as the father of the venture capital industry in Indonesia. He inquired about the flow of capital in Indonesia as there is a gap between our potential and our current standing in the global tech market. 

From our perspective, time is the important aspect to help Indonesia make a leapfrog to be a digital giant tech ecosystem, whose capability can be on par with China and India.   

Currently, we think that Indonesia has evolved to be a larger digital ecosystem in Southeast Asia for more than a decade. It is shown that massive growth in internet penetration and better-educated workers have made it possible for companies to achieve US$ 1 million of monthly revenue within a year, which used to take about 4-5 years. 

We strongly believe that this amount of time can be compressed even further. Indonesia has almost 200 million internet users or about 70-80% internet penetration and improving digital infrastructure, which contributes to a well-educated market and consequently, lower customer acquisition costs and bigger customer lifetime value. There are also many founders trying to solve the problem of speed and efficiency. These factors can accelerate Indonesia’s digital giant ecosystem to be a leading player in the technology scene.

Lessons learned from portfolio founders

Before this unprecedented situation, some startup founders have already experienced and weathered crises of different sorts. They shared their lessons on how they built their businesses and handled the dynamic situation along their journey. Here are the key takeaways from our founders and esteemed guests.