Blog

How We Spotted the Talents behind Two Unicorns

by Preqin

  • 01 Oct 2019
  • PE
  • VC

By Willson Cuaca, Co-Founder and Managing Partner, East Ventures

Founders who thrive have what Indonesia-based venture capital firm East Ventures calls “paradoxical personality traits.”

Indonesia is one of the hottest markets for venture capital (VC) today. But a decade ago, when East Ventures was founded, the archipelago was still new territory for VCs. As a pioneering investor in early-stage tech start-ups, we believed there was great potential here, but few could see it or understand what we were trying to do. We had to prove to the world that Indonesia had an untapped technology sector waiting to be unleashed.

Over the years, our investment hypothesis has evolved to take advantage of changes in Indonesia’s fast-growing economy. But our firm’s focus on taking a founder-centric approach to every single deal remains unchanged. With every check I write, I need to see more than a roadmap to scalability and profitability. I need to see that the founder pitching us has what I call “paradoxical personality traits.”

By this I mean somebody with vision, with ideas you might think of as pie in the sky, yet they are also down to earth and grounded in reality. They are strong-minded, yet they are willing to accept criticism; they must be the kind of person we can mentor. They are firm and decisive, yet they are also flexible and can pivot if circumstances change. And they must be generalists as well as specialists. They have to know a bit about everything that’s critical to their business – accounting, finance, marketing, fundraising – but they also have a specialist’s in-depth understanding of their product, their sector.

This kind of person is difficult to find. You must be able to spot them. Together with the right investment hypothesis, a founder-centric approach is the key to success. That’s been our experience ever since we first began investing in Indonesia’s tech sector.

Undiscovered Potential in Indonesian Tech
With a population of over 261 million, Indonesia has one of the largest homogenized tech markets in the world after China, India and the US. Back in 2009, Indonesia’s internet penetration clocked in at just 13% of the population. But its use of digital products and services was relatively high.

Since the Indonesian language, like English, uses the Latin alphabet, it was easy for Indonesians to adopt Western tech products and join its social networking sites. Locals were avid users of Facebook and Twitter, and many were accessing the web for the first time via Blackberry devices and mobile phones. At East Ventures, we saw a market replete with greenfield opportunities for internet entrepreneurs. My partners and I set off hunting for start-ups in the Indonesian capital, Jakarta, not knowing what we would find.

Vision and Pragmatism
In early 2010 we met William Tanuwijaya, founder of Tokopedia, then a newly created consumer-to-consumer e-marketplace (‘toko’ means ‘shop’ in Indonesian). William had a bold vision. He wanted to build a tech platform that would facilitate commerce across Indonesia’s 17,000 islands.

At the same time, he was realistic about the challenges. He understood that Indonesia had – and still has – one of the largest unbanked populations in the world. He recognized that there were colossal obstacles to overcome, from logistics and payments to infrastructure. William has that rare mix of paradoxical personality traits I see as the foundation of success. And his vision fit well with our investment hypothesis at the time. We believed that to accelerate the growth of Indonesia’s tech start-up industry, we needed to start with e-commerce. So within 48 hours of meeting William, we wrote him a check. It was East Ventures’ first investment.

Self-Assurance and Humility
I’ll share another example. In 2012 we met Ferry Unardi, now known as the founder of online travel agency Traveloka. Back then he was an MBA candidate at Harvard Business School. Ferry told us of his plan to drop out of HBS, come back to Indonesia, and build the business that would become Traveloka.

In Ferry, I saw the paradoxical personality traits I was looking for. He was confident, he knew what he wanted. At the same time, he showed a lot of self-awareness and humility. He was the kind of person who understood what his strengths and weaknesses were, and he knew that he could learn from others. East Ventures went in fast on Traveloka’s seed round.

Fast-forward to today: Tokopedia and Traveloka are two of Indonesia’s four unicorns, valued at several billion US dollars each and serving tens of millions of users every month. The success of these two companies has helped to put Indonesia’s tech start-up sector on the international map.

Empowering the Tech Entrepreneurs of Tomorrow
Having started out in e-commerce with investments in Tokopedia and Traveloka, in 2013 we shifted our attention to Software-as-a-Service to help power SMEs across the nation. In 2014, we moved into online-to-offline (O2O) commerce. From there, we have gone on to incorporate key verticals such as education, agriculture, healthcare, direct-to-consumer business models, and more.

We’re excited about up-and-coming potential unicorns like Ruangguru, an edutech business with over 10 million students using its platform; IDN Media, a digital media company focused on millennials and Generation Z with over 50 million unique readers per month; and Sociolla, a platform for beauty products that includes a digital media portal and leverages online and offline integration.

We have also completed several exits that reflect the global appetite for emerging market ventures. Our portfolio company Disdus, a daily deals site, was acquired by Groupon in 2011 as part of the US business’s expansion into Southeast Asia. Disdus was our first exit, and a great example of the potential in Indonesia’s tech start-up sector.

For us, venture capital investing is not just a financial activity. We see it is a tool for empowering tech entrepreneurs. We want to carry on backing founders who have the potential to transform the lives of millions of people, both in Indonesia and abroad.

East Ventures
East Ventures is one of the most prolific early-stage technology start-up investors in the world and one of Southeast Asia’s pioneering venture capital firms. Since its inception, the firm has backed hundreds of businesses in Indonesia, Singapore, Japan, Malaysia, Thailand and more.

East Ventures has raised a total of four early-stage funds for start-ups in Southeast Asia, and recently closed a $200mn fund for growth-stage companies (EV Growth). On average, 70% of its seed-stage start-ups go on to raise subsequent funding rounds. The firm has seen more than 20 exits and attracted $3.5bn in follow-on funding. Its most prominent O2O portfolio company, Kudo, was acquired by Southeast Asia’s ride-hailing giant Grab in a deal reportedly worth more than $100mn.

This blog is part of the Preqin Markets in Focus: Private Equity & Venture Capital Southeast Asia report. To access the report, please click here.

Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights