In search of unicorns
Indonesia-based startup accelerator Kejora Ventures believes Asean now offers the size and scale to produce some hugely successful tech-based businesses. By Erich Parpart
published : 17 Apr 2017 at 13:30
newspaper section: Asia focus
Indonesia-based Kejora Ventures, one of the most active startup accelerators and investors in Southeast Asia, is looking to unite the region's tech entrepreneurs to increase their competitiveness and find those rare unicorns that could be lurking.
With a presence in Jakarta, Singapore, Makati City and Bangkok, Kejora last month announced that it had raised about one-third of the US$80-million target in the first round of its second fund, Kejora Star Capital II Fund. It is also looking to expand to Malaysia.
If the target is met by year-end, it will be among the largest sums raised by an Indonesian venture-capital (VC) firm.
"Asean's combined population of more than 600 million people means that there is a big enough platform for startups in the region to flourish and compete with the rest the world and Kejora Ventures sees this opportunity," Chatchaval Jiaravanon, a member of an advisory committee at Kejora Ventures and a director at Thailand-based True Corporation, told investors at the launch of Kejora's Bangkok office last month.
"Startups in the region can use Kejora's network to expand within Asean and this will allow them to grow faster and easier. I am a firm believer that whoever can hold onto the beachheads first will eventually be the winner in the end."
Founded in 2014, Kejora has made 29 investments to date. The Kejora Star Capital II Fund has already invested in six startups including C88Fintech Group, Qareer Group Asia, Etobee, Investree, Pawoon and MoneyTable. The second fund is still looking to invest between $3 million and $5 million per transaction in Thailand, the Philippines, Malaysia, Singapore and Indonesia.
In addition to venture funding and go-to-market support, Kejora promotes knowledge sharing and collaboration, while helping the businesses it supports gain access to mentors and influential figures in their industries. It provides training, workshops and accelerator programmes and other services as well.
Sebastian Togelang, Kejora's founding partner, said that more than 90% of its investments were "still performing very well."
The second fund has already drawn strategic investors such as Barito Pacific Group (Indonesia's leading supplier of petrochemical products), Thailand's Charoen Pokphand conglomerate, and Hubert Burda Media (a German global media company), according to the company.
VCs are an essential source for money for startups as few other investors are willing to accept the high risk commonly associated with new ventures, especially those based on technology.
"Our business motto is very simple," said Mr Togelang. "We look at what is successful in other countries including Europe, China, the US and other parts of the world -- and by successful we mean really solid revenue and sustainable companies -- and try to apply their business model here because sooner or later other countries will buy similar stuff in this region.
"We are very focused on bringing these successful business models to startups in Southeast Asia and helping them expand as fast as possible, because some digital businesses are winner-takes-all, where the number one player can probably take almost 70% of the market, so speed and timing are everything in a digital venture."
Mr Togelang, formerly an e-payment specialist with Deutsche Bank, said Asean's growth rate was his main reason for deciding to create a tech startup accelerator in Southeast Asia.
"Everybody is talking about India because it is a huge market of 1.2 billion but with a GDP of $1.8 trillion while Asean, with only half that population, has a GDP of $2.5 trillion so it is not only about population," he told Asia Focus.
"Population is definitely a key aspect for tech companies that want to grow, but at the same time people have to also be ready to buy things. They need to have the money in their pockets to buy things online, and Southeast Asia is on the right track."
He believes that Asean is now in the same phase of digital evolution that China experienced around a decade ago.
"China started around 2005-06 and really began to explode after that, and this is where Asean is right now. There is certainly similarity between where the region is and when unicorns started to pop up in China and we see the same thing happening now in Southeast Asia. The unicorns are coming," he said, referring to startups that achieve a valuation of US$1 billion or more.
Kejora's strategy in Southeast Asia, where there are many different cultures and languages, is to partner and localise, while looking to invest in companies that are not "fresh bets", Mr Togelang said.
"A lot of startups in Southeast Asia are led by young people and unfortunately, only one out of hundreds maybe, sometimes thousands, of these guys are really successful and become a really sizeable company," he said.
"The reality is most of them will fail and we decided that we do not want to invest too much in these guys because it means that we will be paying for their education. We would rather invest in experience and people that have been there with knowledge of the industry that they are doing or trying to do."
He also looks for passion in founders because if "you do not think and live with your startup every day or even die for it, you will not make it because you will stop at every challenge and there are thousands of them".
One example of the company that the Kejora has been investing in is Compare88 (C88), which owns and operates the financial services e-commerce platforms CekAja in Indonesia and eCompareMo in the Philippines.
C88, based in Singapore, also has attracted funding from Manila-based Kickstart Ventures, UK-based Socrates Capital, and Telstra Ventures of Australia. It recently acquired Otobro, an Indonesia-based site that helps people decide which car or motorcycle to buy, in addition to Manila-based ThinkTank Software.
Mr Togelang underlined how crucial speed and timing can be by pointing to what happened in the United States, where the digital revolution started in 1999. By 2010 the market was saturated while China started in 2005 and six years later the market was saturated.
"The game has now sped up and investors must react while it is still cheap," he said. "We do not want to just invest but we want startups to grow faster. That is why we have invested in a huge ecosystem to help them faster, and at the same time we have tried to create a winning formula for startups."
Given that the ventures funded by Kejora collectively represent a network of 100 million online users, once Kejora invests in a startup, that venture will immediately be connected to a web of other clients and companies that will help it grow three times faster than its competitors.
He said that the VC also recognises that it is important to give back to the investors in its funds and it does this by partnering them with startups that could help them expand their businesses.
"We are offering a win-win and ... we want to build more synergy and to be more active in corporate innovation," said Mr Togelang.
"Meanwhile, more competition is coming and we cannot just walk step-by-step because that is too slow. This year is going to be an important age of collaboration since there are big players coming to this region from China, Japan, the EU and the US and we will not survive if we are not united."
The good news is that Kejora does not need to convince investors and startups to have a regional perspective because small players realise they need a pan-Asean presence or they will be crushed by the weight of the big players who are just going to "sit on them with their cash".
"We are discussing a lot with governments and I think we have good support from them, but at the same time we are trying to move as fast as possible with what the governments want to do, and they do know that it is about collaboration and expansion," said Mr Togelang. "We started when everyone was asking, 'What are these guys doing?' but now they realise and want to support them."