Edward Chamdani to Unlock Indonesia's Ultimate Potential by Encouraging Upstream Investment

this article is a part of DailySocial's Mastermind Series, featuring innovators and leaders in Indonesia's tech industry sharing their stories and point of view.

Edward Ismawan Chamdani started his journey in the tech industry through the best-known computer company in the world. For years, he had his shared interest in the financial sector and finally started his own software company. With a decade-long experience in the industry and one of the perks of being an analyst, he builds a fine network within the startup and investment scene.

In partnership with Andi S. Boediman, Ideosource was built from brick to brick. Now it is expanding beyond just a VC. His other initiative, Gayo Capital, partnered with Ishara Yusdian and Jefri Sirait focuses on revenue-generating companies whose businesses organically create impact to the world. Recently, he also started a venture builder named Starcamp Asia aiming to bridge the founder's gap in the country.

Edward has a personal purpose to unlock the ultimate potential of Indonesia sustainably from various aspects especially in leveraging human capital surplus and abundant natural resources via technology disruption and implementation. In order to achieve this mission, he encourages people to be more invested in the core issues, it is upstream investment.

Indonesia is the tech paradise of Asia, where technologically enabled startups can find fertile soil to grow and deliver impactful contributions to the developing nation's problems. The President himself has announced the Nation's Vision To be the Digital Energy of ASIA. An achievable vision as Indonesia has become the biggest economy in Southeast Asia, 8th biggest in the world, and in the middle of a massive digital transformation changing its young population from a nation of workers into digital-savvy talent taking over the world, one unicorn at a time.

Starting with mechanical engineering, grasping some financial background, and accidentally creating a VC, Edward has been learning during the process. He is currently serving as Managing Partner at Ideosource Venture Capital, Gayo Capitaland StarCamp  - with a mission to incubate, invest and accelerate with a "Purpose".

DailySocial is glad to have such an insightful and passionate discussion of Edward's biggest dream to unlock Indonesia's ultimate potential. Below is an excerpt of the conversation.

What do you think of Indonesia's investment ecosystem nowadays?

It was early 2011 when we first started Ideosource, the startup quality was quite green. There are limited sources for mentors, and events, let alone VCs, we're all still learning. Every time we find startups with a legitimate business model, it's still not clear how the investment process should be carried out. Years passed by and we finally saw a sweet spot around 2014-2015, turning out our investment was fruitful.

Over time, Indonesia's startup ecosystem is getting mature and one by one reaching unicorn status. Rudiantara, who at that time was still leading Indonesia's Communication and Informatics Ministry, initiated the leaders of these tech giants to meet with global investors, and the progress is superb. Indonesia is getting broadened and better exposed in the global tech scene. In 2018, was held the first Nexticorn (Next Indonesian Unicorn) with a vision to step up the game for Indonesia's startup scene.

Observing the startup scene in the last few months regarding the global meltdown, it is still very promising. In fact, this is the right time for them to start fundraising due to the projection of investment decline in the next 1-2 years, especially for heavily impacted VCs with big-level funding. However, in general, it will not affect the whole ecosystem, we still have a great potential growth story. Our market share remains huge in several sectors, including commerce, fintech, and edtech.

The most interesting is in healthtech. Previously, we had substantial issues with online prescriptions and Electronic Medical Records. Under the supervision of a tech-literate figure, there are more policies that support tech accessibility and adoption. The presence of the Peduli Protect app, telemedicine service, and collaboration between governments and healthtech companies have proven effective during this pandemic.

In addition, there are many other sectors yet to be optimized, including forwarding, logistics, cross border trading. In terms of natural resources from agriculture to human capital. There are huge potential lies in B2B while people are focusing on B2C.

The thing is, most investments are engaged in the downstream sectors instead of the upstream side due to market availability and accessibility. Upstream investments may take extra effort as it is aimed at the root causes that are often identified by determining the most immediate and direct causes and working backwards from there. In many cases, upstream action addresses social, economic and environmental conditions.

Ideosource grasps the experience of investing in the upstream sector with eFishery. It is resulting in the shifting of the whole value chain, from the unbankable to the bankable fish farmers through thoroughly distributed information. This is the kind of ecosystem that will drive the whole sector. As it extends the business and continues to the processing level, it will lead to export and import and ends up in the country's exchange.

It is not about the downstream sector that does not have an impact, it is only limited to the additional income for the players. When we focus on the producers, we can use local resources for the country's economic resilience. I think VCs should consider this investment angle.

You have a background in mechanical engineering, strong experience in the financing industry and currently serve as Managing Partner in two giant VCs. Can you share a bit of the transition?

Previously, I've been in a sales organization that handles industrial product distributors. Then, I moved to IBM and really got into the tech stuff. In my last year, I've been handling the financial sector (around ``11 banking institutions), combining IBM's solutions to advise banking customers.

In 2002, I co-founded a software company, and my evolution as a founder continued until I decided to exit in 2007. However, I was still around as a Director for several years up to 2010. After that, I'm not immediately started a new company. What I learned as I started my own company, the hardest part was to align the vision, mission, and chemistry with partners. It's bad enough when you meet the wrong partner.

My next journey is to become a business consultant, and the story gets better when I work with Plasa.com. That is where I built a work-related relationship with Andi S. Boediman, the other Managing Partner in Ideosource. It was late 2010 when I met a general partner of a big-enough Private Equity (PE), and he said then it would be the perfect timing to start a VC. We did our research around 4-5 months to finally debut with Ideosource. It was a simple analysis, in late 2010, 3g penetration was still around 30 million with the rapid growth of internet users. It was also the beginning of the e-commerce era.

Starting with mechanical engineering, grasping some financial background, and accidentally creating a VC, I'm learning during the process. The thing is, I learned that running a business, and generating cash flow with available funds for growth are completely different. A conventional business survives only with cash flow. Once I entered the VC scene, there were other perspectives. It is ok if you don't make a profitable business at the beginning, as long as you are analyzing a certain business model in a sector that you can be sure to become a dominant player.

This kind of perspective makes me see there are totally two different worlds. Many people find it difficult to understand that capital markets, venture investment, and startup theses, are totally different from conventional business. An interesting fact, the availability of funds will never be reduced. It is just a matter of who can convince people with loaded bags of money to invest.

What are your hypotheses on the portfolios?

In terms of analyzing, it is relatively similar. First, we need to look at the founder's quality, integrity, and so on. Sometimes, when the founder is approved, the funds are secured. Furthermore, we are to discuss the sector, business model, addressable market, and the target for several years. Also, is it attractive enough for the investors? Because liquidity can only work if the story is compelling for the next investors. We'll be reluctant if there's no story.

What is your biggest hardship during the business journey?

Hardships are inevitable. I previously mentioned the hardest part is finding the right partner. That is one of the reasons why I have several initiatives with different partners. Each of them has quite a distinct appetite, knowledge, and passion. Ideosource was a fruit of the seed that Andi Boediman and I planted a decade before. Our creativity doesn't stop there, Andi has his shared interest with Ideosource Entertainment, while I'm nurturing more impact-initiated startups with Gayo Capital.

Along the way, we found that investing in the upstream sector has its own challenges. The founder gap is clear. The quality of founders in the upstream and downstream sectors is quite big, especially outside of Java Island. Recently, we've launched our latest initiative named star camp to bridge founders with all kinds of information and tools to build qualities and step up their game. This is a marathon as we also develop the founders to deliver the vision and mission.

You have previously mentioned the founder gap, also investors should be more invested in the upstream sector, what's your take on this issue?

In terms of the founder gap, I think it is fine for startups with a focus on the core technology to be headquartered in Java. When the infrastructure is ready, they can deploy it outside the island. Therefore, if there are other cases like eFishery, startups outside Java could replicate the concept. They did not necessarily become a tech company but they could be a facilitator.

There are many in the agricultural sector, these are companies we tried to invest in. We'll create together a more scalable business model that allows them to expand outside of Java. This is the kind of upstream investment I was roaming about, for investors to invest in a certain technology to be licensed outside the island. An integrated value chain happens there.

The thing is, innovation in conglomeration takes 5 to 10 years, just like in the upstream sector. Not many startups are brave enough to enter this scene, only conglomerations with strong capital and a 10-year investment horizon. How can VCs have a conglomerate-like horizon and invest in such kinds of startups?

I have one terminology in Gayo Capital, a reverse conglomeration, inspired by the downstream sector portfolios in Ideosource's early time which currently has contributed a lot more. Why can't it be the upstream sector? If we're going to rely only on conglomeration, the innovation is limited although it has a large contribution to the GDP. Startups have potential as long as they focus on creating an ecosystem that is integrated with each powerful core business, therefore, creating a solid value chain.

Aside from the current position, you're also in charge of this year's Nexticorn highlighting the emerging sector. Can you elaborate on this matter?

Such names are emerging this year, including the Web3 and its definition is still fragmented. However, the underlying of this blockchain technology has tremendous evolution. People are learning about bitcoin, the NFT is rising, and more platforms are being developed to cater to this industry. The concept is aiming to be a decentralized autonomous organization. That's the ultimate destination.

In the crypto scene, we've seen people are still relying on the exchange. In the future, the role might become less needed as people have their own wallets and stuff. In the future, peer-to-peer will exist, and decentralized finance will happen. Disruption will be more extensive than ever, including in VCs.

VCs and investors are saying to be more careful and selective in where they place their money. What is your suggestion for the startup?

I think those who are too insecure might lose the opportunity. Every situation has its moment. It all comes back to the hypothesis. Even in the most peculiar situation, if the market is there and in need of a solution, and it is possible to be executed, it is a deal. I think the more investors are hesitant, VCs who can see the opportunities shouldn't stop.

In fact, using the "growth at all costs" strategy to become a dominant player is so last year. Investors are now looking for growth to profitability. It's no longer an era for "burning money", there are already many casualties. It's a natural correction. Investors will also see the country's direction while making investments related to the regulation and government. This will also be the highlight of this year's Nexticorn. There will be related policymakers to explain Indonesia's objectives toward the tech industries, from crypto, tax, and exchange regulations.

As a seasoned investor with tons of experience in the industry. What is your biggest dream about this country's tech and investment ecosystem?

After a decade or two in the tech industry, building Ideosource while hands-on in various sectors, focusing on impact with Gayo Capital, and bridging the founder's gap with Starcamp, the main objective is one. I want Indonesia to be able to unlock its full potential. Even with the founder's gap, there must be an initiative that we can work together to create a path for them. This is also the reason I'm very excited to join Nexticorn.

I'm also part of several associations, including Amvesindo and Aludi. All of their initiatives are simply to aspire the startup and investment ecosystem in Indonesia to be better. For the people not to depend solely on conventional financial sources and instead have alternative funding. From unbankable to bankable.

On the other hand, we need to provide education and nurturing, as well as mentorship for them. As it continues to grow, various associations with their own specific subject, including Nexticorn, will open new doors to global investors. By saying this, hopefully, Indonesia can be faster to unlock and unleash its truest and full potential. Personally, after setting this vision and mission, I can work more focused and with purpose.