1. Startups

Genesis Ventures: Unicorn Startup's "Go Public" Will Enrich Indonesia's Startup Ecosystem

Takahiro Suzuki, Tokopedia's early investor, did not expect e-commerce services in Indonesia to develop so rapidly and become a unicorn so quickly

Takahiro Suzuki is no stranger to the startup community in Southeast Asia. As a seasoned investor, Suzuki has served as CEO CyberAgent Ventures (CAV) Indonesia until a few months ago. He is also an early investor for Indonesian unicorn startups Tokopedia.

Suzuki, recently join with Genesis Ventures as General Partner. An early stage investment company focused on Japan and Southeast Asia, genesis recently raised its second US$80 million startup fund.

In a joint interview e27, Suzuki shared experiences about previous funding, the startup industry in Southeast Asia and Japan, as well as future plans.

Below are some edited snippets:

There are now a lot of VCs for early-stage startups in Southeast Asia. Why does this region still need funding? What is your unique approach?

Yes, there are quite a few VCs for early-stage startups in Southeast Asia, but at Genesia we have three unique approaches. First, we were able to make large investments in each company. While our initial investment focused on series A funding, we were able to disburse up to US$5 million to each company in follow-up funding in later rounds. We believe this follow-up funding will provide strength for the next startup's fundraising.

Second is decision making for quick investment. We have one general partner in Japan and one in Jakarta. Of course we have a process due diligence before finalizing the investment, but a decision can be made in just a few weeks.

Third, we have experience in VC investing in Japan and Southeast Asia. We have also built extensive business connections around Asia. While conventional industries have not fully developed in Southeast Asia, there are many areas where digital business has developed rapidly before conventional industries. There are also several industries where businesses such as Grab and Gojek has surpassed Japan. Such information is very helpful in making better investment decisions and designing business strategies for our portfolio companies in Japan.

In Japan, on the other hand, the conventional industry is being overhauled and we are investing in many B2B startups in hopes of bringing about digital transformation. Digital transformation is expected to be a big movement in Southeast Asia in the future, and we can be sure that we also bring investment experience in Japan.

Furthermore, many Japanese companies are focusing on Asia's future growth. Our limited partners consist of large Japanese companies and banks, and our investment experience in CAV allows us to build relationships with companies and VCs in Japan and Southeast Asia. We believe this will lead us through the process of finding portfolio companies and forging alliances with them. In our view, our investment experience and business network in Japan and Southeast Asia make us a venture capital company that is different from others.

There is no dearth of funding for early-stage startups in Southeast Asia, but the region is clearly understaffed by Series B and C investments. In addition, there is a perceived lack of quality startups in Southeast Asia. What is your opinion?

We want to contribute to the development of the Asian community in seed funding with the three unique selling points outlined above. Regarding the perceived lack of quality startups in Southeast Asia, we also feel that there are more quality startups in the US and China in terms of numbers, but this is simply because there are indeed more startups there than in Southeast Asia.

We believe that quality startups will be the same in Southeast Asia and the rest of the region. As the startup ecosystem accelerates along with the economic growth in the region, we believe there will be many startups that will grow substantially.

You are an early investor in Tokopedia, which is now a unicorn. What prompted you to invest in startups back then? Have you ever thought this company would be a unicorn in the future? Have you reaped the rewards of this investment?

Since the market has been dominated by unicorn companies everywhere, I invested in Tokopedia hoping that it will become a unicorn company in the future. I didn't think it would be this fast.

The biggest reason for the investment was the decision of its founders, William Tanuwijaya and Leontinus Alpha Edison. They strongly say that they are serious about making Indonesian people better through Tokopedia. I wanted to support them in this mission and decided to invest in it.

Whether I hold their shares or not is non-public information and therefore I cannot disclose it.

What do you think are some of the things that Tokopedia did well to help conquer the e-commerce industry in Indonesia?

In my personal opinion, Tokopedia can grow so fast for the following three reasons:

1- Development of services that put customers first (prioritizing the convenience of consumers and merchants)

2- National expansion, not just Jakarta (in particular, they started recruiting traders nationwide at an early stage)

3- A strong vision and team (they have a strong vision to shape Indonesia into a better country and can create a Nakama [team] that believes in that vision)

In your opinion, does Indonesia have the potential to give birth to other unicorns like Tokopedia? Are you interested in any of the technology companies to keep up with the same pace of growth in the country?

Yes. We believe that many unicorn companies will emerge from Indonesia. We also always try our best to invest in companies that have the potential to become unicorns.

Do you regret not investing in companies like Go-Jek and Grab who later became a unicorn?

Not. I got the opportunity to invest, but have no regrets for not taking the opportunity. But I learned a lot because I didn't think that business would be this diverse. I want to be able to predict a business can grow in its current state.

How is the overall startup ecosystem in Southeast Asia. Which countries in the region have the potential to compete with Silicon Valley? What do you think about the startup activities happening in Malaysia?

Now, many people in the US, China, India, South Korea are investing in Indonesian startups, and the ecosystem is getting richer. We feel that the startup ecosystem will become richer if unicorn companies start showing themselves on the stock exchange. Silicon Valley, yes Silicon Valley. It would be unreasonable to compare it to Southeast Asia.

We believe that startups doing business in Indonesia have more potential to become unicorns compared to other countries in Southeast Asia. There are lots of amazing startups in Malaysia and some of them are already reaping the benefits. On the other hand, as a country, the upside potential of the market is limited, so we feel that if a company grows big, it will have a business model capable of overseas expansion like Grab.

In your opinion, what are the companies that can change the startup landscape in Southeast Asia?

To enrich the startup ecosystem, we expect companies like Go-Jek, Grab, Tokopedia, can apply for an IPO or secure larger funds to proactively conduct M&A and others. We also hope to see more entrepreneurs with experience working in unicorns.

Why did Genesia choose Jakarta as its head office in Southeast Asia?

This is because Indonesia is the largest country and the most competitive market in Southeast Asia.

How many companies are in Genesis' continued investment plan? Have you identified a startup for investment? Apart from funding, what else do you provide to your portfolio companies?

We haven't decided how many companies we will invest in from this second fund, but we won't increase the number to three or four years. We will remain selective in our investment decisions. There are already several companies that we have promised to invest in.

In addition to funding, we support them through business strategy discussions, consultation on organizational structure and recruitment plans, and fundraising (providing support to create pitch deck and networking with investors not only in Japan and Southeast Asia but also other regions).

What is your average investment? Will it be different for markets in this region?

Our investment policy is basically the same everywhere in Southeast Asia. As our initial investment targets the pre-Series A round, the average ticket size is US$300.000-$600.000. The amount of continued investment varies from company to company. Our plan is to make the average investment amount per company $1-2 million, including follow-up investments.

Has Genesis I run out of funds? Is there any exit highlighted?

We no longer make initial investments from fund I. We only have budget for follow-up investments. So we will make an initial investment of fund II in the future. Not many exit so far as it's only been two years since fund I came out, but there are a few that have been highlighted.

How was your experience as a General Partner of CyberAgent Ventures? Why did you leave the Company to join Genesis?

My work with several entrepreneurs in Southeast Asia and Japan has fueled my interest in becoming a General Partner in an institutional VC firm, against the possibility of working for CVC.

Most, if not all, of Limited Partner Genesis are from Japan. Are they optimistic about the startup industry in Southeast Asia?

Although Japan is still the third largest economy in the world, its market will not grow as fast in the future. Therefore many Japanese companies view Asia as an important market for their future growth. We strive to be a platform that connects Japanese companies and early-stage companies in Asia.

How is the distribution of the economy in this region? Does it have the potential to grow bigger?

Since real estate, cars and bicycles, and construction and agricultural equipment are expensive assets, we think the sharing economy for these assets has the potential to grow. That's why we have invested in Luxstay, a home sharing platform in Vietnam. In addition, we are also investing in Sukedachi (on-demand job matching platform for contractors and construction workers) and Taimee (on-demand temporary employment platform) in Japan. We are also supervising gig economy in South East Asia.

- Disclosure: This guest entry by Sainul Abudheen K. was originally published on e27. Translated (by Kristin Siagian) and edited with permission of the author.

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