How do you see the investment prospect during a pandemic?
Different investment firms might capture different trends and pose different views on investing during a pandemic. For us, we see 3 apparent shifts in the startups and investment climate:
1) Structural shifts in business model: as consumer behaviors have definitely changed to the ‘new normal’, businesses are exploring new ways of developing new/strengthening existing products (to stay relevant), acquiring users/customers, providing better user experience, and realizing monetization;
2) Emphasis on fundamentals: the idea of ‘growing at all cost’ is no longer the norm; businesses need to show positive unit economics and a clear path to profitability no matter what stage they are in today. Challenging times like this can reveal great companies among the good ones;
3) Price (valuation) readjustment: natural selection is happening. Companies are looking for funding especially during this time but investment firms are taking a more stringent/cautious approach in choosing the right ones to back up. As supply is now lesser than demand, price adjustment is happening;
Overall, we don’t see any slowdown in the prospects; businesses still need capital to grow/survive and good partners to open new doors. The pandemic has adversely impacted many aspects of the economics on micro and macro level, but we actually see some silver lining especially in our line of business: 1) digital adoption of consumers and SME businesses have never been faster; 2) pitches, business plans, and projections are showing their true selves; 3) more and more stakeholders are emphasizing on fundamentals over short-term tractions.
We have always been very vigilant when it comes to due diligence and investment decisions even before the pandemic, and we will continue to do so in our search of finding great founders out there.
As a VC what kind of startup that excites you more to invest during this global pandemic? Any plan to invest more in the near future?
While many sources say that investment may slow down during this pandemic, Alpha JWC has not slowed down in our investment activities, either at firm level or portfolio level. Last month alone, we announced three follow-on funding for Kopi Kenangan, GudangAda, and Bobobox. We still have dozens of new companies on our active pipeline, in different stages of assessment.
What excites us are companies who have clear vision, distinctive value proposition and agile structure, i.e. one who can adapt to and navigate through the challenges, proving that despite economic slowdown and change of behavior, they are not only able to maintain relevancies, but also achieve their designated growth and appear as the winner. One important characteristic that we look at is proof of product-market-fit, i.e. essential product/ service that people ‘need’ instead of just ‘good to have’.
While it’s obvious in some sectors — like e-commerce and games — it’s always exciting to see new findings in other industries. For example, we see that even FMCG as a vertical, which represent the most basic needs of our consumers (foods, beverages), still has many structural limitations as a big chunk of the supply chain are still run traditionally; an issue that companies like GudangAda tries to solve by digitizing the flow of goods from traders to retailers and eventually end-consumers, leveraging PSBB as an opportunity to launch its logistics pilot, on top of its marketplace platform. Another interesting example is Bobobox which now provides long-term stays in its capsule accommodation and modifies its pods into shelters for hospital workers. We believe that there are more companies/founders who have breakthrough ideas and are doing interesting things to do their share of contributions to Indonesia during this pandemic, and we are keen to talk with more and more of them.
Separately, we’ve also been focusing on supporting our founders, strategically and through follow-on investment. Against all odds, we are fortunate that most of our companies are still consistently growing, and those who are affected directly by the pandemic have navigated their game plans well. We are always ready to invest more in them.
What is your prediction of the startup industry innovation after the pandemic? Do you think healthtech, logistic, edtech, and SaaS will gain their momentum during and after the pandemic?
The crisis is treating tech companies better than most traditional ones. Many sectors, including healthtech, edtech, SaaS and logistics, are enjoying increase of users and transactions. From our observation, we saw a big increase in e-commerce transactions during this year’s Eid season despite the pandemic. People now are more open with Zoom consultation with doctors, while not long ago most look down on app-based consultation. With limited physical interaction, solutions provided by tech companies are becoming a necessity so people’s lives can go back to what it used to be. The tech industry is helping to accelerate the digital adoption on what used to be traditionally-run industries. We have been expecting these changes and we think that these positive impacts should propagate quickly to other verticals as well, e.g. FMCG, F&B, financial services, entertainment, etc. We’re grateful that we’re in a good position to capture opportunities and support these tech businesses to take it to a whole new level.
In regards to how long the momentum will last post-pandemic really depends on how well these companies create that sense of dependency between consumers and their products. What the pandemic does is create reasons for people to try your products, but whether or not they will stay depends on the experiences that you give; again, back to the basic of value proposition. The real test is whether your product is able to become a necessary part of people’s daily lives. Looking at some of the late-stage companies within the aforementioned sectors, I believe these players have the right ‘ingredients’ to maintain their momentum after the pandemic. It’s only a matter of proper execution at the right timing.
With the momentum, we believe our investment can go further than before. If we can capture the right opportunities and back the right founders with financial means and our business support, we would be able to accelerate the growth of Indonesia’s digital economy and possibly change the face of daily lives and businesses faster and better than predicted.