Episode 3 features Adrian Li, Founding and Managing Director of Convergence Ventures, in Jakarta, Indonesia.
In the past 10 years he has been involved in co-founding and operating 6 internet related start ups covering eCommerce, media, market place and product based businesses in emerging markets China and Indonesia. Adrian helped co-found Convergence two years ago, and just closed a new $30 million fund.
In our conversation, we talk about applying business models of more mature markets to the emerging Indonesian market, the value of partners helping to build an ecosystem, the importance of timing when it comes to technology, and Convergence's four verticals of focus.
Show notes -
The tremendous opportunity in Indonesia and SE Asia
Qraved’s pivot to adjust to local culture
4-5 years ago, there was a “void” in VC funding for start-ups in Indonesia
2 years ago, funds had started to be operational in Indonesia, but many weren’t locally based – many were Japanese investors and Corporate Venture Capital (CVCs)
When Convergence launched in 2012, it was one of only independent venture firms to back locally based startups
Greatest opportunity for Convergence is in focusing on Indonesia
Backed 17 companies to date, all early-stage, and 8 with follow-on financing; this helped in doing final close of fund, which surpassed $25 million, with investors from Indonesia and around the world
Convergence likes to work with eco-system builders, and since Indonesia is an early-stage market, the firm believes more about entrepreneurs and investors working to build an ecosystem together rather than directly competing
Baidu has been a great partner for Convergence, and the partnership enables Convergence to fast-track investments from Baidu; going forward it opens up resources in Indonesia and some engineering talent in China to help start-up companies in China directly
Many Indonesians will only know the internet through mobile
Timing of verticals and disruption within industries – Convergence learns from growth path of more mature markets such as China and India – don’t want to be too late or early
Maturity and consolidation in horizontal mobile platforms
Convergence believes there is a critical mass online, so the firm focuses on 4 verticals:
- Digital media consumption – Meeker report – Indonesian media consumption per capita basis is one of the highest in the world
- Commerce – areas for large niches – vertical commerce – fashion, home furnishing, areas needed by consumers, and merchants tend to have higher profiles
- “Search directories and aggregators” so many businesses and SMEs and no good platforms for connecting the consumers and suppliers of those businesses and services
- Disruptive models within lending in particular – there is a huge population who are unable to access credit - both consumers and SMEs, and there can be innovative solutions for funding and credit rating
Venture exits: No listed Indonesian tech companies at present, but if we compare Indonesia's stock exchange and look at similar businesses in media and telecommunications, Indonesia from a population standpoint has the ability to produce billion dollar companies
- 5 “unicorns” in Indonesia currently, so Adrian thinks technology companies will begin to get listed publicly in 5-6 years
Investing in Indonesia:
- Easy to get carried-away with the macro picture, but venture investing in any market is first and foremost a people business, especially early-stage, so an investor cannot just fly-in and get a decent investment
Indonesian cuisine is almost as diverse as Chinese cuisine!