Newsletter #48: Interview with Kevin, Principal at Indogen Capital
16 minutes reading time. Thoughts on startups, growth, and technology 🚀
Welcome to another edition of the Struggle.
The Struggle is a weekly newsletter where I share my thoughts and learnings from running a fast-growing startup in Southeast Asia.
This week, I am trying something new.
About a month back, I interviewed Kevin Chandra, a Principal at Indogen Capital, a Venture Capital (VC) firm based in Indonesia, with investments across the entire region.
Instead of the usual format, where I share my views on a topic, this week, I will share Kevin’s views on a variety of topics covering the startup ecosystem of Southeast Asia, the Venture Capital landscape, what distinguishes great startup founders, and how to grow your personal network in such relationship-focused part of the world.
Before I dive into my conversation with Kevin, here you go a brief overview of Indogen Capital and Kevin’s bio.
Indogen Capital
Indogen Capital is an early stage and industry agnostic VC. Their sweet spot is investments of about USD 300,000 to $500,000, but at times the firm makes follow-up investments as long as they feel there is room for growth, the valuation makes sense, and there is a strong alignment between the founding team and Indogen Capital.
Today, Kevin and his team have deployed their first fund of about USD 10M in promising startups across the region. And while they are a relatively young VC, the firm has experienced three successful exits from their debut fund.
At the moment, Indogen Capital is raising its second fund of USD 50M to continue supporting the Southeast Asian ever-growing startup ecosystem.
“I am currently a principal of Indogen Capital, where I am in charge of overseeing multiple activities from LP fundraising, portfolio management, and deal sourcing. Prior to Indogen Capital, I spend the first few years of my professional career with boutique investment banking in Indonesia, covering mostly M&A and Debt restructuring transactions. Then, I spent a short stint with Central Capital Ventura (VC arm of BCA Bank) before ending up in my current position at Indogen Capital.”
🌏 Southeast Asia’s startup ecosystem.
Viktor Kyosev: Let’s start from the beginning and explore your thesis about Southeast Asia (SEA).
Why do you think Southeast Asia is an interesting region for tech investments?
Kevin Chandra: Let me try to summarize everything that excites us about SEA.
First of all, the SEA has a huge total addressable market (TAM), supported by a young demographic of users. The large young population enables faster internet adoption than other parts of the world. As a result, the SEA internet economy is expected to grow by double-digit each year until the next 5-10 years. In a world where the interest rate is at an all-time low, this region inevitably can become the next investment destination that sees increasing investors’ interest seeking a return in years to come.
Second, the region already has a handful of success stories in the past 5 years with the rise of few unicorns in the region. Not only does this fact help to validate the growth potential in the region, but it also contributes to the increasing amount of capital inflow, especially in the past 3 to 5 years from players outside venture capital. For example, many private equity firms that used to only invest in traditional companies are starting to pay attention to start investing in early-stage startups in SEA.
Third, there are still many untapped opportunities, particularly in second and third-tier cities in each country in the region. However, be noted that few notable problems come along with these opportunities, such as:
Lack of perspective. Not many founders have reached a certain notable scale in their existing companies to the point that they solve problems beyond metro cities. Founders who are thinking to go directly to 2nd and 3rd tier cities need to be extra cautious as there are not so many good ‘playbooks’ to follow.
Talent shortage. There is a shortage when it comes to tech talent in the region.
Last but not least, I would like to list a few untapped opportunities by sector as follows:
B2B marketplace can also be an interesting market to look at after the B2C consumer model reaching a saturation point. The penetration rate is still low, and this is a market that enables multiple players to win.
Edutech is a sector where the ‘follow the money trail’ concept is at play. After Ruangguru’s rise, an uptick of capital inflow to fellow EduTech companies in the region suddenly happened. The rise of one sector in a short span of time can become a catalyst to attract other big players outside the region to enter the market and increase the possibility of acquisition or collaboration in this sector.
🌎 The West VS Southeast Asia.
Viktor Kyosev: You mentioned how the lack of perspective is one of the challenges you see in the region. Success breeds success. We read about a lot of success cases located in western startup hubs.
What do you think is the main difference between local Southeast Asian and western startups?
Kevin Chandra: Instead of pointing out the main difference between which and which, I prefer to answer this question by sharing a framework that can be instrumental as the main difference between local and western startups.
In my opinion, founders in Southeast Asia need to understand how to solve hyperlocal problems using both anecdotal and analytical data as a proxy to make data-driven decisions. The word 'both' is the key here because founders tend to get calibrated towards one angle or the other, resulting in a series of misjudgment in the decision-making process.
Let me give you one quick example to illustrate better. Recently, a startup provided accounting software for MSMEs in Indonesia, aiming to help them switch from using pen and paper to using smartphones to record their daily transactions. They successfully booked a tremendous growth in terms of app adoption in the early days and raised a sizable amount of funding from investors. As I was digging in their early recipes of success, it turns out that one of their key contributing factors is simply because they provide a very easy to use software that does not require many updates and does not consume much storage.
People working in small businesses tend to have cheap and less powerful smartphones, usually below IDR 2 Mio smartphones. Interestingly, people in the MSME sector don’t care much about digitizing their business and often are not incentivized to invest their time to learn about new software. For them, they have been running the business using the incumbent ways for years, and it worked. However, what those owners have in common is that they are always looking for ways to make more money to make ends meet. That is enough for them. As a result, building a complex solution would not work on their smartphones and would not work for the users. And this is what I believe is the importance of how anecdotal data is used to make decisions.
If founders rely solely on analytical data, their first intuition is to probably deploy more features to make the product better - because, in general, more features are always seen as better products. So, merging both sets of data to make a decision is important to understand the t’ true awareness towards using your products and what your products are trying to deliver to them.
On another topic, I would like to emphasize another unique trait of Southeast Asia; the importance of having a strong personal brand.
There is a perception that brands truly do matter in the region. So if you are alumni of a large and popular company or studied abroad, your chances of raising capital are much higher than those who are not. The startup ecosystem in SEA still has a strong bias for people with strong personal brands, not only when fundraising but also for attracting top talent to your startup.
👨 Personal traits.
Viktor Kyosev: Interesting, what other patterns have you noticed?
What personal traits bring strong headwinds when building a startup in Southeast Asia?
Kevin Chandra: Storytelling. Especially when it’s well-tailored to your sector and timing.
Success breeds more success. Your ability to attract talent is very dependent on your title and qualification. If your company gets bigger, it helps with recruitment. People with large personal networks tend to do good as well.
💵 Fundraising in Southeast Asia
Viktor Kyosev: Let’s touch on the topic of fundraising.
What does it take to fundraise successfully in Southeast Asia?
Kevin Chandra: In my opinion, successful fundraising is the combined function of great storytelling, strong business performance or data, and great timing.
In my opinion, successful fundraising is the combined function of great storytelling, strong business performance or data, and great timing.
Founders need to have all these to be successful in fundraising. The first two parts, I think, are pretty clear. So long you can articulate your vision in a way that is clear and backed with strong business performance, then most likely, you will have half a foot in for the successful fundraising.
For this conversation, I like to touch upon the latter part a lot more.
There are a few behind-the-door mechanisms that founders need to understand when it comes to your fundraising timing.
To some extent, I like to recommend founders to use a specified time window during which they want to do the fundraising roadshow.
By narrowing down your fundraising to a period of time, it can help founders in many ways. First and foremost, it helps with the momentum. By not leaving too much of a time gap between meeting the first and subsequent investors, founders can quickly make incremental improvements after every meeting and quickly incorporate their feedback before meeting the next investors. Second, it is also important to leave less room for anyone to talk about your idea before you have a chance to do it yourself. Remember that the VC community, particularly in still relatively young ecosystems like in SEA, is tiny. We are like interconnected dots that enable the spread of news faster than any founder can imagine. And most of the time, as a founder, you don't want one investor listening about your company or idea from another investor who could have a certain bias towards a certain idea. As a founder, you always want to be the first person to paint the picture about your idea in the investors’ mind and hopefully lead them to spread around a good word on behalf of your startup.
👋 On building a personal network.
Viktor Kyosev: Great tips, Kevin. Last but not least, let’s cover the topic of building your network. We live in a very relationship-focused culture.
What tips do you have for building a great personal network?
Kevin Chandra: Always start by qualifying your network. Fundraising is a battle against time, and it is always going to take a long time. Qualifying leads is essential so that you can prioritize and manage your time better. There are many ways to qualify leads; my personal favorite is to separate them into two buckets; transactional and relationship.
You can judge which falls into which category right after talking to people. When it comes to fundraising, it is important to remember that rejection now is not always a rejection in the future. Try always to keep good contact with everyone even though you have probably qualified certain leads as transactional at first. If your transactional leads reject your idea or pitch the first time you meet, always try to seek feedback from them for your incremental improvement when you go out meeting the next lead.
Meanwhile, those people who you qualify as relationship leads require nurturing. Sending quarterly or monthly reports is a good way to maintain the relationship.
If you meet a VC where they ask who your lead investor is, consider them a relationship lead. And as soon as you find a lead investor, you can get back to them. While searching for a lead investor, do not forget to contact the newly acquired relationship lead, preferably in an informal way.
The entry point of meeting investors is also important. VCs got their deals closed through; inbound, referral, outbound. Small funds like Indogen have to be proactive to get outbound deals. Start-ups should be aware of those ways to reach VCs. For example, big VCs are going to get a lot of inbound deals. You approaching through inbound deals is not going to make you stand out.
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