Indonesia's investment mainstays remain fintech and e-commerce
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Posted By: How May I Help You NC on December 22, 2023 For over a decade, fintech and e-commerce have continued to top the investment charts, and have done so again in 2023, even as overall equity funding for Indonesian tech firms slowed. According to DealStreetAsia's SE Asia Deal Review: Q3 2023 report, at least 11 fintech companies and nine e-commerce and commerce enabler startups in Indonesia raised fresh investments as of November. Among the most notable deals, buy now, pay later company Kredivo announced a $270 million investment led by Japan's Mizuho Bank in March, while peer Investree raised about $231 million in Series D funding, led by Qatar's JTA International Holdings last month. Amartha, meanwhile, raised $25 million in debt funding in March from IFC, and $100 million from San Francisco-based investment firm Community Investment Management in June. Although funding values and volumes in the e-commerce industry are considerably smaller compared with fintech, several verticals, such as e-commerce enabler and B2B (business to business) marketplaces have attracted significant investor attention, showing that the e-commerce industry is still going strong in the country. As of November 2023, half a dozen homegrown e-commerce companies have raised funding above $10 million. These include social commerce firm Evermos, which bagged $39 million in a Series C round in May, and fresh grocery commerce Segari which snagged $23.5 million in September. As the investment landscape evolves, what will emerge as the next wave of opportunities and growth areas, going forward, remains a compelling question that will shape the narrative of Indonesia's dynamic financial and digital commerce landscape. With a majority of its population unbanked or underbanked, Indonesia is a red-hot market for digital financial innovation. Fintech services, such as lending and payment, are expected to fill the gap and provide financial access to a wider community in the country. ADVERTISING Herston Elton Powers, founding managing partner at 1982 Ventures, believes that fintech will continue to offer clear investment opportunities, and that the next generation of Indonesian unicorns unlisted companies worth $1 billion or more -- is set to come from the digital financial sector. "Venture capital investment in Indonesian fintech has only started in the past few years in a meaningful way. That said, 2023 funding levels have been hit hard, with many funds still sitting on the sidelines. We expect to see a sharp rebound in VC funding in 2024, especially in fintech, as international investors are bullish on the long-term prospects of Indonesia," Powers said. According to the SE Asia Q3 deal review, wealthtech was the top fintech category in the region, led by Singapore-based startups like Bolttech and Endowus. Nonetheless, in Indonesia, lending firms continued to dominate fintech deals this year due to the wide financing gap between micro, small, and medium enterprises (MSMEs) in the country. With competition tightening for this segment, companies that are able to manage risk correctly and deliver excellent execution and customer experience will continue to thrive in the market. Besides lending and credit payment-related verticals, there are also untapped opportunities in B2B fintech and fintech enablers, according to Joshua Agusta, executive director-investment at Vertex Ventures Southeast Asia and India. "For Indonesia, I see potential in fintech SaaS (software as a service), such as cash management for enterprises. As companies grow, they will have multiple accounts that can be difficult to manage, so solutions that can simplify the process will be very useful," said Agusta, adding that this kind of solution requires API (application programming interface) integration with banking institutions. Therefore, the open banking segment poses high growth potential as well. Embedded financial services that make it easier for consumers to make online and offline purchases are also favorable, said Kevin Wijaya, director of CyberAgent Capital. "Fintech as a stand-alone company might be difficult, especially in terms of new, innovative solutions, but fintech enablers, such as dealers or automotive financing, are still very promising," he said. Regarding e-commerce, tech giants like Shopee, Tokopedia, and Lazada dominate the horizontal marketplace segment. However, some segments like B2B marketplaces, e-commerce enablers, and niche direct-to-consumer (D2C) commerce will continue to gain traction, going forward. In the B2B marketplace and e-commerce enabler space, construction startup Brik raised about $11.35 million in May, while Sirclo raised $30 million in February. Meanwhile, some notable examples of D2C brands include eyewear brand Saturdays, which raised venture debt in April; fashion brand Claude, which bagged seed funding in June; and D2C brand enabler Praktis which snagged $20 million in May "Indonesia has a big potential for D2C, as the country has one of the fastest growth rates of young and productive population in the world. Therefore, there will always be a new market and growing demand from consumers," said Wijaya. A few beauty brands have also attracted investor attention, such as Rose All Day Cosmetics (RADC), which is backed by AC Ventures, and From This Island, which is said to have received investment from Alpha JWC Ventures recently. "Local beauty brands are interesting because they have various pricing and product categories that can be explored. Each brand usually has a champion product in each category. The mom-and-baby segment is also becoming increasingly attractive because consumers are usually willing to spend more for their baby's needs. Several companies are making private labels in this segment where they can take high margins," said Agusta. Social commerce, which makes use of community networks and social media platforms to sell products and services, also shows rosy prospects, investors believe. The Indonesian social commerce market is expected to reach nearly $90 billion by 2028. Some notable startups in the social commerce segment include Evermos and Super, both of which are tapping into tier-2 and 3 cities, where there is a huge untapped online shopping market. "Tier-2 and lower-tier cities are attractive to businesses and investors as these are the real mass markets of Indonesia. However, existing businesses need to adjust their model and strategies when entering these areas," said Glen Ramersan, partner at TNB Aura. To make the marketplace model sustainable outside Jakarta requires tremendous investments in educating consumers, pushing digital payment penetration and building logistics infrastructure, which require collaboration from startups in different verticals, Ramersan added. Sharing this sentiment, 1982 Ventures's Powers believes fintech companies that focus on enabling e-commerce, especially social commerce, will see significant traction over the next 12 to 24 months. He cited the example of a startup called Orderfaz, a payment and commerce enablement platform that is designed to help brands and sellers improve online sales conversion rates in Indonesia's booming social commerce market. "With the new regulations affecting e-commerce on social media sites, many Indonesian merchants will need support in growing their business with tools built for this new economy," Powers said. For the original story from DealStreetAsia, click here. DealStreetAsia is a financial news site based in Singapore that focuses on private equity, venture capital and corporate investment activity in Asia, especially Southeast Asia, India and greater China. Nikkei owns a majority stake in the company. Yez there is more to this: https://asia.nikkei.com/Spotlight/DealStre... If you enjoyed this article, Join HBCU CONNECT today for similar content and opportunities via email! |
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How May I Help You NC
Management, See Moss Interactive Bellarmine University class of 2021 Member Since January 2011 |
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