Despite the headwinds caused by the Covid-19 crisis, Indonesia continues to be an attractive destination for savvy investors. According to the IMF, Southeast Asia’s largest economy is expected to shrink by 1.5% this year due to the pandemic, before rebounding to expand by 6.1% in 2021.
The Indonesian government is preparing to spend about 2.75 quadrillion rupiah (US$186.3 billion) to bolster the economy next year, with most of the funds going to infrastructure, education and healthcare. Meanwhile, the Omnibus Law on Job Creation passed by parliament in October will help businesses by cutting red tape, easing restrictions on foreign investment and providing more incentives to free-trade zones.
Outperforming in a Crisis
Venture capital firm Alpha JWC Ventures is capitalizing on the potential of Indonesia’s economy as its funds continue to outperform its industry peers during this pandemic year. The firm’s two Southeast Asian venture funds invest primarily in early-stage Indonesian startups, with the aim of discovering and supporting exceptional entrepreneurs to create enduring industry champions. About two-thirds of its investments are in Indonesia-based companies.
Alpha JWC’s first fund was launched in 2016. The US$50 million fund has achieved a net asset value (NAV) of 3.6 times with a Distribution to Paid-In (DPI)—cumulative investment returned to the investor relative to invested capital—of at least 12% by the second quarter of 2020. The second fund (2018 vintage) has a NAV of 3.3x and a DPI of 26%. Reflecting its confidence in the region’s longer-term prospects, Alpha JWC is currently gearing up to launch its third fund next year.
Amid a tumultuous 2020, Alpha JWC’s portfolio companies have also continued to attract significant funding. For example, Indonesia’s largest grab-and-go coffee chain Kopi Kenangan completed a massive US$109 million Series B round, while the Indonesia-based B2B marketplace for FMCG traders, Gudang Ada, announced its US$25 million Series A funding in May, only 15 months after its inception. Both companies have Alpha JWC as their first institutional investor.
Alpha JWC’s success is underpinned by its philosophy of prioritizing the vision, passion and grit of a company’s founder when it comes to assessing potential investments. Indeed, it is this philosophy that has made the firm a top-choice partner of many startups.
“We always say that we have a ‘Founder First’ philosophy, meaning that above all calculations and business potential, we put the quality of the startups’ founders on the highest regard. This also includes spotting their unfair advantages and track record, which would be a determining factor in the company’s success in the future,” says Alpha JWC Cofounder and Managing Partner Chandra Tjan. “Finding the right ones doesn’t only require thorough due diligence, but also experience and gut feelings, something that you can only get after doing something for a long time.”
Prior to Alpha JWC, Tjan made a name for himself investing in Indonesian unicorns such as Traveloka and Tokopedia in his previous role as Cofounder and Managing Partner of venture capital firm East Ventures. He has been in the industry for more than a decade, starting when Indonesia’s tech ecosystem was still nascent.
The firm is also led by Cofounder and Managing Partner Jefrey Joe, formerly Chief Operating Officer of Groupon Indonesia and Cofounder of Indonesia’s leading bill payment aggregator Alterra. With one of the largest early-stage funds in the region, Alpha JWC is well positioned to support startups as they progress on their journey of expansion.
“However, for us, investing right does not stop at finding and funding the right companies and founders. We believe that the VC should be an active partner and support its portfolio companies throughout their journey,” Joe says. “Studies show that a hands-on approach improves fund performance significantly. Over the years, we have seen the positive impact of value creation on our companies’ performance, but the past months have shown everyone just how important it is for investors to support their founders in good times, and especially in bad times. We’re lucky we’ve had a long head start so we were more than ready when the pandemic brought unprecedented challenges.”
The firm has one of Southeast Asia’s largest VC teams, made up of high quality and experienced professionals from various backgrounds including regional investment funds, tech giants and global consulting firms. As a value-adding partner, it is the firm’s commitment to provide the best resources and platform to company founders during both early days and the growth stages.
A Pandemic Boost
The pandemic has pushed companies, both established and startups, to pivot and adjust to survive. While the turbulence has been disruptive, Covid-19 also boosted digital adoption in some sectors, including technology. Many Alpha JWC portfolio companies have gained momentum and accelerated their growth during the pandemic, including healthy food producer Lemonilo. The Jakarta-based company has seen sales surge as more Indonesians turn to a healthier lifestyle.
Another company that has benefited is B2B marketplace Gudang Ada. Transactions on its platform increased as regional lockdowns pushed industry players to quickly adopt technology solutions. In May, Gudang Ada launched pilot logistics services to ensure a steady supply of essential consumer goods in Indonesia’s cities.
Meanwhile, the social commerce sector has provided alternative jobs for workers laid off or forced to take a pay cut amid the economic downturn. It also has helped brands to connect with customers who have stopped visiting shopping centers. One of Alpha JWC’s social commerce startups, Evermos, noted significant user and transaction growth since the start of the pandemic.
“It is a tough time for everyone, but it’s not as grim as people painted it to be,” Tjan says. “Times like this reveal whether your investment thesis and portfolio management have been right, and we like what we are seeing right now. The pandemic has created unique investment opportunities, hence we are still actively investing. Our founders and internal team are stronger than ever, and the learnings we get throughout the pandemic will make us even more resilient.”
Joe adds, “We are confident that Indonesia and Southeast Asia is still the most lucrative hot spot for the tech industry in the world right now, which is why we will continue finding the next great companies and support them the best we can. Our third fund will hold the same investment thesis, but with even more dry powder, Alpha JWC will be able to double down on our existing extraordinary startups while also investing in new larger companies.”
For investors seeking opportunities in Southeast Asia, Alpha JWC has shown that there are still gems to be found even in the roughest of environments.