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SuperReturn Emerging Markets 2021: SEA Market Opportunities Uncovered

Published on August 10, 2021

Photo Credits: SuperReturn Emerging Markets

Southeast Asia’s rapid rise of technology companies has continued. The imminent public listings of several ventures will start a new wave of investment opportunities and innovation.

AC Ventures’ Co-Founder & Managing Partner Adrian Li shared his views and predictions at SuperReturn Emerging Markets 2021, “SEA Market Opportunities Uncovered,” earlier this year.

We summarize key takeaways below:

The Indonesia market opportunity continues to deliver strong returns and realized gains

Indonesia’s massive market size of US$1.2TN in GDP and a digitally savvy consumer has continued to drive substantial value creation for investors. Marquee name local ventures such as GoTo, Traveloka, and Bukalapak are forging ahead with imminent listings that will create fully realizable returns to early investors at valuations beyond what could have been imagined 5-7 years ago.

This underscores that while ventures starting in other markets will need to think “regional” from day one, Indonesia’s market size continues to provide the depth for startups to scale to BN$ companies by focusing on the local opportunity alone.

In parallel, as these ventures scale to impressive numbers, the next cohort of potential BN$ technology-enabled ventures are raising capital from global blue-chip investors seeking to back the leading players of high potential verticals. We will likely see another eight unicorn companies emerging from Indonesia within the next 2-3 years. These will come from businesses where investors first started investing 3-5 years ago and primarily benefited from the Covid induced digital adoption wave.

These sectors include eCommerce infrastructures such as payments (OY!), logistics (Shipper, Kargo), and commerce enablers (BukuWarung, Majoo) that have seen massive growth throughout 2020-2021. Fintech is another industry that has seen fast maturity, especially in the lending sector where regulatory-driven bank consolidation is driving partnerships between tech and traditional banks to create Neo Bank plays.

Covid accelerated digital adoption has driven faster maturity of high potential verticals

Around the world, the effect of Covid lockdowns and WFM protocols have super-charged digital adoption across demographics as more people and businesses go about their lives online.

Based on historical adoption patterns that would have taken more years to emerge, several sectors have become highly investible and experienced rapid uptake due to lockdown restrictions. Globally, we have seen this evidently through the user growth of listed products such as online conferencing tool Zoom and entertainment giant Netflix, which has reflected clearly in their market valuation.

In Indonesia, we’ve seen sectors such as education technology (CoLearn), online wealth management (Stockbit), and MSME software (BukuWarung, ULA, Majoo, ESB) see faster, earlier adoption rates driven by the pandemic. However, it is undeniable that some schools still use simple services, such as online meeting platforms or free instant messaging applications.

Historically, these sectors would achieve broader market adoption with more mature customers, businesses, and digital infrastructure. However, COVID has created situations where these solutions are the only way for students to study, people to save for higher returns, and MSMEs to manage their businesses.

Indonesia is entering the next supercycle of technology Investment opportunities

As Indonesia’s leading technology companies IPO, this will create recycling of talent and capital to the ecosystem that will initiate the next supercycle of technology opportunities. With maturing digital users and infrastructure, that makes the perfect environment for the next wave of ventures to start.

Even in sectors seemingly more mature like eCommerce, penetration rates out of full retail only account for 10% (with the dominant market places accounting for half of this). Huge verticals within commerce requiring different approaches such as groceries and neighborhood stores represent US$BNs of untapped opportunity.

Now is a better time than ever to be investing in Indonesia’s digital ecosystem and help back the next generation of entrepreneurs building disruptive businesses. In the next ten years, we’ll see over half of the top 20 largest market cap businesses on the IDX being digital-first businesses.

AC Ventures (ACV) is a top Southeast Asian venture capital firm that invests in early-stage startups focused on Indonesia and ASEAN, with over US$500 million in assets under management. The firm's mission is to empower entrepreneurs with more than just capital by combining operational experience, industry knowledge, deep local networks, and resources. ACV's team has invested in over 120 tech companies in the region since 2012. With a team of more than 35 professionals led by Adrian Li, Michael Soerijadji, Helen Wong, and Pandu Sjahrir, it has offices in Jakarta and Singapore.

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