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Helen Wong, Managing Partner, AC Ventures

2023: Marching Toward Stability, Yet Skirting the Edge of Drama in VC

Published on January 11, 2024

Helen Wong, Managing Partner, AC Ventures

Reflecting on the whirlwind that was 2023, I find myself looking back at a year that was truly as unpredictable as it was instructive. In the global venture capital (VC) industry, there were multiple moments when fund managers were collectively surprised, concerned, confused, and encouraged. I’d like to take a moment to revisit some of the most pivotal moments that shaped our firm and industry this year, with a focus on Southeast Asia, and distill some lessons we can carry into 2024.

The SVB debacle

In March, the venture capital (VC) community was blindsided by the unexpected collapse of Silicon Valley Bank (SVB). The Federal Reserve’s escalated interest rates instigated a mass sell-off in U.S. Treasuries. This, coupled with SVB’s mismatch in the maturity of assets and liabilities, precipitated a severe liquidity crisis. Suddenly, VCs and startups were in a scramble, frantically communicating to navigate the turmoil of frozen funds.

Ultimately, our startups succeeded in transferring their funds, narrowly escaping a significant cash crisis. This episode starkly highlights the critical need for investors to adopt comprehensive risk management strategies, reinforcing the principle that vigilance and preparedness are indispensable in the volatile realm of venture capital.

Indonesia hosts ASEAN summit

Indonesia has experienced a bustling few years on the international stage. Following its role as the host nation for the G20 summit last year, the country again took center stage this year by hosting the ASEAN summit. In our capacity as enthusiastic supporters of the ASEAN Business Advisory Council, AC Ventures was involved in organizing multiple events. I had the privilege of being the keynote speaker at the ASEAN BAC Women’s event, where I had the opportunity to engage with an array of influential female business leaders, an experience that was both enlightening and inspiring. 

Indonesia’s surge in renewable energy spurs red-hot IPO market

The renewable energy sector in Indonesia began witnessing a remarkable surge this year, shown by the astonishing success of the Barito Renewables IPO, which saw its stock value skyrocket to nearly ten times its initial offering price. This growth trajectory is noteworthy given that renewable energy currently contributes only 14% of Indonesia’s total energy production, with expectations to rise to 23% by 2025. Our team is thrilled about these developments and is increasing our investments in this sector, particularly in our solar energy portfolio company, Xurya.

We also ventured into the electric vehicle (EV) market, seeing it as ripe for growth considering that EV penetration in Indonesia was just 0.2% in 2022. With the country housing a large base of 130 million two-wheelers, the potential for expansion is immense. This potential led us to spearhead a US$38 million seed funding round in July for MAKA Motors, an innovative electric motorbike startup. MAKA Motors is not only utilizing Indonesia’s abundant nickel reserves for battery production but also advancing through robust in-house research and development. This investment underscores our commitment to supporting environmentally friendly tech and reducing emissions in the transportation sector.

EU’s deforestation regulation comes into effect

In June, the European Union’s deforestation regulation became operational, encompassing a wide array of products, from beef to books. This directive mandates that companies exporting to Europe certify their goods are not linked to recent deforestation. Foreseeing the impact of this regulation, we spearheaded a series A funding round for Koltiva, a software firm dedicated to aiding multinational corporations in tracing their supply chains. Originating in Indonesia, Koltiva has successfully mapped over one million smallholder farms globally. Moreover, through its network of agronomists, the company plays a role in disseminating sustainable agricultural practices to farmers, facilitating their adaptation to climate change.

TikTok’s e-commerce rise and fall in Indonesia

We invested in Simplus in 2023, a burgeoning home appliance brand, which has since experienced rapid growth, particularly on TikTok in Southeast Asia. This success led us to also invest in Gmeelan, a skincare brand whose Gross Merchandise Value (GMV) skyrocketed from hundreds of thousands to millions of dollars within six months. However, TikTok Shop’s abrupt cessation in Indonesia in October served as a stark reminder of the risks associated with dependence on a single market or platform. 

TikTok, with over 100 million users in Indonesia, was a major player, making its closure all the more impactful. This event underlined the importance of diversification, a strategy our portfolio companies, including Simplus, have adopted by expanding into offline channels and other platforms across Southeast Asia. Additionally, it emphasized the critical role of government relations in navigating regulatory landscapes, an area where my partner Pandu’s expertise has been invaluable.

J&T’s public debut, Indonesia’s step onto the global stage

Despite a challenging year for startups, marked by events like Thrasio’s bankruptcy preparations, there was a notable success story from Indonesia. J&T, a leading last-mile courier service, went public with an impressive valuation of US$13.5 billion. Significantly, its prospectus disclosed that Southeast Asia was the only region generating profits for the company. This highlights that while Southeast Asia may not match the size of markets like China or India, its collection of sizable markets can still yield substantial profits and serve as a springboard for global expansion.

ChatGPT and OpenAI’s rollercoaster ride 

If you are a VC, there is no way you could have ignored the excitement of generative AI this year. ChatGPT’s rise was nothing short of meteoric, with the platform gaining 100 million users by January, only two months post-launch. This record-setting growth outpaced even Google+, which took over a year to reach a similar milestone. OpenAI’s valuation soared, reaching US$29 billion by February, largely thanks to Microsoft’s US$10 billion investment. These figures are a testament to generative AI’s surging impact across all sectors, with OpenAI projecting revenues of US$200 million for 2023 and an anticipated US$1 billion by 2024.

However, VCs quickly learned that the epicenters of generative AI advancements are in the US and China, known for their foundational model talent. In Southeast Asia, startups focus more on AI’s application layer, facing stiff competition from both similar startups and established firms integrating generative AI. Not to mention the tech giants whose foundational models could encroach on the startup’s offerings any day. Do you still remember Jasper.AI?

It seemed like nothing could go wrong for the poster child of generative AI, Sam Altman of OpenAI. Then in November, in soap opera style, Altman was fired as OpenAI’s CEO due to leadership concerns but was rehired just five days later under a new board after internal pushback, including threats of resignation from numerous employees. This event underscored the challenges and complexities of leadership within fast-evolving tech companies.

Profits and governance become top of mind again

An encouraging sign is that our Southeast Asian tech giants are inching toward profitability this year (Grab, Sea Group, though Sea Group is going for red ink again) and GoTo is also making serious progress toward this goal (especially after the TikTok Shop merger with Tokopedia). The penny has dropped for our founders to work towards profitability, and we invested in a few deals that are already cash flow positive and/or profitable this year.

Board discussions have shifted dramatically from fundraising to business building. Overall, I believe the ecosystem has become healthier and more sustainable. At our firm, we are also tightening our scrutiny on governance issues that arise from an era of “founder over-friendliness.”

Profiles in resilience

For us, December ended the year on a high note with Rosé All Day Cosmetics, one of our portfolio companies, announcing a series A round of financing. Their recovery from a disastrous warehouse fire, which destroyed much of their inventory, to achieving significant growth, is truly inspiring.

At the time of writing, TikTok’s US$1.5 billion deal with GoTo aims to reinvigorate its e-commerce operations in Indonesia by merging TikTok Shop with GoTo’s Tokopedia. This merger highlights the ever-changing dynamics of the e-commerce industry. When TikTok Shop initially shut down, influencers and brands flocked to Shopee. Now, the situation has reversed, favoring TikTok again.

Globally, the e-commerce scene is also evolving. Shein, a fast fashion e-commerce leader in recent years, has confidentially filed for an IPO. Even more notable is Pinduoduo surpassing Alibaba in market capitalization, a scenario that seemed impossible seven years ago when Alibaba dominated China’s e-commerce market with a 75% share. Pinduoduo’s efficient supply chain, user engagement through gamification, and strong organizational capabilities position it as a formidable competitor in the e-commerce industry for the foreseeable future.

Insights for adaptation

As we enter 2024, the lessons from the past year are clear for our team. Key among these is the importance of embracing new technologies like AI for all startups moving forward. The SVB crisis underscored the necessity for diversified financial strategies and strong risk management. Our investments in sustainable innovation, particularly in the Electric Vehicles and agritech sectors, demonstrate that environmental responsibility must be paired with commercial prudence.

Despite 2023 being a challenging year for many founders and VCs, with a significant decline in deal value compared to 2022 (detailed in our “Indonesia Venture Capital Report” published with Bain), experience from past economic cycles like the dotcom bubble in 2000, the Global Financial Crisis in 2008, and the China stock market crash in 2015, teaches us that there’s always a way forward. Interest rates might decrease or remain high in the coming year, but our focus remains on backing the best founders as long as innovation continues.

To illustrate this point, consider the stock price chart of a company with a resilient founder. Despite regulatory challenges that nearly crippled its business, the company’s stock has made an impressive recovery. Today, it boasts a market capitalization of US$13 billion, a testament to its remarkable comeback. 

Can you guess which company this is?


Answer: New Oriental

2024 will be an election year in Indonesia, India, and the US, making it sure to be another interesting year in tech.

This story originally appeared on DealStreetAsia.

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