Agaeti Ventures and Convergence Ventures, two active venture capital firms in Indonesia, has announced their merger this morning. AC Ventures (ACV), as the new entity is known, will continue to make early-stage investments.
The merger has been in the works since the third quarter of last year. According to Adrian Li, one of the Partners of ACV, the objective is to consolidate the resources of both firms “to create a platform of exponential value that can provide significant support to our portfolio founders as they build and scale successful businesses across Indonesia, the largest market in Southeast Asia”.
In this interview with e27, Li talks about ACV’s plans, the COVID-19 crisis, and more.
What was the primary motive for the merger? Where do you see a ‘convergence’ of interests for both? Does it have anything to do with the current COVID-19 crisis?
Our primary motive was to combine the experience, network and teams of both platforms to form a stronger overall venture firm. Our prior firms both had similar strategies — our focus on Indonesia, early-stage technology, as well as we believe in being strong operating partners of founders.
It has nothing to do with the current crisis as the merger has been in the works since Q3 2019.
What is the total size of ACV?
We are currently in the process of working on the new fund. Given the present macro environment, we do not have the total size confirmed.
The press release says ACV will continue to make early-stage investments in Indonesia. Do you expect to cut bigger cheques, given the rapidly-changing market dynamics?
Our plan for ACV is to invest in early-stage companies from a few hundred thousand to a few million US dollars.
Does ACV have special focus on any particular vertical? Also have you made any investment from ACV yet? Can you share the names?
The investment thesis of the new fund continues their prior funds’ respective successful investment strategies of investing in Indonesia-focused, early-stage, technology opportunities.
In particular, the teams are seeking investment opportunities into areas of e-commerce, digital content enabled services, financial technologies and MSME enabling technology.
We have made investments in several ventures to date. We will be announcing them in due course.
The COVID-19 is ravaging industries. Do you think the crisis will alter the startup landscape for ever if the situation persists longer than expected?
COVID-19 crisis is different compared to previous financial recessions; in this situation, there are serious health considerations. Quarantines and lockdowns are forcing people to change behaviours and driving faster adoption to technology such as online education, health consultation, digital entertainment and e-commerce.
Like all crises, economies and societies will recover. This time, technology- enabled businesses will be better positioned than ever to serve consumers and businesses.
How can startups come out of this crisis?
The COVID-19 crisis affects startups asymmetrically. Some are experiencing a surge in demand such as online education and e-commerce and delivery. Others, such as travel and hospitality, have seen revenue go to zero.
In all cases, startup ventures, which are dependent on investor funding and are still burning cash, will need to focus on conserving cash and ensuring their survival during this period. Once the market recovers, those who are best capitalised will be best positioned to gain market share and grow.
What are the trends in the early-stage VC investment space in Indonesia?
Increasingly funds are seeking out opportunities that focus on the MSME space and moving on from pure consumer-focused opportunities. The 60 million MSMEs drive half of Indonesia’s economy but the vast majority do not use any technology-enabled services or applications. This is a huge opportunity for efficiency and value and it is drawing strong investor interest.
I recently read in an interview that Indonesia is facing an early-stage investment fatigue. What is your view?
I don’t think so. We believe there is still plenty of opportunities for early-stage investment and the market is ripe for further disruption by technology-enabled companies with better talent, consumer/SME adoption and capital available for entrepreneurs than ever before.