AVCJ Awards 2021: Deal of the Year – Small Cap: Ajaib

Ajaib was no overnight success, but founder Anderson Sumarli firmly believed that “slow is fast.” The company spent 12 months finding the right product-market fit and launched in early 2020. Within six months, it had become Indonesia’s fifth-largest stockbroker by trading volume.

For Sumarli, the planning began in 2018 while he was still an MBA student. He wanted to launch a digital platform for insurance, but soon realised that Indonesian consumers were using insurance as a means of investment. This provided the impetus for turning the business plan on its head and creating a mutual fund platform instead.

“When we started out and launched in early 2019, very few investors believed that Indonesians actually want to save and invest their money for the long term. Everyone assumed that people were just purchasing a lot of stuff on e-commerce sites. We were very lucky to have investors who really believed in what we were doing from the beginning,” said Sumarli.

Ajaib raised a USD 2.1 million angel round in 2019 from Insignia Ventures Partners, SoftBank Ventures Asia, and Silicon Valley-based Y Combinator.

With the growth of the mutual fund platform, it became apparent that investors preferred to invest in stocks directly rather than have managers make trades for them. Ajaib duly altered course. Sumarli would speak to 50 customers per week in the early days, trying to understand their needs and motivations. Lacking reliable data, he favoured direct and deep interaction over surveys.

The most telling insights often came in the last five seconds of conversations, when the customer thought the interview was over. For example, one customer was effusive in his praise for the product, then at the very end, said that he wished there was a place where he could learn about investment. Ajaib added an education feature, which is now among the most popular.

These moves were motivated by gut instinct – something Sumarli believes is responsible for the best and worst decisions people make. His rule is to be conscious of where decisions come from.

Sumarli laboured over perfecting his product because it had seen so many start-ups embark on aggressive and expensive marketing campaigns before they were ready. By contrast, Ajaib didn’t spend anything on marketing in year one. This led to slower growth, but relying on word-of-mouth translated into greater stickiness because customers actively sought out the platform.

“It’s really important to start with the right foundations, because you don't want to fool yourself and think that you have product-market fit when in fact your exponential growth is coming from exponential spending of money, not from a superior product that wins over a long period of time,” Sumarli explained.

In this sense, he borrowed from Y Combinator’s philosophy: it's better to have 100 customers who love your products than 1,000 customers who just like your products.

Scale proposition

With the right product and a loyal customer base, Ajaib entered 2021 aiming to hyper-scale. More capital was raised to support these ambitions, with Li Ka-Shing-controlled Horizons Ventures and Alpha JWC Ventures leading a $25 million Series A round in January of that year. SoftBank Ventures Asia, Insignia Ventures, and Y Combinator re-upped.

Two months later, Ribbit Capital led a USD 65m extension. In October 2021 [after the qualification period for the AVCJ awards had ended; Ajaib won for the Series A], a Series B closed on USD 153m. DST Global took the lead, with Insignia, Ribbit, Horizons, and SoftBank contributing additional capital. The valuation was USD 1bn, making Ajaib Indonesia’s seventh unicorn.

Sumarli noted that the investors are contributing more than capital. Y Combinator, which has seen tens of thousands of companies graduate from start-up to IPO, helped the company on organisational structure as headcount 50-fold to 500. Alpha JWC, an Indonesia-based venture capital firm, has provided input on recruitment.

Ribbit, meanwhile, facilitated access to other financial technology start-ups in its global portfolio. There were introductions to David Vélez of Nubank, a Brazilian digital bank that listed last year, and S.G. Lee of Viva Republica, operator of Korean money transfer app Toss, which is valued at USD 7.2bn. Both gave advice on scaling and strategy.

Returning to the topic of product-market fit, Sumarli noted that it is possible to have the right product but the wrong customers. Ajaib initially targeted the upper-income segment, but it turned out the middle-income and low-middle-income brackets were the most underserved.

The company emphasised attracting first-time users, especially millennials, leveraging education-driven communities, lower commission fees than local brokerages, and fractional shares that lower the financial entry barrier. This was supported by slick technology. New users can open an account in as little as two hours, while transactions can be executed and portfolios tracked via mobile.

“There are three key factors in launching a good fintech product: a user-centric product; the development of a strong distribution network and community to lower customer acquisition costs; and close ties with regulators and the ability to secure licenses. Ajaib has demonstrated strong capability in all these areas,” said Yinglan Tan, founding managing partner at Insignia.

Quality control

Ajaib was also careful in its regulatory positioning, which delayed its launch. The company wanted to hold its own brokerage license, rather than partner with an existing financial institution, even though this meant building the entire service stack from scratch. A license was secured in 2020 through the acquisition of Primasia Securities, a decades-old brokerage firm.

Sumarli – who believes regulators should be treated as partners – felt vindicated in that it allowed Ajaib to pursue its own vision and retain full control over product, operations, and distribution channels. “You need to establish a direct relationship with your customer and not go through another platform to distribute your products,” he added.

With the company headed in the right direction, Sumarli’s focus has shifted from questioning customers to ensuring he has the right people to maintain quality at scale. Recruitment now accounts for approximately half his time, up from less than one-quarter in the early days.

The company has barely scratched the surface in terms of expansion. It counts more than one-third of Indonesia's 2.6m retail stock investors as customers, but there are still many prospective first-time users waiting to be converted in a country with a population of 270m. While cross-border moves have been considered, Indonesia is the current priority.

“Indonesia is the largest market in the region, if you win Indonesia, you win Southeast Asia,” said Insignia’s Tan.

Indeed, Ajaib may have his eye on a broader product offering within the domestic market. The company is readily compared to Robinhood Markets, which is credited with leading a revolution in retail trading services in the US. Sumarli, however, would prefer to be the Indonesian equivalent of blue-chip asset manager that serves institutional and retail clients: Charles Schwab.

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• Topics
• Southeast Asia
• Technology
• Early-stage
• Financials
• Indonesia
• Fintech
• Insignia Venture Partners
• Alpha JWC Ventures
• SoftBank Ventures Asia
• Y Combinator
• Horizons Ventures
• AVCJ Awards