Q&A: 500 Startups' Khailee Ng

Q: What are valuations like in Indonesia’s VC space?

A: Valuations at the seed stage are reasonable. It’s not over competitive: I could look at something, wait a couple of weeks, and it’s still not filled. It gets more cutthroat in the Series A and B rounds – that is where the regional funds get interested. A lot of people are raising later-stage funds because traditional institutional sources of capital don’t want to dive into the seed stages, they prefer to wait until companies are more mature. Even some of our LPs are now looking at co-investments in Indonesian companies. We are in the process of organizing a tour for a UK family office that wants to write $5-10 million checks. We also see ‘Disneyland tours’ from Chinese investors who visit the big companies and the VCs. It used to be local players with some regional interest. Now you have local players, regional players and some folks from outside Southeast Asia for Series A and beyond.

Q: Go-Jek’s most recent round featuring several strategic investors from China as well as the likes of Astra International and Djarum Group. What does this say about the market?

A: The market is growing rapidly but at the same time most of the capital goes to a handful of companies. When global capital moves into a new region it goes for proven names, and right now for the Chinese investors that’s Grab and Go-Jek. As for the local family conglomerates, there are about 20 of scale and many of them own a bank. It’s likely one of them wants to get involved in some way and we do see banks and insurance companies being more aggressive about anything involving fintech because the disruption touches so many lives.

Q: Indonesia now has four unicorns – Bukalapak, Go-Jek, Tokopedia and Traveloka. What growing pains do they face?

A: The war for talent becomes greater, to the extent that you go outside the region to find the right people, because no one has built unicorns in Southeast Asia before. For example, I helped Bukalapak hire its head of growth from Australia. Regulation is another challenge. As soon as a company gets in the news, government officials start asking if it is paying enough tax and has the right licenses. That said, Malaysia, Singapore and Indonesia are competing to be friendliest to start-ups. They say, ‘We have a fintech sandbox, bring your crypto company here,’ because they want to keep a close watch on what is coming through. 

Q: How do you address the financial technology market?

A: We divide it into three areas. You have people providing payment and wallet services, which is old news. Then there is lending, where we see a lot of opportunities in using different datasets to lend to different people. It’s not just about P2P [peer-to-peer], but who is the P? Are you lending to farmers, call centers or Grab drivers? And who are you borrowing from? Are you in partnering with banks and insurance companies or raising capital from the crowd and from private individuals? We also like insuretech – there is a lot of low-hanging fruit around anything that helps insurance companies save money.

Q: And what about deep technology in Southeast Asia?

A: We invest heavily here. We’ve backed companies that aren’t necessarily based in Indonesia, but they want to rollout their technology in Southeast Asia and the market they want to enter first is often Indonesia. As well as investing in a start-up from Singapore that manufactures small rockets that launch satellites into space from a launchpad in Brisbane, we’ve backed a Hong Kong bioscience company that has built a micro biome bank by mapping the bacterial genome inside the gut. Singapore has attractive regulations around space, so we’ve seen a bunch of companies relocate there. Hong Kong has an encouraging set of policies around healthcare and biosciences. When you think about the next wave of unicorns, there isn’t going to be another Grab or Go-Jek or Bukalapak. It will be something that impacts a lot of people in a very meaningful way, hence the importance of deep tech.

Q: Would you still invest in e-commerce?

A: I care more about brands. If a company has its own brand and manufactures its own products, then I might be interested. All these well-funded e-commerce platforms want hit products and subsidies are offered across the system. If you have your own brand you can get the biggest profit margins and borrow money from banks. We invested in an Indonesian shoe company for these reasons.

Q: What are you seeing in terms of exit opportunities?

A: There is a lot of interest in secondaries for hot companies. I get cold emails from people who want to buy Grab shares – for example, someone who represents a Korean family office and wants to invest $10 million. I added up all the inquiries and it comes to $125 million. It’s become a bit of a marketplace in a real sense. There has been a small amount of activity in terms of IPOs in Indonesia, although when Sea went public in the US that inspired a couple of others to think about doing the same. Some local conglomerates and Chinese players have made decent offers for companies, but evidently not decent enough. Acquisitions by other Southeast Asian tech companies are possible – you can use cash and shares, but you need shares that are hot.

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• Topics
• Southeast Asia
• Venture
• Technology
• Financials
• Indonesia
• 500 Startups
• TMT