Profile: Kejora Ventures' Sebastian Togelang

To understand the Kejora Ventures approach to portfolio construction, rewind 10 years and relocate to Frankfurt. Sebastian Togelang is running Neodone Group, an IT outsourcing company, with approximately 50 employees spread across Germany, Indonesia, India, and Ukraine. The business is eight years old; it has built up a stable roster of clients in need of websites, portals, and customer relationship management systems; revenue is in double-digit territory. But Togelang isn’t happy.

“I started in 2002 after the internet bubble burst and then in 2008 the global financial crisis came, so there were a lot of times in the first part of my life where I was only eating rice and maybe an egg to save money. I was investing my own money to survive but the company couldn’t scale. I decided I was in the wrong business,” he recalls. “I wanted to build bigger things – sometimes it is easier to create a bigger business than a smaller business. And what I learned from Germany is that I shouldn’t do everything myself. I should work with the best partners to build something bigger.”

Kejora, the venture capital firm Togelang launched with serial entrepreneur Andy Zain in 2014, now has $400 million in assets under management (AUM) and an investment remit that takes in seed to pre-IPO rounds. The portfolio has a strong focus on financial technology, but also takes in human resources, logistics, and education. They represent not only a cross-section of high-growth industries anchored in Indonesia’s strong macro fundamentals, but also a collection of operating entities that complement one another.

“We invested in a fintech company first, but I realized I needed to hire a lot of people, so an HR company came next. It has been supplying our ecosystem with talent for a while. It’s a strong business – it could become like Recruit Holdings in Japan; if it got to one-tenth that size it would be worth $6 billion – but there is a lot of synergy,” Togelang explains. “We also have data: we know where a person has worked and where they are applying for jobs. If they need additional skills, we can offer them training. Our education company only has 15 employees and it’s already profitable.”

Giving guidance

Alibaba Group is offered as a blueprint of sorts. The Chinese e-commerce giant started out as a B2B sourcing platform, expanded into the B2C space, added on logistics and payments, and now has interests stretching from entertainment to IT services. Kejora wants to achieve something similar but build a complementary ecosystem rather than a single company that makes bolt-on acquisitions. Electric motorcycles are the latest addition. The plan is to get the 16,000 drivers handling last-mile delivery within the logistics business to start using them, then move outside the family group.

Togelang claims the ecosystem itself has become a selling point. Start-ups approach Kejora as much for access to the network of 50 million users and three million small and medium-sized enterprises (SMEs) as for access to the firm’s capital. In some cases, a readymade customer base means less money is spent on marketing, lower cash burn rates, and a shorter path to sustainability.

“We mentor a lot of entrepreneurs – we tell them to think big, don’t try to do everything by yourself, and look at how you can scale by working with other investors or partners,” he adds. “I never had that guidance; I didn’t know what sort of company to build. I was an Indonesian in Germany, so I connected programmers in Asia with projects in Europe. And I learned my lessons the hard way in those first 10 years. Maybe with the right mentors, I would have taken a different path.”

Guidance is a recurring theme in conversation with Togelang. It is likely no coincidence that he considers his father walking out on the family – the removal of an authoritative and supportive figure – as a turning point. Togelang describes his life until age 18 as simple yet stable. Born in Germany to Indonesian parents who moved to the country for study, they returned home when he was eight. His competitive energies were primarily channeled into sports, with academic pursuits put on the backburner. He had recently enrolled at Frankfurt University when his father departed.

“Suddenly I had to finance myself, I had to pay the school fees. Life changed completely. I was doing IT stuff at the stock exchange and e-programming for Deutsche Bank, and then because I dreamed of becoming independent and starting my own company, I was working night shifts in a factory as well,” Togelang says. “When my father left it was a terrible time, but it opened my eyes and helped me become what I am now. I went from being a relaxed person to an ambitious person.”

There followed a period of intense activity. In addition to establishing and running Neodone from 2002, Togelang founded Jobwiwi, a recruitment site aimed at graduates with a background in economics. The business didn’t attract any VC funding and he sold it to a competitor in 2013, making back his principal, but nothing more. While Togelang admits that Jobwiwi was too niche to get traction, there is also a sense that he was charging blindly down multiple entrepreneurial avenues. “I was doing everything I could,” he recalls. “I never had anyone guiding me.”

Moving back

The return to Indonesia was driven by a desire to participate in the country’s nascent internet industry. Having invested in start-ups in Germany, Togelang thought he knew how the story would play out in Indonesia – rising internet and smart phone penetration, rising disposable incomes, a young and consumer-centric population – and regarded it as a now-or-never opportunity. He sold his companies, exited some extraneous investments, offloaded his apartment, and took the plunge.

“In 2002, we used modems to connect the internet and I was paying a couple of thousand dollars for access. It was difficult to develop software for European markets because the internet speeds and knowhow weren’t as developed,” Togelang says. “I thought about moving back in 2006 but I think there were only five million internet users in Indonesia. Returning in 2013 was slightly too late but early enough, so I made the move. Indonesians could browse the internet at speeds required to buy things online. I think that was the trigger that Indonesia was ready for internet companies.”

Making the transition in 2013, Togelang shuttled between Germany and Indonesia 25 times, spending two weeks in each country at a time. He had no track record in Indonesia, no experience as a venture capital investor anywhere, and no formal financial training. In Zain, he found a like-minded partner who was steeped in the local technology scene. But working with the best partners on building something of meaningful size meant pitching to Southeast Asia’s family conglomerates.

Selling the internet to second-generation digital converts was relatively straightforward; convincing first-generation patriarchs accustomed to asset-heavy business models was not. Nevertheless, Togelang persevered, pointing to industry development patterns already visible in the US and China. Three families – among them petrochemicals player Barito Pacific and paint manufacturer Propan Raya – came in alongside Togelang to form a $7 million fund. It would have been larger, but a fourth family pulled out at the last minute.

“Fund I was easier to raise than Fund II,” he remarks. “I was like an international beggar, traveling all the time, reaching out to people I didn’t know and asking for money. Fund I had no exits, so approaching institutional investors was hard. Once we got more of a track record, investors come to us. I used to meet families 10 times, they would say ‘We really like you,’ and then put in $500,000. Now you meet them a couple of times and they give you $20 million.”

Fund II came in under target, but Kejora has gained considerable traction since then. Early investments in the likes of financial supermarket C88 and HR services business Qareer have come good, while several later portfolio companies – lending start-ups Kredivo and Investree and online fashion platforms Pomelo and Sorabel – have progressed to Series B and C rounds. Meanwhile, digital marketing player Diva completed a domestic IPO.

Scaling up

Of the 35 companies Kejora has backed, Togelang claims more than half are profitable. About one-third are valued above $100 million and are among the top three in their respective industries. Moreover, the firm eschewed unicorns with high cash burn, potentially missing out on some stellar returns, but keeping its failure rate low. Togelang says that only two of the 35 have failed, and neither represented a large equity check. As of September 2019, Funds I and II had generated IRRs of 33.8% and 95.8%, respectively. Preqin ranked them top quartile for their vintage, within Southeast Asia and globally.

Although the rise has been rapid, it required a leap of faith from all concerned. Togelang convinced J.P. Ellis, CEO of C88, to abandon his own business idea and work on a fintech start-up when fintech wasn’t a recognized term in Indonesia. He brought in Karl Knoflach who previously helped establish Check24 – the German inspiration for C88 – as another co-founder.

“I told [J.P.], ‘Why you want to try and create a flying car or a Tesla in Asia? There’s no infrastructure for that here. Maybe two people will buy your car. Leverage your experience in finance instead,’” Togelang says. “I created the logo and partially invented the name. I had no idea how much of a hassle it would be back then. You couldn’t convince any bankers of the business model. They would just ask, ‘What is online financial services?’”

Around the time Kejora was raising Fund I, the team was approached by Indosat Ooredoo, one of Indonesia’s leading telecom providers, to help establish an incubator. Together they formed Ideabox, with Indosat putting up the money and Kejora running the operation in return for shares in the portfolio companies. It offered a foothold in the pre-seed stages, but Kejora ended up achieving this internally by opening co-working spaces for entrepreneurs alongside its offices in the region. The firm now has bases in Singapore, Malaysia, Thailand and the Philippines, as well as Indonesia.

A third early-stage fund with a target of $30 million was launched earlier this month in conjunction with Japan’s SBI Holdings. It follows a final close last year on a debut growth fund of $100 million, for which South Korean VC firm InterVest is the strategic partner. Another growth-stage vehicle is in the pipeline, while Togelang is currently raising a special situations vehicle. He spends most of his time on pre-IPO investments now – where the check sizes are above $20 million – with separate teams responsible for early and growth-stage activity.

“Our goal is to help entrepreneurs become the largest in their markets, and in most markets, the top three players will take a 70% share. We want them to become number one and then maintain that status for the next 20 years,” he explains. “That is the purpose of the ecosystem, so I am making it bigger and bigger, with multiple funds. It’s a similar model to the US and China. Ultimately, I would like Kejora to become a large asset management company.”

Lockdown living

The coronavirus pandemic is no deterrent to this ambition. Togelang has been working from home since March and finds his respite from Jakarta’s heavy traffic a blessing. He estimates he loses about an hour a day commuting. That time is now earmarked for early morning tennis sessions as a precursor to days of back-to-back videoconference calls.

He believes now is the time to invest in undervalued businesses and to double-down on existing portfolio companies in areas such as logistics and online education that are beneficiaries of social distancing. Kejora is also receiving more inbound inquiries from corporate and family groups – often those with exposure to traditional retail assets that have been hit hard by COVID-19 – that want to learn about digitization. Some are investing in the latest early-stage fund, others just want to get close to the Kejora ecosystem. And from Togelang’s perspective, the more partners the better.

Six years after swapping Germany for Indonesia, his philosophy remains go big or go home. “I don’t like small things. I like to do impactful things; I like to contribute to the world,” Togelang adds. “If someone asked me, ‘Why don’t you collect watches? Why don’t you collect cars?’ I would say, ‘I don’t because actually I collect companies.’ It is my passion to see entrepreneurs and companies grow and to work with them from day one.”

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• Topics
• Southeast Asia
• Venture
• Technology
• GPs
• Indonesia
• Kejora Ventures