Deal focus: Bibit lays claim to be Indonesia’s Robinhood

The GameStop short squeeze was a high-profile demonstration of the growing influence of robo-advisory platforms and their bid to democratize finance. It also showcased the vulnerability of these nascent platforms as several online brokerages used by retail investors – notably Robinhood – halted transactions because they couldn’t post sufficient collateral with clearing houses to execute orders.

Robinhood ended up raising $3.4 billion in emergency funding led by Ribbit Capital. This followed a prolific 2020 during which the company secured $1 billion in Series F and G funding, with its valuation hitting $11.2 billion.

Indonesian robo-advisory player Bibit is a fraction of Robinhood’s size, but it has benefited from rising exposure for the wider industry, according to Adrian Li, a founder and managing partner at AC Ventures. The start-up recently closed a $65 million round – barely four months after receiving $30 million.

“Interest in this round was not driven by the company; it hasn’t been out there actively fundraising,” Li says. “It is driven by Bibit’s transaction and by global investor interest in backing a company that has executed well in this area, especially given what they see in other markets around the world. It is one of those industries that has benefited from COVID-19.”

Sequoia Capital India led the last two investments in Bibit. Additional contributions came from Prosus Ventures, Tencent Holdings, Harvard Management Company, AC Ventures, East Ventures, and 500 Startups. Li first backed the company in 2019 via Convergence Ventures, a local VC firm he co-founded and then merged last year with Agaeti Ventures to form AC Ventures.

The Convergence team had been following Bibit for several years but didn’t participate in two earlier funding rounds in 2015 and 2017. This is because the company’s robo-advisory business didn’t exist until 2019. Before that, Bibit was known as Stockbit and served as a stock tips platform for retail investors.

“The forum is an incredible community of sophisticated investors, but at the time, the company was purely a forum. We thought that wasn’t scalable from a revenue standpoint – people are trading tips but you aren’t going to monetize that traffic,” Li explains. “So, we continued to monitor them as they launched the robo-advisory business.”

Stockbit is still there, serving as an information portal as well as offering brokerage services. Bibit, meanwhile, is part of a wider effort to encourage local investment in mutual funds. Many of the same democratization characteristics remain: low cost, mobile-first, easy to use. Investors participate in surveys that assess their risk profiles and return objectives, and Bibit recommends different suitable portfolio options. Both sides of the business rely on user subscriptions or sales commissions.

Li highlights two other factors that have contributed to Bibit’s rise. First, a decline in the friction around depositing and transferring money for the consumption of digital financial products. Second, growing retail investor appetite for stocks. “Interest in capital markets generally has increased since the bottom of the market last year,” he says. “The number of retail investors in Indonesia has grown significantly.”

The company claims that millennials and first-time investors make up 90% of its user base. They are behind a surge in mutual fund consumption nationwide. According to the Indonesia Stock Exchange and the Indonesia Central Securities Depository, there were 3.2 million mutual fund investors at the end of 2020, up 78% year-on-year. Millennials accounted for 92% of the new additions. A further one million investors entered the market in the first quarter of 2021.

Nevertheless, fewer than 2% of Indonesia’s 273 million population has participated in the capital markets. Investor communication is therefore a key part of Bibit’s product offering as it reaches out to first timers. The company has recruited celebrities such as actor and comedian Raditya Dika to appear in educational videos and run contests that give people the chance to test their investing knowledge.

The proceeds of the latest round will go towards the launch of new products, technology development, recruitment, and investment in financial education and awareness. Li stresses the importance of having digital infrastructure and customer service – as well as working capital – to keep up with the pace of new customer additions to the platform.

There are other Indonesian apps offering robo-advisory services, among them Bareksa, Fundtastic, and Ajaib. The latter secured a $65 million Series A extension earlier this year, taking the overall round to $90 million, led by Ribbit. However, AC Ventures claims Bibit is the only player operating two platforms – the brokerage service and the mutual fund advisory business – each with a distinct audience.

“They account for a sizeable percentage of the digital investment market across their two platforms,” Li says. “And we liked the fact they had both. Stockbit had an immediate proof of market, albeit with a lower revenue ceiling. Bibit at the time wasn’t proven, but there was a massive opportunity to get people into saving via the capital markets.”

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• Topics
• Southeast Asia
• Financials
• Early-stage
• Indonesia
• Sequoia Capital
• East Ventures
• AC Ventures
• Tencent
• Prosus Ventures
• Financial Services
• Fintech