
Fund focus: AC Ventures hits its stride early

AC Ventures rallies global investors for an Indonesia-heavy Southeast Asia thesis, more than doubling its expected corpus as pandemic disruption changes everything but the plan
With COVID-19 shocking investment activity into a momentary freeze in March 2020, Indonesia’s AC Ventures hit a disappointing first close on its debut early-stage VC fund, which went unannounced. Fast-forward five months to October 2020 and the market had already learned to live with the new normal, allowing AC to seal an official first close of $56 million against a target of $80 million.
Fast-forward another year and the fund has ballooned to $205 million, where it closed last week with support from the likes of International Finance Corporation and Disrupt AD, the VC platform of Abu Dhabi’s ADQ. Again, COVID-19 was behind the surprise outcome, but Adrian Li (pictured), co-founder of AC, emphasizes that it does not reflect any deviation in strategy.
The original plan to spread investments of up to $3 million across some 35 companies remains unchanged, but maintaining exposure to the portfolio’s standouts by participating in follow-up rounds is becoming increasingly expensive. For context, the pandemic-driven technology boom in Southeast Asia has seen some start-ups grow from 10 to 400 people within 18 months.
“Pre-COVID, we thought a $80 million fund was sufficient to support our companies, but their growth has been so fast, and the growth in the size of the investments has been so big, a larger fund was needed to fit our strategy,” Li says. “Valuations have gone up, but they are not richer because the multiple you apply is based on accelerating traction and a growing opportunity.”
LPs from the US and Europe account for 40% of the corpus, with 35% coming from Southeast Asia, and 10% from the Middle East and North Africa. AC describes two-thirds of the capital as institutional. Of every $100 raised, $90 was sourced through video calls with existing relationships or first-degree referrals.
Much of the confidence was tied to the protracted fundraising period, which reduced the blind pool risk. AC’s early bets effectively offered a glimpse of the outcomes investing aggressively in a pandemic could deliver in Indonesia. Six portfolio companies are said to be fast approaching unicorn status, including e-commerce company Ula and fintech supplier BukuWarung, with the fund currently marked at 1.94x.
Thirty out of the expected 35 investments already made. In dollar terms, just over 50% of the capital has been deployed, and this is expected to rise to 65-70% in the first quarter of 2022 as various planned follow-on investments come through.
“For every investment we made, we could articulate very clearly our investment thesis and the founder’s story, how we sourced it, where we came in and how the company had grown,” Li says. “I think LPs really appreciated that, especially if they had never visited Indonesia and had never met the companies.”
Track record also played a role in a broader sense. Indeed, AC is billing its debut as Fund III. The firm was formed in 2019, when Li, then head of Convergence Ventures, and Pandu Sjahrir and Michael Soerijadji of Agaeti Ventures decided to merge their respective operations. This was on the back of a longstanding relationship of cooperation; for example, Sjahrir was an advisor to Convergence.
Each firm had one fund under its belt. Convergence raised a $30 million in 2016, while Agaeti closed a $10 million vehicle in 2018. They delivered returns of 2.99x and 2.41x, respectively. Combined with the new fund under the AC name, assets under management come to around $380 million.
For AC, the new fund is therefore an important milestone in cementing a brand that is already some years in the making but still new by institutional standards. To this end, the firm expects to double its currently 20-strong team in the coming year.
“Sophisticated international LPs understand that venture is a long-dated game, so they want to see managers who are not just there for one cycle but many cycles. Our ambition to create a generational platform means that AC is not just Adrian, Michael, and Pandu – it’s the entire team that we are building as well as all the knowhow and experience that we are institutionalizing,” Li says.
“It tells LPs that, one day, when we no longer want to work at the pace that venture operates at, we have a deep bench that will be able to continue the work we’re doing.”
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