Takahiro Suzuki is a familiar face in the startup community in Southeast Asia. A serial investor, he was CEO of CyberAgent Ventures (CAV) Indonesia until a few months ago. He is also an early investor in Indonesian unicorn Tokepedia.
In an interview with e27, Suzuki talked about his past investment experience, the startup industry in Southeast Asia and Japan, and the fund’s future plans.
Below are the edited excerpts:
There are now quite a few VC funds for early-stage startups in Southeast Asia. Why does the region need another fund? What is your USP?
Yes, there are quite a few VC funds for seed/early-stage startups in Southeast Asia, but we, at Genesia, have three unique selling propositions. First, we are able to make a large investment per company. While our initial investment focuses on the seed/pre-Series A round, we are able to invest up to US$5 million per company in our follow-on investment on the next round. We believe that follow-on investment provides a strong boost to the next round fundraising of startups.
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Second is our quick investment decision making. We have one general partner in Japan and another in Jakarta. Of course, we have due diligence process before finalising an investment, but our investment decision can be made in a few weeks at the shortest.
Third, we are experienced in VC investment in Japan and Southeast Asia, and we have built a large network of business contacts across Asia. While conventional industries have not been developed fully in Southeast Asia, there are many business fields where digital businesses have been growing rapidly before conventional industries do. There are also multiple industries where businesses such as Grab and Go-Jek have leapfrogged Japanese counterparts. Such pieces of information are helpful in making a better investment decision and formulating business strategies of our portfolio companies in Japan.
In Japan, on the other hand, conventional industries are now being redefined, and we are investing in a large number of B2B startups aiming to bring about digital transformation. Digital transformation is expected to be a major movement in Southeast Asia in the future, and we will surely be able to take advantage of our investment experiences in Japan.
Also, many major Japanese enterprises now focus on Asia for future growth. Our limited partners are composed of Japanese major enterprises and banks, and our investment experience in CAV has allowed us to build a network of contacts with enterprises and venture capitals both in Japan and Southeast Asia. We believe that this will help us navigate through the process of funding portfolio companies and forming alliance with them. It is our view that our investment experience and business network in both Japan and Southeast Asia make us different venture capital firm from others.
There is no dearth of funding for seed-stage startups in Southeast Asia, but clearly the region lacks Series B and C investments. Plus, there is a perception that there is a lack of good startups in Southeast Asia. What is your view?
We would like to contribute to the development of Asian societies as a seed fund with the three unique selling points outlined above. Also, regarding the perception that there are not enough good startups in Southeast Asia, we also feel that there may be more good startups in the US and China in terms of number, but this is only because there are a lot more startups there in the first place, in comparison to Southeast Asia.
We believe that good startups make up pretty much the same proportion of startups in both Southeast Asia and other regions. As the startup ecosystem is rapidly maturing in pace with the economic growth in the region, we are certain that there will be many startups that will grow substantially.
You are an early investor in Tokopedia, which is now an e-commerce unicorn. What prompted you to invest in the startup back then? Had you expected this company to become a unicorn in future? Have you already exited your investment?
As the marketplace was dominated by unicorn companies everywhere in the world, I invested in Tokopedia expecting that it would become a unicorn company in the future as well. I could not imagine that it would grow this rapidly, though.
The biggest reason for the investment is the determination of its founders William Tanuwijaya and Leontinus Alpha Edison. They strongly said that they seriously wanted to make the Indonesian society even better through Tokopedia. I wanted to support them in this mission and decided to invest in them.
Whether I hold their stock or not is non-public information and therefore I cannot disclose it.
What do you think were the few things that Tokopedia did right to help it conquer the e-commerce industry in Indonesia?
I personally think that Tokopedia was able to grow so rapidly because of the following three reasons:
1- Development of the customer-first services (the pursuit of consumer and merchant convenience)
2- Nationwide, rather than Jakarta-wide, expansion (in particular, they began recruiting merchants nationwide at the early stage)
3- Strong vision and team (they had a strong vision of making Indonesia an even better country, and they were able to create a Nakama [team] that believed in this vision).
Do you think Indonesia has the potential to produce more unicorns like Tokopedia? Are you betting on any tech companies to take a similar growth trajectory in the country?
Yes. We believe that multiple unicorn companies will emerge from Indonesia. We also always try our best to invest in companies that will potentially become unicorn companies.
Do you regret not investing in companies such as Go-Jek and Grab that have later become unicorns?
No. I did have the chance to invest in them, but I do not regret not having done so. But I did learn a lesson because I had not been able to imagine that the businesses would become as diversified as they are today. I would like to be able to foresee how a particular business would grow from its present state.
How is the overall startup ecosystem in Southeast Asia doing. Which country in the region has the potential to compete with Silicon Valley? What are your views on the startup activities happening in Malaysia?
Now many people in the US, China, India, South Korea, etc., are investing in Indonesian startups, and the ecosystem is getting richer. There are now exit cases, if not many. We feel that the startup ecosystem will become even richer if unicorn companies begin to go public on the stock exchange. Silicon Valley is Silicon Valley, so it makes no sense to compare it with Southeast Asia.
We believe that startups doing business in Indonesia are more likely to become unicorns compared to other countries in Southeast Asia. There are many outstanding startups in Malaysia, and some of them are already profitable. On the other hand, as a nation, the upside potentiality of the market is limited, so we feel that if a company should grow big, it would have a business model capable of overseas expansion like that of Grab.
What are some of the companies that you think can change the startup landscape in Southeast Asia?
In order to enrich the startup ecosystem, we expect to see Go-Jek, Grab, Tokopedia, etc., offer IPOs or secure even larger funds to proactively perform M&A, etc. We also expect to see more entrepreneurs with working experience in those unicorn companies.
Why did Genesia choose Jakarta to base its Southeast Asian headquarters?
That is because Indonesia is the largest and the most competitive market in Southeast Asia.
How many companies does Genesia plan to invest from the second fund? Have you identified any startups for investments? In addition to funding, what else do you provide to your portfolio companies?
We have not yet decided how many companies we will invest in from the second fund, but we are not going to increase the number to three or four a year. We will remain selective in our investment decision. There are already some companies that we are committed to investing in.
In addition to funding, we support them through business strategies discussion, consultation regarding organisational structures and recruitment plan, and fundraising (providing support for making pitch-deck and network with investors not only in Japan and Southeast Asia but also other regions).
What is your average ticket size? Is it going to be different for different markets in the region?
Our investment policy is basically the same everywhere in Southeast Asia. As our initial investment targets the seed/pre-SeriesA round, the average ticket size will be US$300,000-$600,000. The amount of follow-on investment varies from company to company. Our plan is to make the average investment amount per company $1-2 million, including follow-on investment.
Is Genesia I already exhausted? Does it have any notable exit to its credit?
We are no longer making initial investments from fund I. We only have budget for follow-on investments. So we will make initial investments from fund II in the future. There are not so many exits so far because it’s been only 2 years since the foundation of fund I, but we have some.
How has been your experience as General Partner of CyberAgent Ventures? Why did you leave the fund to join Genesia?
My work with several entrepreneurs in Southeast Asia and Japan has driven my interest to be a General Partner at an institutional VC firm, against the possibility of working for a CVC.
Most, if not all, of Genesia’s Limited Partners are from Japan. Are they bullish about Southeast Asian startup industry?
While Japan is still the third-largest economy in the world, its market will not be growing rapidly in the future. Therefore, many Japanese enterprises looks at Asia as important market for their future growth. We strive to be a platform that connects such Japanese enterprises and startups in Asia.
How is the sharing economy faring in the region? Does it have potential to grow even bigger?
As real estate, cars and bikes and equipments of construction and agriculture, etc. are expensive assets, we think that sharing economy for those assets has potential for growth. Therefore, we have already invested in Luxstay, a home-sharing platform in Vietnam. Also, as we invested in Sukedachi (on-demand job-matching platform for contractors and construction workers) and Taimee (on-demand temporary employment platform) in Japan. We are also keeping an eye on the gig economy in Southeast Asia.