This Indonesian fintech startup bagged $60m, but is yet to fully cash in on its product

BukuWarung, an Indonesian-based fintech company that focuses on micro, small, and medium-sized enterprises (MSMEs), announced it has raised US$60 million in series A funding.

The investment was led by Peter Thiel’s Valar Ventures and US-based VC firm Goodwater Capital. Former GoPay chief executive Aldi Haryopratomo, Klarna founder Victor Jacobsson, and some existing investors also participated in the round.

This latest fundraise brings the company’s total funding to US$80 million to date.

A boba seller is using BukuWarung’s app / Image credit: BukuWarung

What’s worth noting is that the startup has raised the large amount while most of their service in bookkeeping and commerce products are still available for free.

After the publication of this article, BukuWarung later on clarified that it has received a significant revenue from payment service by charging users for some fees after they had completed multiple transactions on the platform. However, they refrained from specifying the revenue amount.

According to Adrian Li, managing partner of AC Ventures (which also participated in this round), digitization for MSMEs is a long-term game. “While it’s still early days, BukuWarung has shown strong execution and traction on its products. There is a financing gap of over US$50 billion for MSMEs, which means there is a massive potential in this sector,” he says.

The popularity of fintech startups Khatabook and OkCredit in India have served as a reference for investors, an industry insider points out. That’s one reason why these investors have poured funding into similar startups in Indonesia, fueling a race among digital bookkeeper firms in the country.

What will eventually determine the winner, says Li, is a focus on fast product iterations, a clear strategy toward deepening merchant engagement, collecting dense data, and unlocking financial services for MSMEs. “Nonetheless, we believe the market is huge for multiple players to co-exist,” he says.

First, gain users trust

According to BukuWarung CEO Abhinay Peddisetty, the company is still in the early stages of building value for its users. When the value of the product matches user expectations, that’s the time when the company can start to generate revenue, he says.

“It’s similar with Amazon and Facebook. Can they generate revenue from advertising since the early days? Yes they can. But they decided to delay it because they understand that the users will have an intention to buy a product [that they see on these platforms] when the time is right,” Peddisetty tells Tech in Asia.

MSME owners in Indonesia also need a lot of education in using digital products, he says.

While the company already conducted multiple pilot projects with several fintech lenders – giving loans to users in second-tier and third-tier cities in Indonesia – Peddisetty says “it’s still not in the scale that we want.” The CEO notes, however, that the pilot does show early signs that there will be revenue in the segment moving forward.

Being frugal