Recession Run: East Ventures’ bets during a downturn

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this Q&A series, we talk to Southeast Asia’s investors to suss out what opportunities they see, their thinking, and areas of investment they are looking at in the next few months.

While the world starts to feel the heat of the recession, Indonesia’s economy is yet to feel the impact. The country is expected to see a high 5% growth in gross domestic product this year. The economy has revived after the easing of Covid-19 restrictions, which has led to an increase in consumer demand.

As a result, sectors such as travel, food and beverage (F&B), and consumer commerce are seeing an uptick in business, Roderick Purwana, managing partner of East Ventures, tells Tech in Asia. That said, he still anticipates that there will be a slowdown. “The pace [of investing] won’t increase. If anything, it might slow down a little bit.”

Roderick Purwana, managing partner at East Ventures / Photo credit: East Ventures

But there’s a silver lining: Purwana says that some of the best fund performances have been seen during a crisis, as these times allow for investors to get the best investment deals at a much more reasonable valuation.

Here are more insights from Purwana on East Ventures’ plans during the recession period and some of his advice for founders:

What particular startup sectors will/won’t be affected by the current economic headwinds?

Travel is now benefiting a little bit more than other [sectors]. There is cabin fever or pent-up demand, so people just want to travel. Unfortunately, on the supply side, they’re not running up to 100% capacity.

In other areas, I think consumer apps like ecommerce are still pretty stable. Maybe there’s some decline in online time spent, like in gaming and livestreaming. Those platforms that are exclusively or dedicated to online behaviors might see a reduction in time spent. Other areas like fintech and logistics – I think it’s not growing, even though the economy [in Indonesia] is still doing OK.

Will your firm increase or decrease its investment plans during this period?

East Ventures has already done 22 funding deals in Q1 2022 (from 10 funding deals in Q1 2021). So it will be quite difficult to increase the pace [of funding deals] from there. But we’re coming into a market that has shifted in terms of expectations, especially in the public markets. We’re seeing a repricing of some of the deals, especially with companies in the later stages. Maybe expectation of valuations will shift as well in the next six to 12 months.

We think that it’s an excellent time to be an investor right now. Now the pace [of investing] won’t increase. If anything, it might slow down a little bit. If there are really good companies out there at reasonable valuations and we like them, we’ll still invest in them. But we’ll be cautious as well and look at the market.

East Ventures’ team / Photo credit: East Ventures