3 VCs on investing locally vs globally

Photo credit: Tech in Asia.

Nikhil is a star contributor for Tech in Asia and publishes exclusive, high-value content that serves the Asian tech community. Read more from star contributors here.

Last November, I participated in a very interesting panel discussion at Tech in Asia Jakarta and thought I’d share the discussion here for the benefit of those who could not attend.

The theme of the panel was “Global vs domestic: Where should you build an investment strategy?” In summary, all the panelists agreed that the opportunity lies locally (Indonesia in this case). But we also agreed that it’s best to keep an eye on what’s going on globally to understand how to build companies at scale with business models that work.

Here are the views of each panelist.

Pauline Andriejanssen of B Capital

Local presence with a global vantage point

B Capital invests in B2B/B2B2C healthtech, fintech, and consumer enablement startups (payments, financing, logistics, AR/VR) with a US$5 million to US$20 million check size. The company has been an active series B fund in the region, with investments in NinjaVan and CXA in Singapore.

According to Pauline, the fund acknowledges the growth potential of Southeast Asian markets and thus wanted to be locally present. But the fund is also a global investor and wants to operate as a global team. This helps them identify the right opportunities at a macro level and avoid being disassociated from other parts of the world.

For direct B2C companies in Indonesia, according to Pauline, the biggest challenge is the cash burn needed to reach critical mass and to carve out a sustainable pathway. This is typically painful, and both the companies and the investors will have to be in it for the long haul. This is why B2B2C approaches will be required.

Pravan Malhotra of IFC

Invest locally with a global outlook

IFC is a fund-of-fund (FOF) backed by the World Bank. It occasionally invests directly in B2B, healthtech, fintech, and edtech startups with a US$3 million to US$20 million check size. It has invested directly in companies such as RedDoorz and Oway in Southeast Asia.

The fund is naturally global in its outlook and looks at investment opportunities globally. According to Pravan, the advantage of investing globally is the ability to quickly compare models and metrics across different companies when companies pitch to them.

He also adds that Chinese capital coming into Indonesia is interesting but that models in Indonesia will need to be frugal. This is because the Indonesian market is likely attuned to similarly frugal Indian business models due to the similarities in demographics and infrastructure.

Another interesting fact is that India had companies such as Flipkart who built the required infrastructure for themselves. But due to the lack of capital availability in Indonesia, bigger companies like Go-Jek are the ones that have access to capital and are trying to grow horizontally.

Nikhil Kapur of GREE Ventures