Entrepreneur / November 2016
By Muhamad Al Azhari & Devina Halim
Former JPMorgan investment banker Adrian Li now heads Convergence Ventures, investing modestly in early-stage technology companies. Most importantly, he has brought to the country members of the China Angels group, a powerful collaboration of some of China’s biggest technology venture capitalists, to show off the country’s potential.
For Adrian Li, the founder and managing partner of Convergence Ventures, a venture capital fund that invests in and accelerates early-stage technology companies in Indonesia, the country offers an enormous market opportunity to follow in China’s footsteps to grow its tech start-up industry.
“Indonesia is a market in Southeast Asia big enough by itself to create a billion dollar-value company,” he told GlobeAsia in an interview in his luxurious office on the 26th Floor at Citylofts in Central Jakarta last month.
Convergence currently manages a $25 million fund with limited partners from Indonesia, China and the United States. It has investments in 17 start-up companies that are responsible for about 1,000 jobs in Indonesia and Southeast Asia.
Adrian previously was Rocket Internet’s managing director and spent several years in investment banking with JPMorgan. Prior to establishing Convergence, he developed experience co-founding and leading several venture capital-backed internet companies in emerging markets.
Not content just with investing in Indonesia, Convergence has also been active in introducing the country’s enormous market opportunity. In June, the fund brought to Indonesia the China Angels, an exclusive club of investors and entrepreneurs who have invested and founded billion-dollar technology businesses in China. Eight high-profile investors and entrepreneurs were part of the China Angels group.
They included Xu Xiao Ping, founder of the Zhen Fund, China’s largest seed-stage investor; Kai Fu Adrian, founder of the Sinovation Fund, a $1.3 billion venture fund; and Cai Wen Shen, chairman of Meitu Technologies, maker of the world’s largest digital photo application with over one billion users.
The delegates visited two of Indonesia’s largest technology ventures, Go-Jek and Tokopedia. The investors and entrepreneurs also listened to elevator pitches from over a dozen early-stage ventures.
“As China’s technology market matures, domestic investors have started to seek opportunities abroad. Indonesia’s entrepreneurs can learn a lot from the experience of markets such as China so this is a great opportunity for everyone to benefit,” said Adrian.
And, adds Donald Wihardja, a partner at Convergence Ventures who also plays a key role in the fund’s business development, “China can play a significant role in supporting the development of Indonesia’s technology industry. By facilitating connections between both markets we can provide access to entrepreneurs in Indonesia to both investment capital and know-how.”
The high-profile investors within China Angels are already backing Convergence, from advisory roles to capital investment, said Donald, who also frequently advises the Indonesian government on technology-related matters.
Missing the party
Established in 2014, Convergence is a relatively young venture fund. Adrian admitted it had missed the opportunity to invest in the early stage of some of the biggest tech start-ups in Indonesia like app-based ride-hailing service Go-Jek.
The fund also missed the opportunity to join the “phase 1” party in the e-commerce industry in Indonesia, which he described as the era when the so-called “horizontal” e-commerce players began offering their services to customers. Players in this category are companies that sell products from a large number of categories via online channels. The platforms operate as one-stop services.
According to Adrian, who is also a board member of the Hong Kong-ASEAN Economic Cooperation Association, some of the big players in this category in Indonesia include online marketplace platforms like Tokopedia and Bukalapak and online retailers like MatahariMall, Lazada and JD.id.
However, as consumers are becoming more comfortable with e-commerce services and have greater trust in the industry, Adrian said they have begun buying other types of specialized needs online. This brings opportunities for vertical e-commerce players - specialist players - to join the party.
Players in this category include e-commerce businesses concentrating on one specific line of products, for example baby products or fashion.
“There are opportunities in there. It is like blue ocean,” said the graduate of Cambridge University with a BA and MA in Economics.
Taking the broad view, Indonesia’s e-commerce market is predicted to grow rapidly between now and 2020. According to Minister for Information and Communications Rudiantara, the country recorded just $12 billion in e-commerce transactions in 2014 but they are expected to grow to $25 billion this year.
The government is targeting to see the figure grow to $130 billion by 2020 as it opens up investment in the sector to foreign players. Should the prediction come true, this would place Indonesia third behind China and India in terms of e-commerce transaction values in Asia.
Spotting the market leader
Commenting on how Convergence picks companies to be included in its portfolio, Adrian said the venture fund likes businesses that fall into a certain category, such as those in digital media and aggregator businesses, or those compiling directory listings in a particular area.
Convergence also likes tech companies that grow along with the e-commerce business like payment technologies, logistics companies or those providing advertising technology.
These preferences are reflected in its investments. In September 2014, Convergence invested in Female Daily Network, the largest forum for fashion and beauty in Indonesia, founded by famous lifestyle bloggers Hanifa Ambadar and Affi Assegaf in 2007.
Adrian, along with some other partners, also founded Qraved, a food discovery site. Convergence participated in the Series A funding in November 2014 and in October 2015 Qraved received $8 million Series B follow-up funding led by investors Gobi Partners and Richmond Global.
‘Ultimately what we are backing is the team. We have to be assured that it is the right team doing what it does for the right reasons.’
-- Adrian Li
Convergence also has an investment in Indotrading, the largest business-to-business online directory, and a stake in Adskom, a growing advertising technology company led by Italo Gani and Daniel Armanto.
Before investing, Convergence “looks at three key things,” according to Adrian. First, the fund will question whether the market is big enough. “It is the size, the total market size, whether it is big enough, so that it can produce billion dollar companies.”
The next consideration is whether the timing is right. “It doesn’t matter if it is a big market but if you invest too early and the company can never scale up, then it will never turn into a big company.”
Adrian also believes in the strengths of the team behind a start-up. “Normally companies that we invest in are still very young. They are driven by co-founders and the key entrepreneurs, and normally the company has not made any revenue yet. Ultimately what we are backing is the team. We have to be assured that it is the right team doing what it does for the right reasons,” he said.
Adrian also looks for what he calls ‘traction,’ basically evidence or data that can prove the company has some business and potential. This could be how many users they have registered, how much sales they have booked and how many interactions with customers have been developed.
“We don’t invest in guys with just an idea we think is too early-stage, that is better for angel investors. But once they have the product, once they have got something we can see and evaluate then we will consider investing,” he said.
Although the technology companies under Convergence remain small and medium players, Adrian is upbeat that assistance from global investors like Xu Xiao Ping and others will eventually lift the value of its portfolio. In most of the companies it invests in, it places representatives as full directors or observers to monitor the progress of the start-up. Convergence doesn’t only help from the perspective of strategy, but also helps design how its portfolio companies develop everything from services to recruiting.
“In the next five years, we want to see our companies become the market leaders within their sectors,” said Adrian, who also has experience as a business mentor at several start-up incubators and accelerator programs including Endeavor, Founder Institute, GEPI, Ideabox, Incyte and Sky Star Ventures. He also believes that value created by Convergence’s portfolio will reach hundreds of million dollars over the five-year period.
In 2017, Convergence is looking to have a total of 30 companies in its portfolio and the venture fund may then announce another funding round from some of its investors. He declined to elaborate.
Beyond work, Adrian has been involved in non-profit operations. He founded and chairs a UK charity, CNYTrust, which since 2001 has raised funds to support children in rural China to continue their schooling. The entrepreneur has also sponsored endurance athletes and he is the Polar brand ambassador for Indonesia. He has completed several marathons himself in New York, London, Tokyo, Hong Kong and Beijing and some triathlons, including a full Ironman event.
As a food and wine enthusiast, Adrian co-founded the Jakarta chapter of the International Wine & Food Society with his wife Vanessa. He also serves as the chapter secretary. He and Vanessa live in Jakarta with their two children, Aaron and Austin.
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