Why is it that Tokopedia, one of Indonesia’s most established ecommerce marketplaces, calls its employees “Nakama” – the Japanese word for “friend”?
Tokopedia’s founder William Tanuwijaya isn’t Japanese. He didn’t study in Japan, either. But in 2009, when Tokopedia was still young, Indonesia’s ecommerce industry nascent, and venture capital sparse, it was the Japanese ecommerce company Beenos that invested in Tokopedia.
More Japanese money and mentorship followed along with investments from CyberAgent and Softbank Capital. This led William to adopt some Japanese values in the way he built Tokopedia. The “Nakama” are a relic of that influence.
But it’s not just Tokopedia. Japanese investors have been putting their money into Indonesia’s digital economy across the board, and were among the first to do so.
At Tech in Asia Jakarta, three VCs explored the phenomenon: Teruhide Sato of Beenext (the investment company Teruhide created after Beenos), Steven Venada of CyberAgent, and Teddy Himler representing SoftBank Capital.
Teruhide, or Teru, as he prefers to be called, offered a few simple answers for the phenomenon of Japanese money in Indonesia.
“For us, we knew that for China it was too late, and Indonesia comes next,” he explained. He said that Indonesia’s large, young population and potential for economic growth are obvious factors that make the country interesting for investors.
“Look at what happened in China with Alibaba just a few days ago. US$14 billion in transactions in one day,” Teru continued, alluding to the record-breaking sales volume during singles day. “And what comes after China? It’s India or Indonesia. We said to ourselves, we can’t miss this. Japanese companies aren’t growing, so re-allocating cash-flow comes naturally.”
Teru also reminded the audience that Japanese investors have been active in Indonesia for decades, not just with the tech boom. “Investments in energy, garments, and manufacturing – historically and economically this has been going on for years.” That investments have shifted into the digital industry and tech startups are a natural progression, he suggested.
Teru did admit that his personal reason for coming to Indonesia and learning about its economic potential is that his sister in law is from Indonesia.
Teddy argued that the time machine theory applied in Indonesia. “What works in the US – models like Facebook and Uber – should work in emerging markets,” he said. So it makes sense for investors to be in markets early to jump onto similar opportunities. At the same time, Teddy said, there are also other opportunities for those who understand the market well. “Indonesia is a unique, attractive market with unique problems to solve.”
Komodo dragon in the jungle
All three VC firms chose Tokopedia as one of their early investments. What made them believe that the ecommerce marketplace model is the right fit for Indonesia?
According to Steven, once again, China served as the inspiration. “Taobao in China worked, and we went looking for something similar in Indonesia. Tokopedia had a great team, it was still early and there was a lot of opportunity,” he said.
Teru said that for him, it was first and foremost the founders who convinced him that Tokopedia was worth investing in, but added that he believes in Tokopedia’s marketplace model. ”It empowers small and medium sized enterprises, and this brings prosperity to society. The marketplace is not only good as a business model, it creates employment,” Teru said.
Teddy said that Softbank was impressed by the founder’s deep knowledge of the market, which would make it more difficult for foreign companies to come in and replace Tokopedia. “Leon and William [Tokopedia’s two co-founders] both know the market really well. If Alibaba is the crocodile in the Yangtse, they’re the Komodo dragon in the jungle,” he joked.
“Tokopedia is very mission driven,” he added. “They have this slogan: ‘a better Indonesia through the internet.’ They receive 30,000 resumes a month, those are all people who want to work at Tokopedia. That’s astounding.”
Japan’s society is aging rapidly, and the economy is experiencing a downturn. Could it be that Japanese investors are turning to Indonesia simply because they are running out of options at home?
Steven argued that no, demographics were not the only thing. “In Japan there’s still a lot to be done. It’s a huge market, not only in online, but also offline businesses. In Japan, opportunities are more in replacing existing services, whereas in Indonesia there is still wide open space. No need to go for the niche. Indonesia has big problems, it’s now about solving the fundamentals, like clothing, payments, and logistics.”
Steven added that some of his LPs invested in emerging markets like Indonesia not purely for financial returns. “They look into the future. It’s about getting your foot into the next expansion,” he explained.
But according to Teddy, demographics are a key factor driving money and talent out of Japan. “Demographics are destiny,” he said. “Of course entrepreneurs come down here to start companies, and money goes out of Japan and into growth markets. That’s economics.”
In the end, it’s a mix of demographics, economic opportunities, and an interest in shaping the future that drives Japanese investment in high-growth markets like Indonesia. Do you see other explanations not mentioned by the VCs?
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