Tokopedia's Massive Investment Shatters All Doubts On Indonesian Tech Investment
Rama Mamuaya - 24 October 2014
When I heard that Tokopedia closes that massive $100 million investment deal from Softbank and Sequoia Capital, I burst into small pieces of happiness. My dear fellow Indonesian founders and investors, the moment we've been waiting for, has finally arrived. Now, let's not fuck things up, shall we?
Tokopedia's latest investment is a massive blow that shattered doubts that has been preventing investors investing big in Indonesia. What does it mean for industry? There's 3 main things that we can see coming from this investment:
Market is there, and business is validated
Tokopedia is one of the startups founded back in the early days of tech startup boom in Indonesia. They were founded at a time where tech companies aren't making any money, market weren't as big as today and investment into a tech startup was almost unheard of. Eventually they got seed funded, and series A funded, and series B funded. People in the tech industry were even expecting this news since Tokopedia has been raising money from investors without fail every year.
Investment as big as the latest one is not dumb money. Both Softbank and Sequoia Capital are top investors and have respectable list of amazing companies under their portfolio. Since its founding in 1972 Sequoia has backed startups that now command a staggering $1.4 trillion of combined stock market value, that is equivalent to more than 1/5th of Nasdaq, this includes companies like Apple, Oracle, Cisco, Yahoo, Google and LinkedIn.
So if Softbank and Sequoia puts money, it has to be a good business.
Exit is not as far
With such big money injected at a very late stage (Series E), it only makes sense for investors like Softbank and Sequoia Capital has seen an exit point for their investment. It's hard to imagine investors as big as Softbank and Sequoia to invest $100 million into a company in an emerging market if the startup is only raising another round of funding a few years later.
Either it's IPO or potential acquisition that has both Softbank and Sequoia excited to invest in Tokopedia. Sure it'll take some time to execute, but with that amount of money it's much easier for Tokopedia to file for IPO in Indonesia Stock Exchange (IDX). The only requirement missing is cashflow positive, which I'm not even sure are they there already or not.
More money and ... more money
This investment also put Indonesia back on the map especially for American investors. Although Softbank's holding company is based in Japan, but Softbank Internet & Media Inc (SIMI) is actually based in the United States. Sequoia Capital, although invests through its India operations, is also based in the United States. A deal this massive, into a tech company in emerging market, sends a positive signal for other investors to start looking at Indonesia and see what's going on. I mean, Indonesia is soon to be one of the world's biggest economy and democracy.
Now please keep in mind that although Softbank and Sequoia can easily be considered a hugely successful VC firm, they too book some losses and invested in companies that eventually shuts down. In its 2003 fund, Sequoia books $100 million in losses (portfolio shuts down). With this acquisition, Tokopedia founders doesn't only bring money into their company, but also attracts more money to be put into other companies in the country.
Right after the investment news came to light, I received numerous emails from people in the U.S. and Europe asking about the investment, about why both Softbank and Sequoia Capital dares to put such big amount of money into Tokopedia. And they are all super excited to explore more on what they can do in Indonesia, after all it's a big growing market. Indonesia's political condition also plays an important role, giving investors security and potential economic growth in the market guarantees the interest from foreign players.
Now that the foreign players are ready for Indonesia, the question is: are Indonesians ready?