Bhumi Varta’s Martyn Terpilowski on venture capital in Indonesia










Thesis: For more than a decade, venture capital has been pouring into Indonesia, supporting growing cohorts of startups. This era gave birth to consumer tech giants like GoTo, which is now listed on the Indonesia Stock Exchange (IDX). Venture capital allows founders to rapidly scale their business from scratch while taking into account the risk that the majority of investments will fail along the way. This makes it an effective mechanism to identify and nurture winners in the rapidly changing digital economy.

According to Martyn Terpilowski, this model may have made sense in the early days of consumer Internet companies.

The former hedge fund manager in Tokyo and Hong Kong is now an entrepreneur in Indonesia. His company, Bhumi Varta Technologies, is a geolocation platform. It serves enterprise customers and does not follow the blitzkrieg scaling playbook that is typically used by consumer-facing businesses.

Yet from this perspective, Terpilowski has become an outspoken critic of the venture capital industry in Indonesia. He believes the venture capital equation doesn’t add up in an environment where barriers to entry have been reduced so low that anyone can launch an app. The influx of venture capital has created an overheated market in Indonesia, and it is about to face a reckoning. In his view, it need not be so, if the venture capital industry can reform itself.

“The terms of venture capital have changed.”

When venture capital started, it was for technology and innovation. There weren’t a lot of ideas and there wasn’t a lot of money.

In the early days of consumer Internet companies, venture capitalists like Sequoia made a lot of money on YouTube, for example. It’s awesome. They were the first on the market. Blitzscaling worked because there were few other players.

Then it became trendy. The more money you invest in anything, the more investments you have competing with each other.

Now we have grocery deliveries in 15 minutes. It is not a technical innovation. It has nothing to do with innovation.

The whole concept has changed. You now have over 200 venture capitalists in Indonesia and Singapore looking for the same limited opportunities. They all want to be in the business-to-consumer (B2C) space because they want to get unicorn valuations. In business-to-business (B2B), if you’re dealing with large companies, you can’t mark up valuations in the same way.

Generally, B2B is how you actually make money in the long run. It’s less price sensitive, and it’s more about loyalty. Enterprise customers are not going to tear up the contract every year in a B2B model because the infrastructure takes too long to build.

But venture capitalists (VCs) want to back consumer-facing businesses, and now you have a situation where there are cafes and 10 different food delivery services backed by VCs.

Here we don’t see any technology at all, really.

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