The Jakarta Post
Starting or managing a business during the COVID-9 pandemic is a challenging task as many companies, including Indonesian and global start-ups, have been pushed to permanent closure. Several unicorns and decacorns have had to lay off employees to streamline business and survive the pandemic’s impacts.
The Jakarta Post’s Eisya A. Eloksari interviewed Sequoia Capital India managing director Rajan Anandan via email on June 22 and discussed ways start-ups can survive the hard times, as well as the future potential in the start-up scene in Indonesia and Southeast Asia post-pandemic. Sequoia Capital India manages start-up acceleration program Surge, which trains several Indonesian early-stage startups.
Question: How has the pandemic affected Sequoia Capital India’s investment and accelerator program?
Even though our current accelerator program, Surge, is being conducted entirely online, the level of engagement we have seen from Surge start-ups has been incredible to witness.
The pandemic has not affected the program’s mission to rapidly scale-up participating companies. Even in the current situation, Surge is still actively seeking mission-driven founders from across the region who are going after a large opportunity in their markets.
Surge is committed to investing between US$1 million and $2 million in all technology-enabled start-ups, such as in agriculture technology, direct-to-consumer brands, education technology (ed-tech), e-commerce and telemedicine, among other things.
What are some of the key metrics Sequoia will be looking at while evaluating which start-up to invest in during this time?
Metrics are important if a business has already launched but a lot of seed-stage companies’ focus is entirely on the founding team and the size of the market they are addressing as they may not have user or business metrics at the time Surge partners with them.
Founder-market fit is important as we want to know which founding team has the unique ability to win in a particular market. On market size, we try to deeply understand whether the market is big enough to build a very large business.
For companies that have already launched, Surge looks for early signs of customer love such as through early user feedback, product reviews and customer retention.
Surge is currently looking at companies that are building for a post-COVID world such as in e-commerce and the remote work and collaboration sector. We believe they will be resilient in the near to medium term as they will be positively impacted in the long term due to faster digitization.
What kind of start-ups do you project will have higher growth and which ones will be impacted negatively by COVID-19?
Ed-tech has been one of the industries that has seen a significant change in growth trajectories across the world. Digital health, e-commerce - especially online grocery, online food delivery and cloud food brands, are all examples of this.
Industries that are largely offline, dependent on physical proximity or focused on travel, are all adversely affected – and we are already seeing that happening. International travel, hospitality, offline retail, offline events are not going to be the same again for a long time. Startups in these types of industries will all need to find ways to reimagine their businesses.
What is your advice to existing start-ups, as well as to those that plan to commence operations, to survive in times of crisis?
Throughout history, some of the best companies have been formed during the toughest times. Existing startups should first focus on ensuring they have enough runway to last into the next year. Then, they will need to reimagine all aspects of their business for a post- COVID world. If they get that right, they will come out of this stronger than ever. I believe innovative, lean, agile startups will be built during the next 12-18 months.
If a start-up is in a sector that has been deeply impacted, they will need to consider changing many aspects of their business – be it in the way they sell, marketing spending or where they can find new customers. If the start-up has enough runway, it should even consider completely changing its industry of focus. Founders need to deeply think through how the consumer and buying behavior is likely to change because of COVID-19 and evolve accordingly.
For those who are planning to start from scratch, make sure that your product or service is a “must-have”— something that is addressing a real problem and one that can be solved at scale for a large segment of the market.
How does Sequoia see the start-up potential in Southeast Asia in the coming years?
We are seeing a rising interest in entrepreneurship because of success stories of SEA’s start-ups. The first generation of entrepreneurs from unicorns such as Gojek and Tokopedia have paved the way for a new wave of founders who are willing to take risks and are not afraid to chart their own journeys.
A decade ago, Southeast Asia did not have any unicorns; today the ecosystem has evolved tremendously and the region now has more than 10 unicorns, including four from Indonesia. The region has also seen exponential growth over the past few years. Today, there is over $6.5 billion invested in SEA by venture capital firms, six-fold the amount in 2015.
How has the start-up scene in Indonesia been the past few years and how is the current scene amid the pandemic?
Over the last five years, Indonesia has been one of Southeast Asia’s key centers for start-up activity, in terms of the numbers of new start-ups. We see a lot of potential for start-ups that are technology-first, especially as the COVID-19 pandemic is rapidly accelerating digital transformation.
An example of this can be found in Indonesian start-ups in the Surge 03 cohort, such as cloud kitchen Hangry, the popularity of which has soared during the pandemic, as there has been a shift in customer behavior from dine-in to food delivery. This creates demand not only from young people but also the older segment.
The fact that the start-up scene has scaled so tremendously in the last few years alone speaks volumes about the technical and entrepreneurial talent in the country.