Building the Entrepreneurial Ecosystem Part 2: Angel Investing

A major piece of the entrepreneurial ecosystem that has yet to be fully developed here in Indonesia is access to early stage funding. There is a gap between the funding provided by friends and family and the much larger investments most venture capitalists are looking for that causes issues for a number of entrepreneurs. Some VCs have been moving to earlier stage investments, but this comes with its own set of issues. Accordingly, one of GEPI’s biggest initiatives during my time here has been launching Indonesia’s first open angel investor network and two angel funds.

We had a big launch event in mid-July with 30-40 affluent prospective angels to teach them about angel investing, valuation, and structuring/negotiating a deal. Partially supported by the US State Department, we brought in two prominent angel investors from the US to hold a full-day workshop. It was an amazing learning experience and a great opportunity to see business tycoons go through a negotiation simulation similar to the ones in our MO class – I definitely still have a ways to go.

Panelists at the workshop

Pak Ciputra, the godfather of
entrepreneurship in Indonesia

I’ve also had the unique opportunity to structure two angel funds – one focused specifically on female entrepreneurs, and another more general one. Having no background in investing, it was really interesting to understand how an investment fund works, and then adapt that knowledge to an Indonesian context.

These angel investors are interested in all businesses, not just social enterprises. That being said, a number of the businesses in our pipeline that we’re preparing to pitch to our investors are social enterprises that have positive impact, but also compelling business propositions. I’ve prepared a workshop on presenting to investors,

Presenting to a group of entrepreneurs

 and spent my last day at GEPI working with 14 entrepreneurs on their investment pitches. The remaining challenge though for both investors and entrepreneurs is a lack of exit options. In the US, there is a robust IPO market and a lot of acquisition activity that lets investors earn multiples of what they invested to cover other startups that fail. However, here in Indonesia, an IPO is not a viable exit option and the lack of data on acquisition terms makes it difficult to determine whether it’s actually profitable to do angel investment. As such, entrepreneurs crutch together alternative investment terms that likely aren’t in the best interest of the business or investor (i.e. a 3-year profit sharing period with the full investment paid back at the end, almost like an income-based loan). I believe once this hurdle is overcome, the entrepreneurship scene here will grow even faster than it already is.

Work with a startup social enterprise in Bali? Yes please!

It’s been a busy few weeks, with the last 2 weeks spent making field visits to the 2 businesses we’re working with and the launch of our angel investor network coming up quickly next week.

Terraced Rice Paddies in Ubud

One of those businesses is a for-profit social enterprise that focuses on dealing with the tremendous amount of waste that is currently illegally dumped in Ubud (a mountain town popular with tourists) in Bali.  Tourism has boomed in Bali over the past years, but the infrastructure and practices to deal with it are lacking, and ingrained business practices make proper disposal of garbage even more complicated.  The norm now is for businesses to be paid for their waste by pig farmers who use the organic waste as feed, sell the recyclables, and dump the rest down the nearest ravine.  Trying to convince those businesses to switch to paying for proper disposal of their waste is an uphill battle as you can imagine.

Illegal Dump in Ubud

This 15m high illegal landfill
used to be a river bed...

Scavengers picking through the trash

My role in the visit was to help our investment partners (a social venture capital firm looking to make early stage investments to build a pipeline of deals) complete their due diligence to decide if they would invest in the company, and to identify specific areas we could address to help the business scale (decided to focus on data management and marketing).  We met with their management team, customers, and investors, and had practically every piece of garbage not in a landfill pointed out to us – I think Bali may be ruined for me forever!

The business's waste processing facility

From left to right: Representative from our
 investment partner, COO, CEO, and me

It was a great learning experience to get insight into both the entrepreneur and investor’s side of things, and to be able to voice the entrepreneur’s viewpoint in conversations that would have otherwise been internal to the investment firm.  We spent most of our time bouncing from meeting to meeting, but did manage to fit in some good food, massages, an afternoon at the beach, and drives around the most popular places in Bali – quite the tough life!  

One of our customer meetings was at a
5-star resort with this view - talk about roughing it

A nice break from one of our
trash tours...

More to come on the other part of the trip later…

Selamat Siang!

Hello folks!  I’ve been in Jakarta for just over two weeks now, and have been having a great experience so far.  When I decided to spend my summer with the Global Entrepreneurship Program Indonesia (GEPI), I never would have guessed how much exposure I would gain so quickly.

I’ve already had the opportunity to attend INSEAD’s Social Entrepreneurship Conference here in Jakarta where I met entrepreneurs and social entrepreneurs from Indonesia and beyond, sat in on a meeting with GEPI’s executive board consisting of prominent Indonesian business people, and met with the leadership of The Founder Institute Jakarta.  GEPI is definitely on the forefront of both the entrepreneurship and social entrepreneurship scenes here.  Its mandate is to promote entrepreneurship in Indonesia, and I’m excited to be able to contribute to that even for just a short while. 

GEPI’s three big initiatives are starting up an angel investor network, launching Indonesia’s first business incubator/co-working space focused on the creative sector, and supporting innovative social enterprises.  While I’ll be contributing to all of these, I’ll be spending the bulk of my time on this last piece.

I had the opportunity to meet with a member of the management team of one of the startups I’ll be working with, and am incredibly excited to be able to help them out.  The for-profit social enterprise is helping farmers transition to organic farming practices, allowing them to sell their rice at a premium while also benefitting the environment and consumers.  The team is a group of young, talented, and humble entrepreneurs who just need some help thinking about how to scale their business.  I’m hopeful that I’ll be able to use what I’ve learned at Ross so far to help them accomplish this goal.

Outside of work I’ve been spending my time getting acclimated to Jakarta.  I’ve learned enough Bahasa Indonesia to confidently tell a taxi driver where I want to go (until he responds or asks a question that is…).  There’s tons of great food here, and since all of it is Halal, I’ve been able to try out all sorts of food I can’t eat at home.  I’m planning on venturing out to other parts of Indonesia over the weekends, and will post some more pictures soon.

First week!

Since the end of February, I very much looked forward to my summer internship working in India as a WDI fellow with Start Up!, an angel investor, incubator and consulting firm that strives to launch, strengthen, and scale social ventures in India, and now it has become reality.

It’s been close to a week since I landed in New Delhi, India, with no working phone and no sense of direction. While the first few days were rough in getting used to the different pace and infrastructure of life here in Delhi, I now have a working phone and become accustomed to the random honking, constant haggling for an auto rickshaw ride, and of course, the intense summer heat (109 degrees Fahrenheit today!). Thankfully, I’m now more in the know of the various neighborhoods, what each area has to offer, and how to haggle a decent price with the auto rickshaws. 

Furthermore, my stomach has been fairly content with the level of spicyness it gets to indulge in every day :) In addition to the spice, I even got to try some Himalayan food in Hauz Khas Village.  This is the Yeti special non-veg (clockwise starting with the tingmo (the white bun - tastes like a chinese mantou), lungs, tongue, sausage, and meat).

I've also made a few new friends along the way, especially since I'm one of the early birds here in Delhi. Knowing other people here has definitely helped make the transition less daunting. 

As for my internship, I started this past Monday, and I can already tell that it’s going to be a busy summer but in a good way.

Start Up! was founded in 2007 and since then has partnered with social ventures in the non-profit and for-profit continuum. These social ventures are ones that aim to maximize philanthropic capital in the bottom of the pyramid (BOP). The Start Up! office and team are small, vastly different from my past work experiences in corporate America. However, it’s great because this means many opportunities to take ownership in my projects and take the initiative to grow and learn more about the social enterprise space in India.

I have several internal and external projects to pass my time for the next 12-13 weeks, apply what I learned this past year at Ross, and further refine my business skills. Internally, I will be developing a refined business plan and financial model for Start Up!, creating a business plan for Start Up!’s business accelerator with two other interns who will be joining me soon, and reviewing the design of an incubation toolkit for internal use. My external project is expected to be evaluating the market feasibility of a social enterprise.  They provide young semi-urban Indian women with an online platform to share their thoughts on various issues through video blogs. I’m definitely looking forward to working with an organization whose mission is to empower women.

That’s all from me for now. I will take more pictures soon. I'm looking forward to hanging out with the WDI Fellows who will be joining me here in India very soon!