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Meet the VC: How Indonesia’s MDI Ventures manages 3 overseas exit within a month

Joshua Agusta shares how MDI Ventures made its calculated moves as an Indonesian VC firm long before it was cool to do so

Indonesian corporate venture capital (CVC) firm MDI Ventures has been reported to be in fundraising mode for its third vehicle. This time, the firm –which also has operations in Silicon Valley– aims to tap external investors.

In 2016, MDI Ventures launched a US$100-million single-LP fund from Indonesian state-owned Telkom Group, followed by a US$40-million fund in partnership with Telkomsel, the telco giant’s subsidiary.

In this interview with e27, Joshua Agusta, who is Vice President (Investment) at MDI Ventures, talks about the fund’s local operations which had witnessed three back-to-back exits within just a single month.

The early days

In the venture capital space, the term ‘exit’ is used to describe a point at which an investor sells its stake in a firm to realise gains or losses. For MDI Ventures, the three back-to-back exits it witnessed in a span of one month represent healthy capital gains.

According to him, it is not common for Indonesian VC firms to get exits as fast as MDI Ventures did, let alone in an overseas company. Agusta says that MDI Ventures managed to achieve this feat thanks to a carefully mapped-out move, crafted since its establishment in 2016.

“Basically, our strategy in the early days was to have a quick win. We will shadow the more established and seasoned VCs to learn from them as well as participating in their portfolios’ funding,” he explains.

Also Read: Indonesian digital payment startup Kredivo secures financing from Telkomsel’s VC arm, MDI Ventures

He speaks of the firm’s decision to invest in Whispir, an Australian cloud-based email, text messaging, and web chatting platform, which he dubs as a learning process.

In investing in Whispir, MDI Ventures followed the footsteps of Telstra. The local telco giant is already a seasoned investor through its VC arm Telstra Venture; by participating in the same round, MDI Ventures was able to establish a good rapport from early on.

Given that MDI Ventures’s LP at that time was Telkom, the decision to back a company that was already backed by an established telco entity made a lot of sense, says Agusta.

“We, of course, have a responsibility to show our LP that we can have a quick return, hence the venturing out overseas,” he stresses.

These are the three back-to-back exits from the VC:

Whispir

Whispir has commenced trading on the Australian Securities Exchange (ASX) on June 19, following an oversubscribed IPO that raised AU$47 million (US$32 million) via the issue of 29.4 million shares at AU$1.60 (US$1.10) each.

The IPO comprised of a primary raise of AU$27 million (US$19 million) and a secondary sell-down by existing shareholders of AU$20 million (US$14 million).

At the IPO listing price, Whispir had a market capitalisation of AU$163 million (US$113 million).

According to Agusta, MDI Ventures was confident in backing Whispir because it has recorded a more than 100 per cent net negative monthly recurring revenue churn since 2013.

“For any SaaS company, this is a very impressive stats to have,” he says.

As for quality aspect, Agusta vouches that Whispir’s founding team members were solid and persistent, shown by the company’s ability to land multiple sales contracts from Fortune 500 companies and partner with world-class names in enterprise communications.

Red Dot Payment (RDP)

Singapore-based RDP is a fintech firm best-known its product RDP Connect, which focusses primarily on the hospitality industry. With RDP’s tools, clients such as hotel chains can introduce their own booking sites without the need for other booking engines or aggregators.

Naspers’ fintech company PayU announced that it had acquired a majority stake in RDP on July 5, as part of its expansion into Southeast Asia. While the details remain undisclosed, PayU has confirmed that it values RDP at US$65 million.

Also Read: Naspers unit PayU forays into Southeast Asia by acquiring Singapore startup Red Dot Payment

“For RDP, since 2016, the company has been growing its revenue at a double-digit rate month-on-month, with a healthy gross margin compared to other payments companies,” says Agusta regarding the VC’s investment in the company.

In terms of quality, RDP consisted of ex-banking industry veterans who mostly worked for Visa. For MDI Ventures, this showed a deep level of domain expertise, which is important for a highly-regulated industry such as payments.

Wavecell

On July 22, 2019, MDI Ventures announced that another exit was made from the acquisition of Singaporean cloud-based communication platform Wavecell by US-based 8×8 (NYSE: EGHT) as a part of its market entry strategy across Asia. The deal was worth approximately US$125 million.

Established in 2010, Wavecell helps businesses enhance customer experiences by offering SMS, chat apps, video interaction, and voice solutions for any platform.

The startup operates in key Southeast Asian markets such as Singapore, Indonesia, Philippines, Thailand, and Hong Kong.

The deal brings MDI Ventures to a total of three successful portfolio company exits in 2019, all of which have taken place simultaneously during the month of July.

The firm can now claim that it has cultivated a total of five success stories since the fund’s first investment in 2016.

“Wavecell is a great example of our firm backing a company based on a founding team with deep industry know-how, who are aiming to solve a real problem, in a relatively untapped space, at just the right time,” stresses Agusta.

MDI Ventures’ playbook

Agusta highlights that MDI Ventures is an independent entity with its own funding processes. It “combines a VC model with services in providing companies from Telkom Group with access to operational assistance and help in building startups’ growth engine after making a financial investment.”

When considering to invest in the company, MDI Ventures always approach the assessment from both the qualitative and quantitative side.

“On the quantitative side, strong traction and growth in their key operational metrics were important to us,” he explains.

In Whispir’s case, for example, some things that MDI Ventures considered were whether the business actually upsells and by how many per cent.

“They have a spread out footprint and their clients returned to use their offers,” Agusta says.

The first investment MDI Ventures made was in Japanese company Geniee. It is a platform to enable users to deliver ads to earn maximum revenue from pure advertisements, demand side platform (DSPs), real-time bidding through ad exchange, multiple ad networks, and affiliate ads.

True to its “quick win” strategy, Geniee exited in 2017 and is now listed in Tokyo Stock Exchange Market.

In the future, MDI Ventures plans to diversify its portfolio, particularly by backing up-and-coming unicorns in Indonesia, such as fintech startups Finaccel and Kredivo.

“We started off with capturing a quick win opportunity overseas, and now we have shifted focus to go after startups in Indonesia. It’s all a part of our portfolio mix. From a total of 32 companies we’ve backed so far, there are those that we’ve invested in to have a return, and there are companies that we believe will exit. It’s all pure strategy,” Agusta elaborates.

Also Read: Indonesian digital payment startup Kredivo secures financing from Telkomsel’s VC arm, MDI Ventures

Recent data shows that 2018 saw a surge in Corporate Venture Capital (CVC) activity worldwide. For the whole year, there were 2,740 deals on record, while roughly US$53 billion was disclosed in CVC funding for tech startups.

Asia attracted 38 per cent of all CVC deals in 2018, up from 31 per cent in 2017.

“What matters is that our investment thesis is working, and that Indonesian corporate funds can succeed not just on their home turf, but also throughout the region,” Agusta emphasises.

Image Credit: MDI Ventures

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