Indonesia: Prabowo & Gibran 59% Electoral Win (Party vs. Candidate), Quick Commerce Viability Debate & VC Accountability - E398

· Indonesia,Podcast Episodes English,Southeast Asia,VC and Angels


“I was talking to my friend from Kauffman, who said there's a difference between a startup founder and a business owner. I love startup founders, but over time, hopefully, they can become a business owner and a business owner in emerging markets. People who own the majority of the business still take a lot of pride. Oftentimes, when things don't work out, think about what to do to change so that the business works. And over time, a startup founder hopefully will morph into that business owner who takes accountability for the business, pivots or does things that you just don't like just to make the business work because the question isn't, ‘can this business grow for two years’ but ‘can this business truly make an impact’? And that oftentimes, it requires going back to fundamentals and lasting for a long time.” - Gita Sjahrir

“In the end, it's so important to understand a market need vs. a market want, because if you ask customers, they almost always say they want ABC. I'm saying this as an ex-entrepreneur. I've built multiple companies in which my biggest mistakes in the past were I always asked and gave people what they wanted and realize it's not what they needed.” - Gita Sjahrir, Head of Investment at BNI Venture

“Be very careful also with fundraising and seeing fundraising as a metric of success, because fundraising is just one metric. Oftentimes, fundraising measures how well people raise money, which is not necessarily how well that business is going to do. So when fundraising, you want to scale up solutions. You don't want to scale up problems. When things haven't really had their product market fit and then they take in a lot of funding, often what happens is you scale up problems.” - Gita Sjahrir

Gita Sjahrir, Head of Investment at BNI Ventures, and Jeremy Au discussed three main themes:

1. Prabowo & Gibran 59% Electoral Win: Gita shared the aftermath of Indonesia's election, highlighting Prabowo’s landslide victory in a 3-way contest. She delved into opposition voters' dismay and demonstrations in Jakarta, tempered by the fasting month which limited the extent of public protests. She also revealed that despite Gerindra's presidential candidates' landslide victory, the winning party's failure to secure a leading position in the legislature forecasts a complex political landscape and potential governance challenges. The percentage of voter blocks, Jokowi's moves on the Golkar party and division among major candidates underscored the evolving debate within the country’s electorate on the influence of political personas vs. party ideologies. She also highlighted Indonesia’s increased freedom of expression allowing for political discourse across social and mainstream media, in contrast with the Suharto era.

2. Quick Commerce Viability Debate: Gita discussed the sustainability and profitability challenges in quick commerce within markets like Indonesia, where lower GDP per capita and high capital burn rates demand significant model adjustments for viability. She noted that market size and consumer behavior emphasized the critical need for adapting quick commerce to align with the local population’s purchasing power and real needs, rather than replicating models from India and more affluent economies like USA and Europe. She also talked about the potential integration of quick commerce with traditional commerce, leveraging infrastructure to blend digital speed with physical market realities and focusing on areas like private label products for sustainability.

3. VC Accountability & Founder Dynamics: Jeremy and Gita delved into the accountability of VCs and the crucial role of frank discussions between VCs and founders. They underscored the importance of VCs being more than just financial backers by becoming genuine thought partners for founders. They critiqued the "negative blitzscaling" model in Southeast Asia, cautioning against scaling businesses with negative unit economics. They also emphasized that founders should scrutinize their growth strategies and prioritize sustainability over rapid expansion, highlighting the risks of scaling inefficiencies rather than solutions. They need to retain decision-making authority and evolve towards prioritizing long-term business viability and market relevance.

Jeremy and Gita also talked about the importance of political party financing transparency, the role of media in shaping public opinion post-election, the significance of recalibrating growth and scaling expectations for startups, and the evolution of e-commerce models in response to market demands.

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(01:37) Jeremy Au:

Hey Gita, another happy morning.

(01:39) Gita Sjahrir:

Happy morning to you too.

(01:40) Jeremy Au:

Happy morning. Wow, so it's been quite a ride since the past month. You know, obviously there was a big election win landslide victory. But obviously a lot of, like, as we predicted and as you laid out, there's a lot of post election changes that had to happen in terms of moves, counter moves, and updates. Maybe I'll just rattle off a few of the bullet points. I think a big one that we have was that, I think the margin of victory came in which was, the election did not go to a runoff and then obviously there is some opponents who are contesting the results of that, and the process. Any thoughts about that, Gita?

(02:09) Gita Sjahrir:

Yes. So now in Jakarta, we are experiencing some voter dismay, which I think is actually very natural. And if anything for me, it's also an indication that there's more freedom in expressing how voters feel. So there are some movements here and there, some demonstrations. But overall, it actually hasn't been a very large demonstration also because it's fasting month, so it makes it extremely hard to do anything during the day to o. Most people here are Muslim, so they are not eating or drinking during the day. But overall, I would say a lot of the conversation is also expressed in the media. So not just social media, which is one of the ways that the Gen Z voters are expressing their thoughts, but especially also even in mainstream media. So in papers, in magazines, you are seeing a lot of these analysis, political analysis, including political analysis that are more controversial take, and that goes against the popular idea.

And, as someone who grew up in the Suharto era, by the way, that is the big difference that I am seeing, which is, back in the Suharto era, we wouldn't see a lot of dissent because back then it was also quite illegal. And, that, that's tough, right? And as someone who actually had a father who was imprisoned by Suharto for dissent for me, seeing that there is now more expressive and open dissent is a positive signal. But overall, I think because of the big landslide win, and also because the balance of power is not just the winner's party. So basically the winner's party didn't make the top two in the legislation. That created some balance of power moving forward. This could mean, by the way, that Mr. Prabowo, when he becomes president, he can also experience a lot of issues with moving laws and policies forward if the legislation does not agree with him.

(04:02) Jeremy Au:

Yeah. I think it's really interesting because, the magnitude is quite large. I think the unofficial results was that Prabowo is at about 58%. Uh, Anies at 25 percent and Ganjara Pranowo at 17%. So I thought it was a quite interesting dynamic because I think it also shows maybe to some extent a split of the vision or directions, I would say, because obviously three of them was. Very similar, I think, especially in some of the economic side, I felt, but I think the way that they portrayed themselves was actually quite different. Do you have any point of view on like maybe what those three angles, what that roughly shows about, the composition of how Indonesia is thinking about things?

(04:36) Gita Sjahrir:

So in terms of positioning, I will say this. I think the reason why Anies ended up also taking quite a large chunk is because if you look at the breakdown of positioning, Mr. Provost's positioning is basically whatever Mr. Jacobi did was good. Let's stay the same.

(04:51) Jeremy Au: Right.

(04:51) Gita Sjahrir: That message resonates with a lot of people, especially the mass, because for the mass, they're seeing it, Oh, so you're trying to say that nothing much will change. Okay, that's good. We like that, right? And then if you look at the next one Mr. Anis, his entire thing is total reform, like we'll change everything, right? And that's a very attractive proposition, because if you don't really like what is going on recently, you would really like 1 80, right? Psychologically, at least. The problem with Mr. Ganjar approach was he essentially said, we'll keep some things that are good. We'll change some things. And in general, and I think fortunately, a lot of developed markets, politics will tell you this people tend to veer towards extremes just because it's more psychologically comforting, it's psychologically safe, either I go with A or I go with B, but it's very rare that people will go, I will go with A point one. Or, you know, or A point two. You will most likely go to right or left.

(05:52) Jeremy Au:

Yeah. Black or white.

(05:53) Gita Sjahrir:

Yeah, right.

(05:54) Jeremy Au:

But I really like gray. It was like, boo gray.

(05:58) Gita Sjahrir: Yeah, that's a tough sell to be honest, right? And I think that's why when you saw the breakdown at first, a lot of people in the beginning thought that it was going to be a big competition between Mr. Prabowo and Mr. Ganjar, but because Mr. Anies was able to carve out this more revolutionary positioning, despite the vision and mission actually having a lot of the same take as the other competitors. It ended up standing alone in a much better way than the other one, right, than Mr. Ganjar. And I think that was the strength of, his platform, by propositioning, B versus A, right, versus Prabowo versus the status quo, he was able to gain that.

Another very important thing that we have to understand for Indonesian politics is the cult of persona is still very important. So the idea is, can people be bigger than the party they represent? And unfortunately, as we learn, Mr. Ganjar may not be bigger than the party he represents. When he, one day, who knows he'll reach that cult status, then that'll be a different equation. But for now it's almost the competition between cults of persona versus a party in which almost always an individual. And how big that individual becomes in the eyes of voters will be more important than the party itself.

(07:11) Jeremy Au:

And that's interesting because we're talking about people versus a persona. And one of the articles that came up was that we're looking at potentially that Jokowi could potentially move from PDI-P to what's Golkar, right? And obviously this is an interesting public news on Channel News Asia.

And I think we're talking about this, but it was interesting because this reminded me of the early stages of democracy that you mentioned the last time around. So we've seen that, for example, the US, you saw it in the UK in the early stages. I think people switch parties very often and we still see that happening, for example, in Malaysia as well where people ,switch parties.

(07:44) Gita Sjahrir:

Yeah Well in the early stages, too, the parties Are all still very fluid. So many of these parties were also invented maybe 10 years ago. They're very young which means they're not as established also in the mission and vision They have they might have some values instilled already but the way those values are expressed You can result in very different takes on policy, right? So, in that way, I can understand how every political party are still, I wouldn't say, necessarily they're searching for their identity, but more they're searching for ways to express that identity that resonates the most with the voters that they want. And during this time also, because no party is so big that you know, they overshadow everyone.

And actually, you can even argue this with the U. S. today, that maybe some personalities are bigger than the party, right? But if you get to a level of party scale and sophistication and also history, then it becomes a much harder equation for an individual to completely take over a party or completely dictate what a party does. But right now in Indonesia, it's just very early stages of democracy where parties are still trying to, you know, collaborate with others. Sometimes they create coalitions with others in order to further their journey. Because the question isn't, will this party be around in five years? All of these parties have to think about, will I be around in 50?

What does that look like? Where am I going? What kind of candidates do I have? What kind of policies do I stand for? And right now, if you look at the party's history, not only are many of them very young, but if you even look at their voting history in legislation, they can sometimes stand up for things that may not reflect a previous identity or value. They might, for example vote for a very free market solution for an economic policy, despite being a party that back then said that they stood for something that is more community-based markets, but we don't know. And that's the thing. Everything is still in flux because we're just very young.

(09:50) Jeremy Au:

Yeah. And I think it makes total sense, right? I mean, at the end of the day, the population, the electorate is making certain decisions about what they like and what they don't like. And so people are triangulating for what is the best, I said, position and does what people like, but also like you said, differentiation versus the other, and you mentioned that in the context of the three candidates about, I think also matters for the parties, and if the party makes a sincere decision to position itself in one niche, but a candidate is obviously can move faster than the party so they can always be thoughtful about that, then, yeah, either you change parties or you change the party.

And I think both of them are possible. Donald Trump was a good example. I mean, initially he was a Democrat and he switched to becoming a Republican and then the Republican party did not like it. And then he basically changed the Republican party. So it was interesting. I mean, I think that nuance between candidate versus party, it still happens even for the most mature democracies in the world.

(10:36) Gita Sjahrir:

This brings into another point from one of the presidential candidates that I thought was very spot on, especially for emerging markets and any new democracies, but Mr. Honest said that in Indonesia, one of the biggest challenges is understanding political party financing.

(10:52) Jeremy Au:


(10:53) Gita Sjahrir:

And political party financing in Indonesia and perhaps in other newer democracies is still very great. It's not that transparent. You don't know who's getting lobbied by whom. You don't know how much money flowed into anywhere. There are no real lobbying data or information, and that causes a lot of confusion not just in terms of the media and outside, but also inside, because then, political parties due to political party financing needs may have to create coalitions with other parties that they may not stand together with.

And that is a really big challenge in understanding this market. This is why when people say they want to invest into Indonesia, I want to set up operations in Indonesia. It is not enough to just hire a local person and then check on that local person every six months, because things here become very layered due to how our, policies, our laws and everything else, they're still in flux and they're still very new.

So unless you are on the ground and you really understand what is unfolding and you don't always trust Google with giving you key information because lots of things are also not written down, then that is really the way to operate here. If you are really serious about going into Indonesia it just requires a lot more homework. And I think that's probably the sentiment for a lot of emerging markets. And it's why, although getting in early can probably give you the best alpha in the future. It just requires a lot more homework. And the question is, who's willing to do that much homework?

(12:22) Jeremy Au:

Yeah. That's one thought for the future. On that note, the second part was, we want to talk about quick commerce and social commerce or commerce in general, because we felt like it was something that both of us were like, stopping a lot of notes about, Oh,

(12:33) Gita Sjahrir:

Yes. Oh my.

(12:34) Jeremy Au:

So we just thought it was like, Hey, we got to discuss this. So the big parameter that we have obviously is that. quick commerce was so hot in 2021, 2022. So much money is being raised obviously in the US, then it became India, then it became Indonesia, then it became , to some extent as well, Singapore, Philippines and Vietnam.

And now, somebody recently was asking me, I was like, Hey, what do you think about this company and that company? And then click on this. And I was like, I actually don't know. I felt like this is what my thoughts about why I didn't think it wasn't working out, I would say one to two years ago, but I think it was a fair point to be like, As of this year, this new year, where does that field stand? And what do we now know? That's different or better. So, that's my kickoff point. What do you think, Gita?

(13:15) Gita Sjahrir:

Yeah. We were swapping notes on this because when this model came around in 2021, of course, immediate question is, wait, when are you profitable? And the reason why I said, when are you profitable is because if you're dealing with markets like the United States, where your GDP per capita is $80,000, you're almost $30 trillion economy. Okay, maybe you can, you know, have a very large burn that can then morph itself into profitability just because your economy is so deep. That's possible. But once you go down countries where the GDP per capita is under 10, 000, and I'm also saying this about India places like Indonesia, Vietnam, then that question becomes a lot harder to answer because becoming a profitable company after burning so much in these markets are extremely challenging.

The average person in Indonesia makes $400 a month. Even if you're saying you're targeting, Oh, I'm targeting MAC middle affluent customers, you also have to see their share of purchasing power is nothing like the United States on average. This is not, you know, saying every person individually, but on average. But the problem is that model relies on on average. The model literally has to have a certain amount of orders per dark store in order to make it work, have any margin to begin with, and also it has to have a certain amount of basket size again, right?

And that's where it gets very, very tricky because you're still dealing with markets and heck, even the U. S. is like this. You're still dealing with markets where if you give people discounts and incentives to increase their basket size or in order to have more frequent transactions, they'll get addicted.

But the big difference is this is not necessarily the market where if they get addicted, they will necessarily pay for it in order to keep the addiction, because on average, on average, it's just a much less deeper economy than the US.

(15:15) Jeremy Au:

Yeah, I think it's interesting because you know, the reason why we're kind of talking about this again is that I think in 2023, the interest rates when kablooey and in a negative way, because sometimes when we say things explode, maybe it's positive, sometimes, it's. But in this case, we mean it in a, in a bad way. And it's interesting because I think this year we're starting to see that re-emergence of articles saying like, okay, wow, GMV is really growing aggressively. And here's some numbers, but like, in India, 2021, it was 0.2 billion of GMV. In 2022, it's 1. 6 billion of GMV. And now in 2023, it's 2. 8 billion of GMV. So it's a scene that QuickCommerce, the definition of this vertical is growing 77% year on year, so much faster than "traditional". I use traditional air quotes, e commerce are 14 to 15%. And so I think this was some of the numbers that were coming out that kind of like has reignited some, I would say, theoretical or conversation about whether QuickCommerce, if it works in India, would it work in Indonesia? I think that's kind of the framing that people are thinking about.

(16:16) Gita Sjahrir:

And I think my question to that was, Is it profitable in India?

(16:20) Jeremy Au:

Yeah. Well, the answer is generally no. I think, but It's contribution Sure. for some players.

(16:28) Gita Sjahrir:

Cool. Thank you. I think but it, this isn't to necessarily knock on the quick commerce model because in general, when any market changes, it doesn't matter where you are, if it's India or Indonesia or Vietnam, once you get to a certain level so let's say the middle affluent or let's say, you know, living in urban areas middle affluent customer market, yes, generally they may have similar spending patterns and similar consumption appetite. So they may have the appetite to want certain things very quickly because there's there, consumptive pattern starts changing as they move up the socioeconomic class. I do believe that with changing markets, then the product has to start changing to, like, I do not believe that because traditional commerce has worked out so well in the past, and it really hasn't because the market changes, then, the market has to adopt itself to what's out there. No, not at all. But I do believe that quick commerce will have to morph over time, like there must be a time in which we find a certain model of quick commerce that finally works for the market that it is in, which could be different than if you are in India and Indonesia and Vietnam versus if you are in the United States that might be different.

But I think a lot of the problems with markets that are still very new is we have a tendency to look at what works in the US or, you know, for us, because we're really close to China, what works in China adopted and think that it must work here because it works there. And again, this is why localization is so ridiculously important because everything requires localization because again, it's product market fit, right? You have to create a product that fits with the way your market operates and fit with what your market needs.

And when it comes to need, for example, there was recently an announcement that one quick commerce company here in Indonesia will focus more offline stores and maybe not do 15 minute deliveries anymore. And that's probably because maybe the market here does not need 15 minutes. Maybe they're fine with 45 minutes, right? Maybe in order to pay less, they're even fine with an hour or more. Which is by the way, a lot of people are like that here in indonesia. Yeah, and so that is why it's so important to localize the product market fit and I wouldn't dismiss quick commerce as fast yet because I do believe that model will just have to evolve in order to fit the Market, so if that means more private labels more offline stores, they don't do any more guarantee on a certain time frame, but maybe they're still faster than, same day, maybe they're like in the next three hours. And then maybe in some areas, for example, that are not as densely populated they have a different guarantee. Then I can start seeing it working. But I do believe that you just cannot violate the ultimate rule of business, which is one day your business will simply have to make more money than it spends.

(19:21) Jeremy Au:

Well, very controversial statement there. That last closing line there. Just kidding.

(19:25) Gita Sjahrir:

Like I realize, you know, every time I say that they're like, Oh my gosh, you're so old. I'm like, yes, I am.

(19:30) Jeremy Au:

So old school. There we go.

(19:31) Gita Sjahrir:

So old school. And I'm like, sorry, I apologize I'm, you know, 80s kid. But back then, back then, \ we do have to learn that over time, just to make that business sustainable and to continue to serve your market, you \have to find a way to make that business sustainable.

(19:47) Jeremy Au:

And I think I want to double clink to that, which is, what about QuickCommerce is compelling versus why it's sustainable versus unsustainable? I think that fundamentally, of course, I think the word QuickCommerce was compelling because, in general, people want stuff earlier rather than later, right? So it makes total sense in general. But I think where it kind of has always broken down for me on a theoretical basis is that if I really think about my level of purchases as somebody who's relatively organized. I don't need a bag of rice in 50 minutes, for example, because that's something I probably order on a monthly basis, right? So it is a stack, it's in a stack of purchases. And I got to double click into some of these, like SKUs and some of the people doing quick commerce around the region. I think if you, once I saw it, it kind of really made sense, which is the best performing SKUs were stuff that, were generally more expensive, really urgent and relatively portable, right? So a bag of rice was a terrible idea for somebody to take a motorcycle to carry last minute. So yeah, exactly. Diapers is one. Honestly, I think it was like vapes, alcohol, ice cream, and honestly, sex aids, right? So, condoms and stuff like that .

And so, it's interesting. And, but then, if you think about it, you're like, wait, that's a convenience store, right? If you look and go to a gas station or a lot of your neighborhood stores, actually, that's what they're stocking as well, because, Hey, you can run to make a run and take it. So I think it's an interesting SKU dynamic where I think suddenly you're not saying quick commerce, you're really saying convenience stores. And then you're like saying, okay, you can make an argument that sizes and geographies are underrepresented in convenience stores. So, saying stuff 7 Eleven, whatever it is, we can have more of those. And then I think that's where I think you started saying stuff that made sense, which is like, okay, can we make quick commerce into regular commerce, slow commerce, which is one hour delivery or we start tiering it. So 15 minute delivery is very expensive and one hour delivery is okay. And next day delivery is pretty fair. And then you have dark stores and private labels. And then, but then as we do this, there'll be something saying like, wait, didn't we just differentiate between quick commerce and traditional e commerce? So I think that's really, I think the kind of a bit of a head scratcher, I would say.

(21:44) Gita Sjahrir:

Oh, nope. Totally. I'm right there with you because in the end, just for any product that is trying to solve a market need and this is why it's so important to understand, is it a market need or a market want, because if you ask, they almost always say they want ABC. And I'm saying this as an ex-entrepreneur, like I've built multiple companies in which my biggest mistakes in the past, I've always been to ask people what they want and then give them what they want and realize it's not what they need.

(22:11) Jeremy Au:


(22:12) Gita Sjahrir:

Right? Because people will say I want, and I know because I'm one of those people who get consumer surveys, right? I'll say, I want that thing, now at this price, but when you give idea to reality and you let them clash, that's when you'll find out product market fit, because that's when you realize, Oh, that was never a market need. That was actually market want, and I think there is a lot of value in delivery of 15-minute things because you never know also what segment of the market you're targeting. If it's, for example, my friend group is , sometimes we'll need things immediately right now because our family needed or our child just needed immediately, but in the end, you are still competing with traditional solutions. And traditional solutions for Indonesia, for example, are these things called warung, which are traditional convenience stores that are manned by one person by the corner. And if you're friends with them enough, for example, I am, you can literally ask them to deliver to your apartment or your house but they might take some time. And so it really is about, again, why I say just localization and why I say, always think about whether your idea fits market need and not want is really that, because you just have to have that meet reality, because I know that maybe warung is not a reality in some states in the United States, maybe in the US, like the concept of a New York Bodega doesn't exist in other states.

Who knows, right? And in places like that, maybe that certain type of commerce model works, but then again, if you adopt anything at all to your home market, you just need to understand, like, one, what is the traditional solution? Are they good enough to meet the market need? And then three, then how do you differentiate yourself? And what makes you a better solution for the market you want to target?

(24:04) Jeremy Au:

Yeah. And I think that's interesting because what we're trying to say here a little bit is we're creating this, we're almost replicating the whole war on a traditional trade system at some level. Because we say dark store uses basically mean, like a small micro-warehouse, in that sense. And then replacing like you said, the single family member who was their own business that time is effectively free in the sense that they're there, they're standing there, they're on their phone. And this is where they live and they work in some extent versus replacing that with a travel rider, right? So I think there's an interesting one to one replacement. And I think the tricky part is, like you said, it goes back to the low GDP per capita. It's like, how much more can you squeeze out of it? Because there's, we start doing all kinds of things because we're like and I think, you add in other facts that you're saying like, okay, we're doing dark stores.

We're trying to squeeze fulfillment and then maybe we'll do some ad revenues to try people, and merchants to advertise on a platform. Sure. But still, you're like, at some level, then you're like, wait, are we competing with TikTok shop, or Tokopedia at some level, because what's the set of SKUs that they are not covering that requires speed, but is also not displaced by traditional trade. So, because we're not, because what we realized is that shipping prawn crackers is probably going to lose to traditional trade because it's available everywhere. So, I'm coming from like that wedge is feels thin also, I would say that both TikTok Shop and Tokopedia can evolve on one side as well as Grab and Sea, Shopee, but I also say traditional trader can also move and evolve naturally. I guess that's my question mark question.

(25:31) Gita Sjahrir:

Actually, my take on this is I do believe Quick Commerce might be here to stay, but I wouldn't be surprised if the operator becomes traditional commerce. Like, I wouldn't be surprised, and really the ones who can guarantee, let's say, 30 minutes delivery only in these situations and these regions are certain traditional commerce companies that are already operating anyway, right? And then they can probably compete in terms, especially in terms of private label production, because they just have all the infrastructure already. They have the production facilities, they have the logistics, they have the distribution.

So you know, might be what can happen next, but again, this is why I'm always saying in the beginning be very careful also with fundraising and seeing fundraising as a metric of of success, because fundraising is just one metric and oftentimes fundraising measures how well people raise money, which is not necessarily how well that business is going to do. So when fundraising, just be very careful because you want to scale up solutions, you don't want to scale up problems. And when things haven't really have their product market fit and then they take in a lot of funding, often what happens is you scale up problems.

(26:43) Jeremy Au:

Yeah. I think that's the tricky part because I think if you a founder going out to quick commerce, if I said, I want to do quick commerce because I've always done commerce or something like that, it was a reasonable bet. And maybe my disagreement would be like, you have to raise that money because it's available. Just take it and go and build, but I think where the nimbleness has to be, there is like that part of the brain that goes like, but the economics don't work at a certain scale and we need to pull all these levels and we need to be super disciplined. and we talked about this before, but I think the big difference is that in Southeast Asia, the VC board may not be sufficient top partners to help you get through that because what we're kind of saying here is like, I think there's a US playbook and a lot of people are reading sub stack, you know, in terms of the growth or sort of blitzscale and so forth. But I think scaling a negative unit economics business can make a very big hole in the ground if people are not paying attention to each other.

(27:34) Gita Sjahrir:

Well, I will give a caveat that for anyone who uses the term blitzscale um, and then you haven't read the book Blitzscaling, I really recommend actually reading the book Blitzscaling, simply because in Asia, Southeast Asia, I wouldn't know, but you know, China, but in Southeast Asia, unfortunately you are so spot on. We read the substack. We watch the interviews and we assume that because that works in the US, why not why not have it be done here? And if our GDP per capita keeps rising, which it is, right. Then surely in like five to seven years, it'll turn out well. But the thing is, people also always underestimate how long sometimes development takes because it's rarely straightforward.

Like politics is rarely straightforward, economics is rarely straightforward. So whatever time frame we have in our minds, we're I always say maybe you want to double that because what you said about levers was so true. There are so many levers, so as a private company, if you're an entrepreneur, I always say, figure out your levers of revenue. And then ask yourself, how many unless, like the word unless, how many times do you use the word unless in your scenario unless our GDP per capita gets to this, then we can start increasing basket size to this. Then, we finally get to contribution margin at this stage. Then, we become profitable. Then, we can list, or then we get acquired in a multi billion dollar transaction. Think of how many unlesses there are in your statement because if there's so many steps, so many unless, so many levers and just so many variables going on as an entrepreneur You really can only control what you can control. You cannot control how fast the economy grows. You cannot control lots and lots of stuff. So try to pinpoint like how many unless and how many levers it takes for you to get to the success you want because the bigger it is You are in deep trouble especially in emerging markets. And I'm saying this for African continent, for LATAM, like other regions where you are still in a very early stage and as a private player, as a founder, as an entrepreneur, it's so important to just know the limitations too, of what you do so the more you can control your levers of success the more you can reduce the unless so that you get closer to that success the better off you are because if not it'll drive you crazy, because then you're waiting for GDP per capita to hit 10,000. You're waiting for urbanization to happen at a faster rate than what you want. And you're waiting for all these things to finally get you to IPO. do that.

(30:08) Jeremy Au:

Yeah, and I think that's what it reminds me of is, I think there's this phrase they have in startup failures called cascading miracles. But basically, in order for a company to succeed, you need multiple miracles to happen. And I think that's a common path that we understand, makes sense for, like, deep tech companies in the US because obviously, we understand at SpaceX requires you to engineer rockets that can fly into space, times you need to get the government to give you the contract, which is effectively 90% or 100% of the revenue. And then times you have the ability to make sure that they're able to come back and then, there's a bunch of cascading miracles where everyone kind of understands that deeptech in the US requires a lot of work and we respect that.

I think people don't realize that we had the same issue for consumer companies that are in Southeast Asia, because of like what you said, the GDP per capita is hard, the UN economics as a result are hard, the quality of talent and executive leadership you have is also hard, and so there's an order of magnitude of difficulty in each of these levers that is underappreciated at both the executive level, I would say, I think obviously founders know that very quickly once they're building, but I think it tends to be underappreciated at the board level, I'd say at a VC level as well, and I think that's my concern, so I think there's a lot of cascading miracle in Southeast Asia, where it just needs a lot more work to actually get to that exit that you mentioned.

(31:22) Gita Sjahrir:

This is also for Southeast Asian founders in general. When you're trying to talk to VCs, also try to find investors who once built companies themselves. And I'm really saying this. I'm really stating this very clearly because be careful of taking everything that investors say 100% and then getting very angry at them when things don't work out because both you and I are laughing right now because it hits too deep, but in the end, that's your business, like it's your responsibility. Sorry. I'm not saying that I'm not saying that VCs can be wrong. VCs can be wrong very, very often. And that is why it's so important to take accountability of your business and not always take what we say because a lot of venture capitalists also were not founders.

They didn't bootstrap companies. So, for example, if you've always bootstrapped companies, then really look at the background of your venture capitalist too, was that VC have experience in bootstrapping one or two businesses in the past? Did that VC ever learn how to scale up? So, a lot of times, when you're dealing with also very young VC ecosystem, we're all very young. We're all babies basically in this process. Just be careful too with how you're thinking about scaling up your business with these thought partners, as you said, like Jeremy, you got it like as thought partners, yes, VC does have to step up like we have to learn. We have to innovate. Think longer term. We have to do all these things, but also as founders, you know your business better in the end. And it's also your business. So start working at it like you're a business owner. And I was talking to a good friend of mine, now from Kauffman, who said there's a difference between a startup founder and a business owner. And then he said, I have nothing against startup founders. In fact, I love startup founders, but over time, hopefully they can become a business owner and a business owner in emerging markets, we still have a lot of these traditional business owners, right? People who own the majority of the business, they still take a lot of pride. They oftentimes when things don't work out, they go, Oh, what can I do to change so that the business works? And over time, a startup founder hopefully will morph into that business owner where you take accountability for your business, where you, oftentimes have to pivot or do things that you just don't really like just to make the business work because the question isn't like, can this business grow for two years, but the question is, can this business truly make impact? And that oftentimes require going back to fundamentals and lasting for a long time. And so it's really that, like, can you become a true business owner? And that requires a lot of accountability.

(33:59) Jeremy Au:

Yeah. I think it's accountability. I think VCs have to be accountable for what they're saying. and also for

being on top of their portfolio companies and being clued into what are the true levels for the company. So say what you do and say what you don't know. I think that's a big one. Is founders as well have the accountability naturally as well. Yeah.

(34:17) Gita Sjahrir:

Actually, that's huge. I think because I was on the other side as a founder for a long time for 13 years. And I've had to deal with a lot of investors. In my work today, I actually try to encourage founders to. To just argue back, just argue with me, argue and learn to stand their ground and also I learned to just shut up most of the time, because if I've never operated a B2B SaaS, what do I have to say about how to get to a better product market fit for one of their new verticals?

In the end? I probably will have no idea. And that is why also perhaps maybe more VCs today can just be more wary of the limits of what they know. And that's why I also encourage so many founders to just, just have more ownership of their business so that they can also not always take in everything a VC say.

(35:05) Jeremy Au:

Yeah. On that note, I'd love to wrap things up. Just a quick paraphrase of the three things I think we covered. I think first of all we covered the Indonesia, the election, the post process, but also some of the learnings that we learned about what Indonesia is looking for as a population and demographically in terms of blocks, but also talking about political personas versus parties.

Secondly, I think we talk about quick commerce and we talked about it in the context of Indonesia, India, but really talking about the fundamental levers, but also the market size and some of the dynamics and that led us to our third topic, which is talking about in terms of founders and VCs having the accountability and frank conversations needed to really drill down on what are the true levers. So avoid negative blitzscaling or to avoid, cascading miracles, but really be clear about what the business needs to be because Southeast Asia is not an easier market than America. It is not the same market as America. It is a harder market for sure. And so I think if it's a harder game, I think we just had to play at a higher level, right?

(36:00) Gita Sjahrir:


(36:01) Jeremy Au:

On that note, thank you so much for sharing.

(36:02) Gita Sjahrir:

Thank you.