I always believed in a philosophy that you can't do too many things at the same time. The thesis that I always use is, in life, you have four burners. You have your career, family, social and health. At some point in time, you have to make a decision on how many of them you want to burn. If you burn four of them at the same time, it will just be a small fire. You won't get anywhere in your career, family, social life and health. At different stages of my life, I only chose two. Some may have chosen three. I did sacrifice other things but that's the life of a founder. - Willy Arifin
Willy Arifin pioneered Indonesia’s SME focused neobank, KoinWorks, in 2015. As the Co-Founder and Executive Chairman of KoinWorks, Arifin is tackling financial inclusion for 65 million entrepreneurs in Indonesia. Additionally, he is a vivid angel investor known across South East Asia through his Alternative Ventures arm, supporting founders with technology centric solutions that disrupt traditional industries
Jeremy Au (00:28)
Hi Will. Welcome to the show.
Willy Arifin (00:31)
Hi Jeremy. Nice to be in it.
Jeremy Au (00:32)
I’m really excited to have you because you are an entrepreneur who is really tackling Southeast Asia’s financial inclusion and I think you have a strong history, not just in terms of your background but also in terms of the range of activities you are doing across Asia. Could you introduce yourself for those who don't know you?
Willy Arising (00:50)
My full name is Willy Arifin. I came from a family that has been doing business for three generations. Since my early age, I have been groomed to be an entrepreneur. We talk about businesses a lot at the dining table with my family. I do attend some board meetings even though I was very young and I don't know what it is.
I was just running around and making noises in the board meeting room. I was always at a close proximity of the business. I grew up and graduated from Michigan. Once I came back, I was pulled back into the family business where I was asked to review the business strategy for Southeast Asia. Later, I was put in charge of the family business in Indonesia.
Well, time flies by. That was 2003 and fast forward to 2015, I bumped into Ben, a good friend from school, who is also from Michigan. We wanted to do something together and we looked at a few opportunities. Finally, we stumbled onto a data point which was very interesting in Indonesia. There is an 80-billion funding gap under the banks there and about 65 million SMEs in Indonesia which really caught my eyes that we pretty much stick ourselves in.
I told him that he has to be Batman and I have to be Robin because I have a family business to handle as it was hard for me to commit 100% of my time. A lot of discussions and negotiations went on with my family. Finally, at one point I got this gut feeling that this is up to me.
It's going to be huge and I decided to jump on board and commit 110% to this. That's one of my interesting tech journey. Ever since KoinWorks started in 2015, we have grown from just four people to now 650 people. It’s very different in terms of how you operate a tech start-up in the traditional business run by the family. I was the almost the youngest in the family while I was the oldest in the tech start-up. It’s a big gap and a big difference but I took the job based on my gut feeling and I think I've made the right move so far. The year 2018 onwards, I was very interested in doing tech investment. That's when me and my wife decided to allocate a part of our money to invest on founders that are willing to use technology to disrupt the industry.
I wanted to empower entrepreneurs. I feel that this is truly a golden era in Southeast Asia, at least in the past five years. The next five years will be very interesting and I truly believe Southeast Asia will be the next powerhouse.
Jeremy Au (03:57)
Amazing. Let's talk about that beginning stage. You said you got to shadow some board meetings. As a kid, what do you remember about that?
Willy Arifin (04:06)
Nothing. I was just running around drawing things on the board and disturbing the family. Well, you hear them talking about growth, revenue and profitability but at that age of eight or nine years old, you don’t know about that much. All you know is that they are talking serious matters and you just want to catch your dad’s attention so you make a lot of noise everywhere.
I think those little things actually creep into your mind during dinner. My dad would talk to my mom about it. You'll listen, get inputs here and there but indirectly it will just creep into your mind. Once you grow up, you will remember these things.
That is something we talked about. Now I’m encouraged to talk to my wife during dinner while my kids are there as well. Hopefully they will catch a bit here and there of what we are talking and they will be inspired to be an entrepreneur in the future.
Jeremy Au (05:05)
When you talk about business and entrepreneurship in front of your children, how do you think it gets across to them. What do you think they understand or don't understand?
Willy Arifin (05:15)
Well, my son is actually quite interesting. He is ten years old now. We started to talk about stock trading. I give him a virtual account with about 25,000 virtual money.
We talk about stock trading because me and my wife love to invest. We encourage him to invest in things that he believes for the company.
As a child, they know this. They invest in brands like Disney, Nike and Apple. They see popular things that people use these days. He actually did pretty well. He doubled his 25000 in less than nine months. That was during last year but I don't know about it now. I will have to check in his portfolio. These are the little things that I feel would influence them indirectly for their future.
Jeremy Au (06:00)
You went to Michigan and you decided to become a computer engineer. Why did you study computer engineering?
Willy Arifin (06:06)
I have been very interested in tech stuff when I was young. My dad always buys me speakers and DVDs and he asked me to sort of install it. I will be sticking all the cables, trying all the different speaker configuration and that got me to electronics.
Then, he got me a computer that was running the Lotus Software and it intrigued me. I thought I'm given the opportunity to choose. Some parents are pretty strict as in they tell us to go in a certain direction. I was given the freedom to choose.
Strangely, I make games and that's what I learned in school. For my final project, I made a fighting game in a way similar to ‘Tekken’ or ‘Street Fighter’.
Jeremy Au (06:59)
Amazing. Of course, what's interesting is that you didn't really go into an engineering job after that. You decided to pursue more of a business role eventually. How was that transition between your major versus your career?
Willy Arifin (07:13)
It's a big gap. I actually applied to IBM and I got accepted but my parents told me to move back to family business. I was thrown there, shadowed my dad, moved around department by department and learned by swimming. That's always the way.
They just throw you down and you have to figure out how to swim. The good thing is, I feel that software engineers learn logic 1010 and a lot of things are based on logic. I use that to implement into the family business. Of course, there are some friction and feedback in our family business. There is always a bit of drama than just pure business but you get to learn the loops. Well, I was there for almost 12 to 15 years but my dad is also a good teacher.
Jeremy Au (08:06)
Why was he a good teacher?
Willy Arifin (08:07)
That's interesting. My dad doesn't really tell you what to do. He gives you freedom. I think that is what you need when you are young because if you are being told what to do, then you are just somewhat executing it. If you are not told what to do, you have the freedom to do whatever you want to do because you can experiment and test a lot more things.
I think that made me to become very experimental and works well from my start-up to a lot of what the MVPs has to done. It’s quick to the market, trials, testing and see if works or not. It doesn't give you fear, instead you feel like you are there to challenge the world.
Jeremy Au (08:46)
What's interesting is that you went through this transition to the family business and then eventually built out a new venture. Talk us through how that transition happened.
Willy Arifin (08:56)
That’s an interesting one. Like I mentioned, my co-founder is the Batman and I’m the Robin at the very beginning. I can't give my time and I have to row two boats. It took me almost three years to transition out, negotiate with my family and finally commit 100% in there. However, I still have to attend the board meeting and strategy meeting quarterly with my family.
Willy Arifin (09:22)
The transition period was pretty smooth because it was well planned by me and my co-founder. In the beginning, my co-founder Ben, pretty much runs day to day jobs. I was handling the finance and accounting side. Once we got to hire a person in charge of the finance and accounting, I stepped down to just monitor and advice.
Then I went to the marketing side and it’s the same case. We slowly built the marketing side and once we have a person in charge then I begin taking my foot from the gas gradually. My last role was in products and I love products. I'm someone that always feels challenged and I believe that innovation is something that has to be built in the company.
Without innovation, you are just ready to be disrupted. Even a tech start-up that disrupts the industry can be disrupted too. You need to keep innovating. That's something that we truly believe in KoinWorks. Finally, we promote our VPO (Vice President of Product Management) to be the CPO (Chief Product Officer) which enabled me to take my foot off where now I'm more into investor relationships, fundraising and developing small strategies.
Product is still close to my heart. Innovation Lab is something that I love to do and continue doing it.
Jeremy Au (10:47)
What do you find is the difference between the new venture and the family business? I started hinting at it a little bit. Do tell us, what is the culture difference? What is your personal difference? How do you do things differently.
Willy Arifin (11:00)
It's very different. The first one would be the age group, the way how people see you. In the family business, they see you very differently compared to how the employees see you in the Tech Start-Up. In the Tech Start-Up, luckily for those that we hired, they give their 110% and they are on fire. They want to challenge the market.
Well, in the traditional business, they don't question the instruction anything since a lot of the people are older because it was my dad's era. I would say they are kind of subtle and it’s hard to see the fire in them. All they want is a 9 to 5 job. I call that the settling age and I think the that is big difference between the two cultures.
Jeremy Au (11:49)
How has your own personal routine or work style changed as a result of this transition?
Willy Arifin (11:55)
A lot. This is what I tell to all of my fellow founders. I always believed in a philosophy that you can't do too many things at the same time. The thesis that I always use is, in life, you have four burners. You have your career, family, social and health. At some point in time, you have to make a decision on how many of them you want to burn.
If you burn four of it at the same time, it will just be a small fire. You won't get anywhere in your career, family, social life and health. At different stages of my life, I only chose two. Some may have chosen three. I did sacrifice other things but that's the life of a founder.
You have to sacrifice. You can’t be everywhere all the time and I know all founders have health issues especially in the early stage. They put their heart, sweat and their blood into making things work. The first three years of the Start-Up is the fragile stage and if the founders are not putting in everything, then those people are not the right founders.
Jeremy Au (12:59)
That's really interesting. I love the four burners analogy. What advice do you normally give? How do you think people should be switching or prioritizing them?
Willy Arifin (13:09)
Everyone has a different need. For me, when I started KoinWorks, I understood that I have to row two boats, both my family business and KoinWorks. Career and family was my choice. I pretty much switched off the other two. During that two years, most of my friends would always look for me and I won’t be there.
In terms of my health, I was gaining weight. It was insane because you are eating irregularly and you are constantly stressed and challenging yourself all the time. That was really a hard and challenging time for me in terms of health.
I remember vividly that I have to pitch to the investors and I had a gout attack the day before. The next day, the mood and feeling was not right. You still have to make it happen because this is the only opportunity and time with the investors. They want to talk to you and rescheduling isn’t an option.
I think my advice is to choose wisely on whichever to burn out of the 4 burners. You scale some of it and turn off some of it.
Jeremy Au (14:19)
As you think about these four burners, how have you been able to prioritize? Are there any hacks to make it easier to have three or four burners? Nobody wants to do two burners. Everybody wants all four.
Willy Arifin (14:32)
It’s easier to manage if your family consists of just your parents. However, if it consists of your wife and your kids, that’s a bit different. That requires attention and to be in a constant touch with your kids or it will be considered as if you are not there for their birthday.
Physically, you will be there but mentally you are not. It doesn't feel right too. I think the hack for this is to get into entrepreneurship earlier before you get married. That makes life much easier.
Jeremy Au (51:08)
What’s interesting now is that not only you have been the executive of KoinWorks but also starting to angel invest and do that as well. What do you see in the founders today?
Willy Arifin (15:22)
Honestly, founders are getting more complicated. Their expectations are very different from what they are aware of. I think there were not that many VCs around during the era where me and Ben started. You can probably count early stage VCs in Indonesia or Southeast Asia by your fingers.
Now, it's flooded. Everyone is going early stage. It’s definitely the right time to be a founder right now. If anyone of your audience has doubts in becoming a founder, I can surely tell you that the money is everywhere. This is the golden era of Tech Start-Up in Southeast Asia. That’s the reason why I jumped into this investment.
I think in the next five years, we will see a lot of disruption to the traditional business and we will see a lot of very successful and great stories of founders.
Jeremy Au (16:22)
You have been a founder and now you are an angel. What was it like to be on both sides of the table? Do you give them advice? Do you feel like you can help them run the business better? How does that happen?
Willy Arifin (16:33)
The strange thing is that there is a couple of things why founders want me at their table. My network and my experience. Finally, a lot of founders might not realize that they need someone to be there when they get confused and someone to tap their shoulders and say, “I have been there as well, don’t worry about it”. We just need to figure out the mental part because that’s actually a key component as well and the good thing is I have done it before. It's more authentic for me to tell them this.
Jeremy Au (17:09)
Did the founders listen when you were trying to make it authentic? When I was a founder, I listened to some angels and I did not listen to some other angels. I'm just curious on how you think about it.
Willy Arifin (17:21)
Founders have a lot of angels. Right now, at the early stage of a Start-Up, they have like 20 angels and you can pretty much see the names in there. I think that the founders need the angels for certain purpose and they can optimise each angel for a specific need and listen to what advice is given.
Not all advice given will be 100% correct. It might not be at the right time or even the right industry. As Founders your time is precious therefore you have to pick and choose the right advice.
Jeremy Au (18:02)
How would you advise founders to differentiate between good advice and bad advice or even advice that should be taken and advice that should be put aside?
Willy Arifin (18:11)
You have to listen to a few advices if you can’t take one source of truth. I always tell founders that it is good to have multiple angels to listen to and it’s good to listen to the board as well. Everyone has different inputs and in the end they have to digest it and speed up the output themselves instead of just following what the advisers and going along with it. The founders, intellectually have to be up there to absorb, to filter the noise and to speed up the output.
Jeremy Au (18:42)
Has there been any advice that you find not really interesting and advice that you find relevant?
Willy Arifin (18:48)
Well, I think we always have that that scenario because sometimes advisors only know certain things at that point of time. Historically, sometimes you need to have the whole context as well. I went through that stage too. Me and my co-founder had to digest a lot and speed up the right output. Hopefully we put out the right output all the time.
Jeremy Au (19:14)
It's interesting because you recently raised a lot of capital as you got to the scaling phase, not just in equity but also in terms of debt as well. Could you share a little bit more about the different stages right between the founding, the early stages and now when you are starting to raise a lot of capital. What has the experience been in terms of the company’s growth?
Willy Arifin (19:36)
That's the beauty of being a founder. You have to constantly evolve. I think for early stage founders, it's good to build a culture where you are more hands on where you get your hands dirty all the time and you are looking at every single detail.
You can do that when you have about 2530 people, when your company is still figuring out. Once you have proved that you are an MVP, you need to step on the gas on the growth side. It’s a bit different then. You need your generals there to help you when you have like 200 - 300 people. You can’t be making decisions every single time because you pretty much won’t have time to reenergize yourself. You need to evolve as a founder going through the different stages and understanding when to step back and when to step in. At our stage, it is a key component that we empower our generals to be able to make key decisions and the right decision all the time. Sometimes there are doubts and we have to make the call. I think that's the difference stages our founders need to evolve themselves.
Jeremy Au (20:45)
How do you make the call when there are doubts? What helps you make one decision compared to the other decision.
Willy Arifin (20:51)
Some founders require 90% data points to make a decision. For me, 70% will do because by waiting for 90% data points or even 100% for some very conservative founders, it will be very slow. Certain decisions require that accuracy of data points. That's something founders need to figure out in terms of the industry that they are in and the sensitivity of a decision. Again, I like to make quick decision but of course I need to have the right data point as well.
Personally, I would like to make that call with 70% data points and my gut instinct compared to waiting for another week for data points.
Jeremy Au (21:37)
How do you make decision by comparing decision A and decision B with that 70% information? Do you talk to your friends, advisors or family? How do you have that debate?
Willy Arifin (21:47)
This is called corporate governance. As the founder, you now have a board to answer to. When in doubt, the first few people you have to inform is the board before making a big call. I think that's a good structure of doing things the right way. Friends and families might have the industry experts. It's for you to ask advice but the board has a more collateralize decision making.
Jeremy Au (22:15)
What's interesting is that you are making all these decisions at a very fast growth rate over the past six years and you are also working with SMEs in Indonesia. Historically, that has always been a tricky sector to work with in terms of non-performing loans and information. What’s your take on that?
Willy Arifin (22:36)
That's where my key learning point is leading to. Underwriting for SMEs, influencers, content creators and freelancers. It’s very different from underwriting a commercial size company compared to a corporate sized company where their financial statement is pretty clear. You don’t have to reconstruct their financial statement that much. SME is the founders tool. They are the founders.
They are businesses that has less than 20 - 30 people. The dependency on the legitimacy and the strength of the founders are the key components. The challenge is sometimes you will meet a founder who is not legit or SMEs treating it as a hobby. What we want to see is the founders or the SMEs treating this as their life, it’s something they really want to do or at least, this is a side hustle for them. For those who are not really serious, there is always a challenge.
Jeremy Au (23:32)
And how have you been able to get your non-performing loans percentage lower than average because that's a big decision. As an underwriter you probably have less than 70% information and you are making 70% decision on that. How do you get better over time?
Willy Arifin (23:51)
I think that's true experience. Once you have sharpened your tools, your senses become more attuned to it. Since we are talking about NPL (Non-Performing Loan), the right way to put it is that NPL is just a metric to measure the portfolio quality or a start-up. Some lending companies will readjust their pricing to adjust the NPL. The conversations should be on NIM (Net Interest Margin) where a company might have a slightly higher NPL. I’m not saying we are but you might be super profitable.
To put it this way, you have a NPL of 1% but the company is not profitable. It means you are not taking enough risk but do you think it’s wrong if a company has a NPL of 3% and is super profitable? I think it’s how you price it against the market that you are hitting.
Jeremy Au (24:40)
That's actually a really good point and that's something that most people don't really understand which is that at the end, there's a trade-off between these two factors. What's interesting is that it's also a good strategic choice about which of these to prioritise. In certain times, the focus is on the net interest margin and sometimes it’s on NPLs.
How would you advise Fintech companies? There are so many of them and they are doing some kind of lending out there these days. How would you advise them to be thinking about the Fintech space or even the strategy they should be thinking about?
Willy Arifin (25:11)
Well, everyone talks about nuclear winter and all investors are looking at profitability. My single advice for those who are doing credit is to not subsidise the interest rate. I know some peers are doing that and that's not healthy. If you say someone is risky, you should price it according to that risk.
I’m not saying that you should price it according to the risk and you should give them a discount. Sooner or later you're just going to shoot yourself in the foot.
Jeremy Au (25:45)
That makes a lot of sense. That's interesting because there are a lot of people going to Indonesia because there is a huge SME growth story about them as a backbone for the economy and the long term macro trends. However, I think facing the difficulty of not having enough information and our credit history really makes up that decision as well.
How should people think about the Indonesia SME compared to the Fintech approach? I know you are obviously all thumbs up for it. I'm just wondering how people should be thinking about that.
Willy Arifin (26:19)
SMEs always have a data point but it's just a matter of where. For a lot of the offline SMEs, the data point is not available online, internet or the digital world. On the other hand, online SMEs actually have a lot of data points. It's just how we harness that data point to underwrite them.
Of course, for commercial sized business, you can construct the financial statement more clearly. The way you have to see it is the risk profile. With this amount of data point, what kind of pricing you should apply on it compared to someone who has a complete data point?
At the end of the day, it's the price risk factors. Some of the Indonesian SMEs that are at the bottom of the chain have no data points at all and that's where you have to price it accordingly. You can’t give a farmer who is dealing with cash basis an attractive interest rate because it is wrong.
Now, there are a lot of architects popping up everywhere that are empowering farmers or fishermen. Only then, you will have additional data point and that is when you can price it even better. I think data is the key here.
Jeremy Au (27:32)
What’s interesting is that you also talked about financial inclusion. For those who don't really understand it, I think I may have a hint of where you going with this. How does providing loans to SMEs lead to more financial inclusion? What is the social value or impact of lending to them?
Willy Arifin (27:53)
If someone doesn't have Internet access, they will fall behind because they can’t educate themselves through reading or getting video content on the internet. That is why Internet access has become a key point in our life these days. Financial inclusion is the bread and butter of SMEs. Imagine SMEs who can only get loans from loan shark. They are pretty much doomed.
The interest rate is 50% and that is by month. Having a financial inclusion offers them an access of credit at the right price which will change their business. We have a statistic in KoinWorks. If they take a productive loan with us, their sales will increase by 60% within six months.
Jeremy Au (28:44)
That's powerful and that 60% helps them pay employees better, pay themselves, feed their families and work better. As you think about all of this, could you share about the time that you were brave.
Willy Arifin (28:59)
I think the bravest decision I made was to jump from the family business to run KoinWorks. Not only it took a lot of negotiation, but it was also a big decision. Honestly, it changed my life. Looking back, I think it is quite crazy. Some of the phrases that I remember was, “how can you do lending without looking at someone? Do you want to run that business?”.
That gut feeling is really the sixth sense that made me to take the jump. This is the one. The data shows that there's a big market there and this is the one that I need to tackle. I need to empower people here. This is where I'm going to change my life and people's lives.
That was probably my bravest time ever. Of course, taking a decision to marry my wife was another brave decision as well.
Jeremy Au (29:53)
It’s interesting. Was your wife present when you made the decision to transition from the family business to founder.
Willy Arifin (30:00)
Of course. It was a collective decision.
Jeremy Au (30:03)
How is that a collective decision? I think there are so many founders out there trying to make a decision on transitioning from a regular job or executive to becoming a founder. How do they make a decision if they have a family? Do you have any advice or memories on how you have reached that collective decision?
Willy Arifin (30:22)
I think it is good to sit down, talk and run the numbers. Everyone has a different pocket. It's not easy to generalise things but it's good to run the numbers because being a founder, you know the statistics as well. Maybe out of 100 start-ups, only less than ten will make it.
The earlier you do it the more chances you will get to fail. However, you will also have more chances to succeed. Honestly, I started KoinWorks at the later stage. I should have done it when I was in my late twenties instead of mid-thirties.
Jeremy Au (30:58)
That is also something people always think about, waiting longer and getting more experience before they set up a business compared to starting earlier. Sounds like you are in favour of going out earlier.
Willy Arifin (31:11)
Yes, of course. I think experience can be gained when you are learning. However, when you have more experience, chances of success are higher but it's not that much higher.
Jeremy Au (31:23)
If you could go back in time all the way back to your senior year in Michigan, what advice would you give yourself?
Willy Arifin (31:37)
Well, network as much as you can. As you grow older and as you build your start-up, the power of networking with the people that can open up the doors for you is much more important.
Jeremy Au (31:49)
How do you advise people to go about networking? Once you are a certain executive, you can be comfortable networking but there are so many people who are not comfortable networking or they are relatively on a lower rank/position. How did you get comfortable with networking?
Willy Arifin (32:04)
I'm a really introverted engineer. That is basically my kind of character. If I go clubbing, I will be sitting in the corner and playing with my phone. I think everyone has to get into their comfort level. Networking is also a life process.
I don't think you can live your life just by yourself in a little cocoon in the corner. You need to be able to network with your family, your friends and your kids as well. The sooner you learn about it, the better it is. However, different people have different pacing.
I think it's great to start early in school when you fail and you don’t feel bad but when you fail in the real world as a founder, the effect is greater. School is always a good time to experiment a lot of things.
Jeremy Au (32:55)
I love that so much. On that note, I love to wrap things up by sharing the three big messages that I got from this sharing.
First of all, thank you so much for sharing about your own personal journey from a computer science graduate to jumping in family business and listening to the board meetings. As you said, not knowing what's going on up until helping out at a family business from department to department and eventually choosing to be a founder yourself.
That was a really interesting trajectory that really feels familiar, especially in Southeast Asia. I think there are so many people who are obliged or have responsibilities to their family. It was really nice to hear you share about that experience.
Next, of course, thank you so much for the technical dive into FinTech, risk & reward, net interest margins (NIT), non-performing loans (NPL) and not forgetting what the impact is about helping SMEs in Indonesia and Southeast Asia. It's really amazing to hear that ripple effect of what you're building over time.
Finally, thank you so much for sharing the four burners analogy about family, social, health and career. It’s really interesting to hear the analogy and metaphor about how founders and folks should be thinking about in terms of what they can switch on, switch off, do more and do less. Thank you as well for sharing a little bit about your own personal struggles and the early stages around your health to focus on your career compared to later on where you have been able to prioritise a little bit more of your family and career as well.
Thank you so much for sharing all that you've shared.
Willy Arifin (34:22)
Thanks Jeremy. I really enjoyed talking with you here.