Sebastian Togelang is the founding partner of Kejora Group, a technology start-up accelerator and early-stage investor with over USD 200 million asset under management and more than 35 investments around Asia. He was one of the speakers at Mobiliari FinFest 2018, talking about the potential of fintech in Indonesia. We found the time to sit down with him and find out more about fintech.
Can you tell us a little bit about your background?
I became an entrepreneur in 2000, so it has been 18 years now. I grew up in Germany, and four years ago I came back to Indonesia to start Kejora Group. Currently, we have invested in more than 35 companies.
Why did you decide to come back to Indonesia?
Because of the growth potential I see here. Right now, I see an exciting digital economy landscape in Indonesia. Everybody complains about the amount of problems in Indonesia, but I actually came back because of these problems. I see problems as the driver of growth. And as Indonesian, I prefer to be here. I find Indonesia to be so rich in culture and potential holiday places, too, which is a good combination [laughs].
How did you end up becoming a venture capitalist?
I have always been interested in entrepreneurship. When I came back to Indonesia, I was thinking of creating a start-up, but I felt that I wanted to do more for Indonesia. I saw that one way for me to help is by becoming a venture capitalist, so I can help start-ups to thrive and make positive changes in Indonesia. That is why we started Kejora. Kejora is not just a VC—we want to build a whole ecosystem for technology start-ups and the digital economy, too. We are very hands-on with most of our start-ups, so we will meet with the founders on a weekly basis. It is very exciting and that’s part of my passion as well.
What regulations in Indonesia do you want the government to change in order to support the growth of VCs?
I believe the current government has shown good interests and support for technology start-ups. The government can support the growth even more in many ways such as good regulations, tax incentives, financial supports, and many more initiatives. VCs play an important part of the ecosystem since without funding, the start-ups will face a hard time to grow. However, VCs and local early stage investors will also need support from the government, so they can help more startups and help the ecosystem to flourish.
Here in Indonesia, we can simply look at our neighbours where the government supports their start-ups and VCs with grants, active funding programs and efficient tax structures on capital gain as example. Most important is to establish a good communication and constant dialog between the ecosystem stakeholders. A good discussion and finding solutions together is the best way to bring changes in the long term.
Which do you think is more important: idea or founder?
From my experience so far, the execution of ideas is more important since ideas will constantly adapt and change. It is very important if the founder is motivated and believes 100 per cent in what they are doing. If possible, they are founders who are ready to die for the idea [laughs]. The reason I said this is because as a start-up founder, they will face so many problems and challenges—if they don’t have enough passion, they will give up quickly and the company will not go anywhere. So be really passionate about the idea and also focus on the execution of that idea.
When you’re dealing with start-up founders, what are the common mistakes you often find?
I don’t see them as mistakes, but I do challenge all of my entrepreneurs to always think big. I want them to focus on customers and solving problems rather than thinking about valuation and short-term profits. It is also an investment philosophy to always invest in start-ups that have a vision in what they are creating rather than start-ups that are just worrying about building a big valuation.
What reasons would you have to not invest in a fintech company despite market opportunity?
There are so many fintech companies out there, and obviously we have to decide which ones are serious and which ones are fraudulent, because now, due to the cryptocurrency hype, many exciting things are happening, but there are also many people who are frauds and their ideas are scams. It is really important to choose the right entrepreneurs who have the right vision.
How do you see the future of fintech in Indonesia?
Fintech has largely been seen as a facilitator of economic growth in Indonesia. Financial inclusion is really important in Indonesia, but unfortunately, the banks are covering only around 30% of Indonesian population right now. So, there’s another 70% population in Indonesia that are still unserved by the banks. So fintech will play an very important role in helping to reduce financial exclusion.
How is fintech helping people not served by banks?
Fintech is lowering barriers to entry for customers, reducing the cost of transactions, and improving the quality of financial services. But perhaps one of the exciting aspect of fintech is the ability of user data to facilitate lending without requiring a lot of paperwork – as well as to enable better individual sizing and pricing of loans. Numerous players in the fintech space are exploring new credit-scoring approaches, as well as predictive mechanisms to best assess customer needs and deliver financial services. Also, since traditional financial services are typically concentrated in urban areas, fintech can tackle the problem of rural access as well as the provider cost and customer fees associated with lending. Disruptive innovations in mobile financial technologies, such as digital wallets, peer-to-peer payments, distributive ledger technology and others can help enable instant access to money, enhance financial capability and leverage big data for better risk management – thereby reshaping financial services and become more accessible for the unbankable population.
Do you think these people will have problems adopting financial technology?
Well, if you see popular ride-hailing apps, imagine how many drivers registered there that were previously not familiar with smartphones before and now they’re using those apps on a daily basis. So the adoption of technology is very rapid right now.
Why do you think the banking system took so long to catch up?
The traditional system is more complicated, and the process is longer. You need to go to the bank, often wait in line, fill lengthy documents to open an account and do the KYC(Know Your Customer) process. That’s why now several banks already started digital banking which make it easier for users to register and start banking. In the modern era of digital and fintech it becomes even easier. Now all you need to do is just download for applications for chatting, transportation or e-commerce and the user can pay and transfer money without realizing they have become fintech users.
How do you see the banking industry responding to the growth of fintech in Indonesia?
I think they already know that they cannot stop it, so they are figuring out ways to collaborate with fintech companies. I think that is the best way to go as well, because if they are not open to these new technologies, they will probably become more disrupted. There are also benefits to collaboration. Our goal in Kejora Group is to get more collaboration between fintech and incumbents.
Why is fintech needed in Southeast Asian countries?
In developed countries, fintech is not a thing because everyone has a bank account. But in Indonesia, India, and China, there are many people who are unserved by banks, so it will be easier for these populations to just use their phone for daily transactions like ordering food, payment, and everything else.
What is the biggest misconception about fintech?
Due to the hype of cryptocurrency, which is a part of fintech, there are, unfortunately, players who give bad experiences to some people. But I don’t think there’s any negative perception of fintech in Indonesia yet. In the end, positive collaboration between the government, fintech and traditional players will shape suitable regulations and policies that promote the growth of fintech and financial inclusion while preventing irresponsible players to grow and damage the good image of fintech.