The impact of scandals on ecosystems already in the deep sea
eFishery was supposed to reflect what the local ecosystem can do and what Indonesian founders can do. This was supposed to be one of the greatest companies in Southeast Asia. This was supposed to be a winner,” Gate Ventures told CNBC.
Dimas Ardian | Bloomberg | Getty Images
The Southeast Asian startup ecosystem has been brave in the multi-year fundraising drought, and the recent scandal has taken yet another blow to the sentiment of investors in the region.
Indonesian Agritech Unicorn Efishery, backed by investors such as Softbank Group and Temasek Holdings, was one of Indonesia’s top startups, but a preliminary and ongoing investigation has led to the company becoming financial fraudulent. It suggests that they may be involved.
The company did not immediately respond to CNBC’s request for comment.
According to an official company statement obtained by CNBC, Efishery’s board of directors announced Tuesday that it had appointed FTI Consulting for the business advisory firm as the company’s conduct manager.
FTI Consulting also issued a statement saying it “is intended to support its ongoing efforts to conduct a thorough and objective business review of the company’s true financial and operational position.”
This occurred amid a continuous investigation launched by whistleblowers’ claims regarding the company’s accounting, which estimates management has increased revenue by $600 million over the nine months leading up to September 2024. Masu. It has been reported.
The report reportedly offered investors $16 million in profit over the same period, but the investigation claims it actually suffered a loss of $35.4 million.
“(eFishery) was supposed to reflect what local ecosystems can do, what Indonesian founders can do. This was supposed to be one of the greatest companies in Southeast Asia. This should be a winner. That was,” he told CNBC at Golden Gate Venture.
companydeployed a smart feeding system for the fishing industry, reaching unicorn status after a $200 million Series D funding round in 2023. However, today, the company’s supporters are reported Among other options, Bloomberg said it is considering liquidation or acquisition.
Underwater ecosystems
The Southeast Asian startup ecosystem was already facing years of painful and costly readjustment since the Covid-19 pandemic when regional funding surged.
In 2024, total trading volume in the region fell 10.3% from the previous year to 633 transactions, but according to a January 2025 report, the trading value increased 41.7% to $45.6 billion. It has become. Taking street Asia.
“With this in mind, the 2024 figures represent just 54.6% of the capital raised in the first year of the 2020 Covid-19 pandemic, and just 19.5% of the 2021 peak.” According to the report.
So, where did things go well?
In the context, some people think that the startup scene in the region is relatively young, but it has only begun to develop more quickly in the last decade and a half.
“We’re looking forward to seeing you in the future,” said JX Lye, founder and CEO of ACME Technology and former COO of Endowus. “I think the early 2010s was the golden age of Silicon Valley… it was all going on. Uber, Airbnb, Dropbox is all going on there.”
“But what happened in the mid-2010s was suddenly what made Southeast Asia an interesting growth story,” Lye said.
It was also when the first wave of startups in the region began to emerge. Companies such as Gojek, Carousell, and Grab were the first to offer investors a strong opportunity to leave, or a way to sell their stock for profit.
It can be said that Southeast Asia has seen what growth is virtually undiminished until its post-covid crash.
Justin Hole
Partner, Golden Gate Venture
In addition to the first wave of successful startups, other factors have emerged during this time frame that accelerated the growth of the regional technology and startup ecosystem, resulting in investor interest being swept through.
“There was a huge middle class explosion… since the early 2000s, in the mid-teens,” Kevin Aluwi, co-founder of Gojek and venture partner at Lightspeed, told CNBC. “There were a lot of predictions that the Southeast Asian consumer market would look like a mini-China, but that didn’t pan out.”
Investors were hoping to see a very “vibrant, high-expense consumer market emerge,” so companies have a pricing power, frequency of transactions, and overall, startups have on the average revenue they earn. I was hoping that they were overshooting the predictions. You can bring it in, Alwie said.
“There was a business model that many people thought was feasible, but it wasn’t feasible,” he added.
Ultimately, investors began to realize that some companies in the region may be overvalued, revealing that there are few opportunities for exits and are far away.
“The biggest problem is… there are few exits in this market so investors have no way to spend money,” Knish Sridhar told CNBC.
“It’s really hard to do business in Southeast Asia because it’s not like that. There are seven different languages, seven different governments, seven different governments, seven different (systems) regulations,” Sridhar said. .
“This is not the case where you do business in India or China where the local market is 1.4 billion or 1.2 billion people,” added Sridhar.
From 2011 to 2022, the region saw a huge surge in attention and resource allocation, Hall said. “We can say that Southeast Asia has seen virtually unstoppable growth until the crash in the post-covid,” Hall told CNBC.
“There were some founders who had money raised too quickly and they had money raised too quickly. Unfortunately, the capital formation outweighed the development of the local market,” Hall said.
The impact of scandals
Today, allegations of fraud and fraud by Efishery have echoed throughout the region.
“Beyond our own group, we also want to acknowledge the wider impact on the Indonesian startup ecosystem and the communities it serves,” the Efishery board said in a statement. Ta.
“The recent revelation of alleged illegal activities within the group (including fraud) is deeply discouraged by all of us, and risks our confidence in Indonesia’s investment environment, where our group’s major subsidiaries are located. “We may be exposed to the statement,” the statement added.
Aquaculture companies were told as one of the most prominent examples of what a great startup looks like in the region.
“There was a lot of hope that (eFishery) is the next generation…I think it’s a real shame for the ecosystem as the child of that development poster turned out to be (doubtedly) scams. “Allwie said.
This could have a conservatively calm effect for 12 months, but it’s probably long.
Justin Hole
Partner, Golden Gate Venture
“I think Southeast Asia has definitely been hit with that perception… but the ones that suffer the most will be Indonesia’s growth stage companies,” Hall said. “I think we’ll be scrutinizing all the good companies in Indonesia more. It’s not a hassle to invest in Indonesia, as you can see what investors are saying.”
“I think this could have a calm effect on a modest 12 months, perhaps for a long time. It’s very negative right now,” Hall said.
Industry experts also say that if the allegations are proven true, the scandal will not only have a negative impact on investments in the region, particularly Indonesia, but also mainly on the medium to large-scale funding stage. It also reflects that it will have a negative effect. This affects not only investors but also founders.
“First of all, I don’t think it will have a big impact on the early stages because of the small check size,” said Lye of Acme Technology. “But I think it’s going to be a lot tougher for investors, though, from the middle to the later stages… because there’s a big round.”
“And that’s the problem, because every funding round is more complicated… Now they want evidence, they want auditability, but in many cases they do so We can’t provide it. It’s going to increase the effort,” Rai said.
“That’s not said, it’s not visible, right? And then the funding round could literally kill your company,” said Lai.
Silver lining
Ultimately, the scandal sent shockwaves through the Southeast Asian startup scene, but industry experts agree that there is a silver lining.
“If I’m very pessimistic, I’d say this would cut the dollars invested. If I’m more optimistic, it’s not that I’m cutting the dollars – that’s what those dollars are. It’ll take some time to unlock,” Hall said.
“In the long run, I think this is a good thing. Companies need to scrutinise governance. Investors need to be very enthusiastic about it,” Hall added.
In addition to having better due diligence and governance, investors agree that seeing more successful exits occur is key to improving funding drought.
“We need local exits. We need a global exit. We need a company that can actually return the money to investors,” Hall said.
Today, founders and investors alike are overly optimistic about their forecasts, and now the market is adjusting and recalibrating what is realistically possible.
“This calculation started a long time ago. Ajjari didn’t do it… (people) were simply unrealistic in their expectations. If those expectations are reasonable, , yes, I think this is the perfect place to build this. Business,” Hall said.
Ultimately, Southeast Asia is “still the third most populous region in the world. Indonesia is the fourth largest country in the world,” Lye said. “All these set-offs and challenges only make us more familiar with the next wave of business owners, entrepreneurs and investors…we all bounce back stronger.”