Survival of the Focused: Inside East Ventures’ Investment Strategy Amidst a Global Slowdown

The venture capital landscape is currently navigating what many call a "funding winter." Headlines are dominated by news of layoffs and startup struggles, creating an atmosphere of uncertainty. However, for seasoned investors like those at East Ventures, a crisis isn't just a challenge—it’s an opportunity to find the most resilient founders. In a recent discussion, Roderick Purwana, Managing Partner at East Ventures, shared deep insights into how the firm is navigating these turbulent times and where they see the next big opportunities in Southeast Asia.

The Indonesian Resilience

While the global economy braces for the impact of a recession, Indonesia’s economic climate remains surprisingly stable. With a projected GDP growth of around 5 percent this year, the nation is benefiting from a post-pandemic rebound. As social restrictions eased, consumer demand surged, breathing new life into local markets. Roderick notes that this recovery has particularly boosted sectors like tourism, culinary arts, and consumer commerce.

Despite this localized optimism, East Ventures remains pragmatic. Roderick anticipates a natural deceleration in investment pace. The rapid-fire deal-making of previous years is shifting toward a more measured approach. Yet, there is a silver lining: history shows that some of the highest-performing funds are born during crises. When market euphoria fades, valuations return to reality, allowing disciplined investors to secure better deals for truly sustainable companies.

Winners and Losers in the Current Shift

Not every sector reacts to a slowdown in the same way. Tourism, for instance, is currently enjoying a significant tailwind. After years of travel restrictions, the pent-up demand is massive. Interestingly, the challenge now lies on the supply side, as infrastructure and service providers are still working to return to 100 percent capacity.

On the flip side, the digital habits formed during the pandemic are shifting. While e-commerce remains relatively stable, activities like online gaming and live streaming are seeing a decline in user engagement time as people spend more hours offline. Even in sectors like fintech and logistics, which remain fundamental, the growth trajectory might flatten despite Indonesia's overall economic health.

The Question of Investment Pace

To understand the scale of the current shift, one only needs to look at the numbers. East Ventures signed 22 investment deals in Q1 2022, a significant jump from the 10 deals signed in the same period the previous year. Maintaining that record-breaking pace is difficult in any environment, let alone a cooling market.

Roderick points out that market expectations are shifting, particularly in the public markets. This shift is trickling down to private deals, especially for late-stage companies. Over the next 6 to 12 months, we can expect valuation expectations to align more closely with current market realities. While East Ventures isn't closing its doors—they are still actively looking for great companies at sensible prices—they are moving with an increased sense of caution.

Why Edtech and Healthtech Face Uphill Battles

The recent wave of layoffs in the K12 edtech space highlights a persistent problem: monetization. The pandemic accelerated technology adoption in education and healthcare, but converting that usage into sustainable, recurring revenue remains difficult. Whether it’s convincing parents to pay for a subscription or scaling telemedicine and pharmacy delivery, the core challenge is the same. East Ventures remains interested in these sectors but is approaching them with a high degree of scrutiny, often entering at the seed stage to mitigate risk.

The Untapped Potential of F&B and Logistics

One of the more surprising areas of focus for East Ventures is the culinary (F&B) industry. Compared to neighbors like Thailand, where F&B companies have scaled significantly or even gone public, Indonesia’s culinary sector is still in its early stages of modernization. While food delivery is huge in major cities, the "dine-in" culture is making a massive comeback. Some establishments, like those under the Ismaya Group, are seeing higher foot traffic now than they did before the pandemic.

Beyond F&B, the firm continues to double down on commerce, fintech, and logistics. In fintech, the evolution is moving beyond simple comparison tools into specialized areas like credit-tech, wealth-tech, and insurtech. In logistics, the focus is on the efficiency of first-mile and last-mile delivery, which remain the backbone of the digital economy.

SaaS and the "Feature vs. Company" Dilemma

When it comes to B2B and SaaS, the challenge in Southeast Asia is cultural. Adoption is slower than in mature markets like the U.S. because many businesses are hesitant to move away from legacy software or manual processes. While East Ventures believes the long-term shift is inevitable, the road is long.

This brings up a critical question regarding digital bookkeeping startups: Are they a feature or a real company? Many startups in this space offer free products to SMEs to acquire data, with plans to pivot into digital banking or credit scoring. However, Roderick warns that the expertise required to run a bank is vastly different from building a bookkeeping tool. Building a business on a single feature is risky; if a competitor does it faster or cheaper, the moat disappears.

Looking Toward the Future: Web3 and AI

Looking ahead, East Ventures is keeping a close eye on emerging frontiers. Web3 and crypto remain on their radar, but there is a growing excitement for Artificial Intelligence (AI) and its derivatives. While the market for AI-driven startups in the region is still nascent, the potential for disruption is significant, and the firm is actively monitoring for founders who can harness this technology effectively.

Final Advice for Founders

For founders navigating this economic slowdown, Roderick’s advice is simple: be cautious and manage your expectations. In recent years, high valuations led to over-optimization of things that didn't necessarily drive core value. His message to entrepreneurs is to return to the basics. Focus on your core business and ensure your product or service is truly excellent. If you can build a solid foundation from the ground up, the funding will eventually follow, even in a winter.