EFishery “was presupposed to be reflective of what the native ecosystem may do, what Indonesian founders may do. This was presupposed to be one of many higher corporations from Southeast Asia. This was presupposed to be a winner,” Justin Corridor, companion at Golden Gate Ventures, advised CNBC.
Dimas Ardian | Bloomberg | Getty Photographs
Southeast Asia’s startup ecosystem has been braving a multi-year funding drought, and a current scandal has delivered yet one more blow to investor sentiment within the area.
Indonesian agritech unicorn eFishery — backed by buyers similar to SoftBank Group and Temasek Holdings — was amongst Indonesia’s prime startups, however a preliminary, ongoing probe means that the corporate might have been concerned in monetary malpractices.
The corporate didn’t instantly reply to a CNBC request for remark.
EFishery’s board of administrators introduced on Tuesday that it has appointed enterprise advisory agency FTI Consulting as appearing administration of the corporate, in keeping with an official firm assertion obtained by CNBC.
FTI Consulting additionally issued a press release saying that it “goals to help ongoing efforts to conduct a radical and goal enterprise evaluation of the corporate’s true monetary and operational place.”
That comes amid an ongoing investigation, initiated by a whistleblower’s declare in regards to the firm’s accounting, which estimates that administration inflated income by nearly $600 million within the 9 months to September 2024, Bloomberg reported.
The corporate additionally reportedly offered a revenue of $16 million over the identical interval to buyers, however the investigation alleges the startup really made a $35.4 million loss, in keeping with the report.
“[EFishery] was presupposed to be reflective of what the native ecosystem may do, what Indonesian founders may do. This was presupposed to be one of many higher corporations from Southeast Asia. This was presupposed to be a winner,” Justin Corridor, companion at Golden Gate Ventures, advised CNBC.
The firm, which deployed a wise feeding system for fisheries, reached unicorn standing in 2023 after a $200 million Collection D funding spherical. Nevertheless, as we speak, backers of the corporate are reportedly contemplating liquidation or buyout, amongst different choices, in keeping with Bloomberg.
An ecosystem beneath water
Southeast Asia’s startup ecosystem had already been going through years of painful and dear recalibration for the reason that Covid-19 pandemic, when funding within the area soared.
In 2024, whole deal quantity within the area fell 10.3% from the earlier yr to 633 offers, whereas deal worth sank by 41.7% to $4.56 billion, in keeping with a January 2025 report by Deal Road Asia.
“To place this in perspective, the 2024 determine represents simply 54.6% of the capital raised throughout the first yr of the Covid-19 pandemic in 2020, and a mere 19.5% of the 2021 peak,” in keeping with the report.
So the place did issues go mistaken?
For context, some will contemplate the area’s startup scene to be comparatively younger, having solely begun to develop extra quickly within the final decade and a half.
“We’re simply initially of this complete asset class, if you’ll,” mentioned Jx Lye, founder and CEO of Acme Know-how and former COO of Endowus. “I’d say that the early 2010s have been the golden ages of Silicon Valley … the whole lot was taking place — Uber, Airbnb, Dropbox are all taking place there.”
“However what occurred within the mid 2010s was that immediately, Southeast Asia turned fascinating as a progress story,” mentioned Lye.
That was additionally when the primary wave of startups within the area started to emerge. Firms similar to Gojek, Carousell and Seize have been among the many first to offer robust alternatives for buyers to exit, or a technique to promote their stake for a revenue.
You could possibly say that Southeast Asia noticed what was successfully unabated progress up till the crash in post-Covid.
Justin Corridor
Accomplice, Golden Gate Ventures
Together with the primary wave of profitable startups, different components surfaced throughout this time-frame that accelerated the expansion of the area’s tech and startup ecosystem, which consequently introduced an inflow of investor curiosity.
“There was a large explosion of the center class … within the early 2000s to the mid-teens,” Kevin Aluwi, co-founder of Gojek and enterprise companion at Lightspeed, advised CNBC. “There have been numerous projections that the patron market in Southeast Asia will appear like a mini China, however that did not pan out.”
Buyers have been anticipating a really “vibrant, excessive spending energy client market to emerge” and thus, overshot their predictions on the pricing energy that corporations would have, the frequency of transactions that will happen, and general, the typical income that startups would have the ability to usher in, mentioned Aluwi.
“There have been enterprise fashions that many thought could be viable, however weren’t viable,” he added.
Finally, buyers started to understand that some corporations within the area might have been overvalued, and it turned clear that exit alternatives have been few and much between.
“The most important downside is … there are only a few exits on this market, so buyers haven’t any means of getting their cash out,” Krish Sridhar, founder and CEO of Know, advised CNBC.
“It is actually arduous to do enterprise in Southeast Asia, as a result of there is no such thing as a such one factor. In Southeast Asia, we’ve got seven totally different languages, seven totally different governments, seven totally different [systems of] regulation,” mentioned Sridhar.
“It is not like doing enterprise in India or China, the place the native market is 1.4 billion folks, or 1.2 billion folks,” Sridhar added.
From 2011 to 2022, the area noticed an enormous spike in consideration and in useful resource allocation, mentioned Corridor. “You could possibly say that Southeast Asia noticed what was successfully unabated progress up till the crash in post-Covid,” Corridor advised CNBC.
“You had funds that raised an excessive amount of cash too shortly, you had founders that raised an excessive amount of cash too shortly, and sadly, capital formation outpaced the event of the native markets,” mentioned Corridor.
Impression of the scandal
In the present day, the allegations of fraud and misconduct by eFishery have reverberated all through the area.
“Past our personal Group, we’d additionally wish to acknowledge the broader implications for Indonesia’s startup ecosystem and the communities it serves,” eFishery’s board mentioned in a press release.
“The current revelations of alleged misconduct (together with fraud) throughout the Group have been deeply disheartening to us all and should jeopardize the boldness within the Indonesian funding local weather the place the principal subsidiaries of our Group is positioned,” the assertion added.
The aquaculture firm was heralded as one of the distinguished examples of what a superb startup appears to be like like within the area.
“There was numerous hope pinned on [eFishery] being the following technology … Having that [bubble] burst, as a result of the poster youngster of that improvement turned out to be [allegedly] fraudulent, I believe it is actually disappointing for the ecosystem,” mentioned Aluwi.
I believe this might have a chilling impact for, conservatively, 12 months, however in all probability longer.
Justin Corridor
Accomplice, Golden Gate Ventures
“I believe Southeast Asia positively took successful in its notion … However the ones that can undergo probably the most could be the expansion stage corporations in Indonesia,” mentioned Corridor. “I believe it would topic each good firm in Indonesia to much more scrutiny, to the purpose the place I can see buyers saying, it isn’t definitely worth the problem to put money into Indonesia.”
“I believe this might have a chilling impact for, conservatively, 12 months, however in all probability longer. It is very destructive proper now,” mentioned Corridor.
Business consultants additionally echo that if the allegations are confirmed to be true, this scandal wouldn’t solely have a destructive influence on investing within the area — notably in Indonesia — but in addition largely on the mid-to-large fundraising phases. This may have an effect on not simply buyers, however founders as properly.
“I do not assume that it’ll influence the early stage rather a lot, as a result of, firstly, your test sizes are small,” mentioned Acme Know-how’s Lye. “However I believe within the center to later phases, that is the place buyers will likely be much more stringent … as a result of that is the place the larger rounds are.”
“And that is the issue, as a result of then each funding spherical will get much more sophisticated … Now, they need proof, they need auditability, however numerous occasions you simply can not present that. In order that’s going to extend the price of fundraising. That is going to extend the trouble,” mentioned Lye.
“It is unsaid and unseen, proper? As a result of then, a fundraising spherical may actually kill your organization,” Lye mentioned.
The silver lining
Finally, though this scandal has despatched shock waves via Southeast Asia’s startup scene, trade consultants agree that there’s a silver lining: the teachings realized.
“If I am being very pessimistic, I’d say that that is going to cut back the {dollars} invested. If I am being extra optimistic, it isn’t that it’ll scale back the {dollars} — it is simply going to take longer for these {dollars} to be unlocked,” mentioned Corridor.
“I believe in the long run, it is a good factor. Firms have to scrutinize governance. Buyers must be extraordinarily diligent with that,” Corridor added.
Together with having higher due diligence and governance, buyers agree that seeing extra profitable exits occur will likely be key to enhancing the funding drought.
“There must be native exits. There must be international exits. There must be corporations that may really return cash to buyers after which not directly to their restricted companions,” mentioned Corridor.
In the present day, founders and buyers alike understand their predictions have been overly optimistic and now the market is adjusting and recalibrating to what’s realistically doable.
“This reckoning kicked off a very long time in the past. EFishery didn’t do this … [people] have been merely unrealistic of their expectations. I believe if and when these expectations are rational, then, sure, it is a great spot to construct a enterprise,” mentioned Corridor.
Finally, Southeast Asia is “nonetheless the third most populous area on the earth. Indonesia is the fourth largest nation on the earth,” mentioned Lye. “All of those setbacks and challenges will solely make the following wave of enterprise house owners, entrepreneurs and buyers much more savvy … we are going to all bounce again stronger.”