From Silicon Valley to Bandung

Editor’s Note: This is a guest post by Arip Tirta. Arip founded and became director at UrbanIndo.com. Before returning to Indonesia, Arip was Director of Investment Analysis and Strategy for Hercules Technology Growth Capital. In this post, Arip tells us about his experience working in Palo Alto, his decision to return to Indonesia and the reason why he chose Bandung to pursue his own dream.

My name is Arip Tirta. I recently returned to Indonesia after spending 15 years in the USA. I received a Bachelor of Science in Mathematics of Computation from University of California, Los Angeles (UCLA) and Master of Science in Scientific Computing and Computational Mathematics from Stanford University.

Prior to my arrival in Indonesia, I was the Director of Investment Analysis and Strategy for Hercules Technology Growth Capital (Nasdaq: HTGC), which is a specialty finance company that provides both debt and equity to technology start-ups predominantly in the US. Hercules was co-founded by Manuel Herinquez who has over 25 years of experience in venture capital and venture lending. Prior to co-founding Hercules, he was one of the Managing Directors at VantagePoint Venture Partners.

I was hired as the first analyst in 2006 2004 and worked for seven years at Hercules. As Director of Investment Analysis and Strategy, I was in charge of various responsibilities including creating business strategy along with executing M&A transactions, managing various valuation projects, advising/assisting Managing Directors on investment opportunities and deal negotiations, and developing financial models for the firm. During my seven years tenure, Hercules made over $2.0B on investment to over 150 companies and survived one of the worse economy crisis that hit the financial market in the late of 2008 and throughout 2009.

In May 2011, I decided to leave Hercules to pursue my newly found dream, starting my own companies. Soon after that, I co-founded Band of Founders/Teknologi Kreasi Anak Bangsa along with six other people (3 Indonesians, 2 Indians and 1 Swedish) who work for various technology or investment firms in Silicon Valley, USA. The goal is to help first time entrepreneur to launch a company addressing emerging market. From the partnership, we launched our first company (UrbanIndo – www.urbanindo.com) and are working on various projects focusing mostly Indonesian market.

I had the opportunity to meet Wiku Baskoro of DailySocial and promised him that I would write an article about my life and business in Silicon Valley and also a series of articles on venture investing in general with a focus on the financing aspect of it. I hope my articles can provide more insights into the venture capital world for the local startup players.

I didn’t really have a typical day at Hercules. Every day was different from the last but I usually started my day with coffee from a local coffee shop. Lucky for me, Hercules is located in downtown Palo Alto that has really good selection of coffee shops.

One thing that I notice is that coffee shops around down town Palo Alto have a major role in the Silicon Valley startups. Every time I went to a coffee shop, I saw entrepreneurs pitching their ideas to potential investors or working on perfecting their business idea. It’s the preferred place for entrepreneurs to meet and greet. You don’t know whom you will meet there, from prominent venture capitalist to young local startup who is trying to be the next Mark Zuckerberg.

Thousand miles apart, close to my current office on Taman Sari in Bandung, there is a café called S28. The first time I walked inside the shop to grab my morning coffee, I had dejavu moment. I saw people sitting around a table discussing business, pitching their ideas and also working on their business model. I was so relieved to see that because it gave me validation that Indonesia is ready to become the next hot spot for technology companies.

During my first year at Hercules, I looked at about 50 companies a month across various industry sectors and stage of developments. I met and interacted with C- level executives and venture capitalist on a daily basis. I felt like a kid in a candy shop. One thing that is so apparent to me is that the Silicon Valley has a unique perspective on failure.

I remember looking at a company and noticing that the CEO of that company had pretty bad track record. Trying to impress my boss, I quickly red flagged the deal and told my boss about my finding. To my surprise, my boss told me that failure is not a bad thing. He considered it as a tough lesson learned experience that can be used on the next company. Soon enough I learned that Silicon Valley regarded failure as a badge of honor. It’s more like a rite of passage that most entrepreneurs need to pass before they find their own success.

The US has traditionally been referred to as a melting pot because it consists of many people from different countries and cultures all blended together. The notion could not be truer in Silicon Valley. Driven by American dream, Silicon Valley is land of immense diversity. People from all over the world come to Silicon Valley looking to work for the next Google or Facebook.

I am surprised that lots of people in Indonesia prefer to get cash and don’t care much on getting some ownership of the company that they are working on. We need to realize that most people in Silicon Valley get rich not from the salary but the options and/or stock grants. I think it is important for a company to give its employees options and/or stocks. Not only will it give incentive for the employees to work harder and stay within the company longer but also to have a sense of ownership and belonging. Same as people in Silicon Valley, soon enough the Indonesians will be chasing the new Indonesian dream.

There have been lots of talk and discussion on picking a city in Indonesia to become the Silicon Valley of Indonesia. There was a recent article on DailySocial that mentions Serpong as the strong candidate. My pick would be Bandung and it is not because I was born and raised in this city but because of 3 reasons:

1. Failure is a good thing – Similar to Silicon Valley, people in Bandung embrace failure. To innovate, we need to take risk and not afraid of failure.
2. Early adopter – People who live in Bandung are more open to try new things. In order for technology start-ups to flourish they need early adopters to support them.
3. ITB – Most of the cutting edge innovation come from fresh grad and young entrepreneurs. ITB has been doing a phenomenal job on nurturing its students to innovate and start their own company.

Many big companies rely more and more on the emerging market for growth. The potential market in Indonesia, especially for internet and mobile companies, is huge. This year has been really good for start-up companies in Indonesia. There have been several companies that got acquired by big foreign companies. In the next five years, I believe there will be a lot more VC investment activities in Indonesia.

We have seen lots of activities from local and foreign incubators in Indonesia. On mobile space, big firm like Nokia (NYSE: NOK), Research In Motion Limited (Nasdaq: RIMM) and among others have been active in supporting the local start-ups this year. The next wave of investment would come from local and foreign VC. Before then, we need to continue to innovate and support our local start-up companies.

In the next article, I will write about valuation and terms that venture capital firms use when they issue a term sheet. The Founders of technology companies often tend to focus heavily on the post money valuation. There are other things that they need to consider. Hopefully the articles can be useful to help the local startup players when they are trying to raise capital from a VC.

Arip Tirta, Director and co-founder UrbanIndo.com. Prior to founding UrbanIndo, Arip served as Director of Investments and Strategy at Hercules Technology Growth Capital (Nasdaq: HTGC), a public company in the field of investment in Palo Alto, California. During the 7 years in HTGC, Arip handles investment of more than $ 2 billion USD (IDR18 trillion) involving 150 technology companies in the USA. Arip also a member of the Board of Directors Band of Founders, an incubator that helps young entrepreneurs to start technology companies in emerging markets. Arip received a Bachelor of Science degree in Mathematics of Computation from the University of California, Los Angeles (UCLA) and a Master of Science degree in Scientific Computing and ComputationalMathematics from Stanford University.

Gedung Sate Photo by Lucien Kivit.