Coffee tech start-ups keep VCs awake during tech winter

Experts say that profitability was the one thing these coffee tech companies had in common, which was what investors desired over mere growth.

Ruth Dea Juwita

Ruth Dea Juwita

The Jakarta Post


A promotional image features various types of coffee beverages offered at Kopi Kenangan, a grab-and-go coffee chain brand managed by Indonesia’s Kenangan Group.(Kopi Kenangan/-)

May 25, 2023

JAKARTA – Technology-powered coffee companies, also known as coffee techs, continue to bag new funding, seemingly unaffected by the recent tech winter even as many other start-ups across industries saw their funding dry up.

Singapore-based coffee chain Flash Coffee raised US$50 million Series B funding from several investors led by White Star Capital, according to a statement it released on May 11.

Flash Coffee said it operated 92 stores in Indonesia and that all of them had been profitable. The number of stores in Indonesia comprise half of all outlets it operates across the Asia-Pacific.

“We have found a solid product-market fit and are eager to expand our presence into additional cities in Indonesia to further drive sustainable growth,” David Brunier, Flash Coffee founder and CEO said in a statement.

The start-up plans to use the fresh funds to double down on tech and product innovation, improve sales and achieve “level-growth profitability” by 2024. This includes expanding its chain of offline stores to Surabaya following its success in Bandung, its first outlet outside Jakarta.

Indonesia is the second largest consumer among coffee exporting countries after Brazil, according to data as of May 2021 from the International Coffee Organization (ICO), grinding through around 5 million 60-kilogram bags of coffee annually.

The ICO wrote in its April report that global coffee consumption increased 4.2 percent annually in 2021-2022, up 0.6 percent from the previous year following a release of pent-up demand due to the COVID-19 pandemic.

Kenangan Group, which manages homegrown coffee chain giant Kopi Kenangan, announced it had raised $109 million in Series B funding from several investors led by Sequoia Capital, according to a statement it released on May 13.

Kenangan Group CEO Edward Tirtanata told reporters on May 17 that the company was finalizing its plan to launch an initial public offering (IPO) on the Indonesian bourse by the end of the year, but it had not decided on a date.

In the meantime, it planned to open 150 new international outlets until 2024, adding to its chain of 900 outlets in 67 cities across Indonesia and 10 new outlets in Malaysia.

“The most appropriate [time] for an IPO is when there are many international outlets and the international revenue is significant,” Edward told a media gathering.

He added that the food and beverage (F&B) industry in the country was growing well and that new F&B entrants, not just coffee, were all looking to join the party.

Experts told The Jakarta Post that profitability was the one thing these coffee tech companies had in common, which was what investors desired over mere growth.

The coffee tech wave mirrored the growth of coffee chain companies as investees assured their profitability, buoyed by “relatively good macroeconomics conditions”, said Roshan Raj Behera, Southeast Asia partner at Indian management consultancy Redseer Strategy Consultants.

While investors remained selective about backing new companies in “an early to growth stage, but well-run companies are able to raise fresh capital at competitive valuations”, Behera told the Post on Monday.

Though investment values were much higher in today’s climate, Behera noted that investors were still focusing on companies that could address customer pain points and deliver profitable growth.

East Ventures, a sector agnostic venture capital (VC) firm based in Singapore known for its focus on Indonesian start-ups, said it saw that many start-ups today still had potential to grow, given the improved conditions in Southeast Asian economies, especially Indonesia’s.

Showing no signs of slowing its funding, the firm planned to continue investing in companies across the region “as long as there are great founders out there”, Pheseline Felim, East Ventures’ head of media and marketing, told the Post on Monday.

This view is reflected in the firm’s May 19 announcement on the $250 million it raised in the first and final close of its latest fund, Growth Plus, which brought the total funds it raised in the past year to $835 million.

The new fund aims to focus on supporting “portfolio companies with the resource to scale and achieve their full potential”.

“With the end of the COVID-19 pandemic, we are seeing various changes in consumer behavior and of course, this has encouraged improvements in several sectors, especially those related to consumers,” Pheseline said.

Last year, East Venture invested in Morning, a Singapore-based coffee machine start-up, as well as two Indonesian coffee techs Otten Coffee and Fore Coffee, which it has been funding since 2015.

Besides F&B, East Ventures is eyeing investments in direct-to-customer (DTC), health, bioscience and climate tech companies while it closely monitors the generative artificial intelligence sector.

scroll to top