eFishery: The Indonesian Startup Scandal That Rocked Southeast Asia’s Food Tech Sector

The alleged financial fraud committed by one of Indonesia’s most promising startups will likely have a ripple effect on Southeast Asia’s food tech economy.

A financial scandal surrounding a heralded aquaculture company from Indonesia has left the food tech ecosystem in Southeast Asia reeling.

eFishery, an agritech startup known for its smart fish feeding system, has been one of Indonesia’s top agtech players, reaching unicorn status in 2023 after securing $200M in a Series D funding round.

The company claims it has built a “sustainable aquaculture ecosystem”, and among the species it addresses are shrimp, the most farmed animals in the world. Around 440 billion shrimps and prawns are farmed and killed each year, making up over half of all farmed animals.

But the 2013-founded startup is currently under investigation for misleading the market about its financial performance, after its co-founders Gibran Huzaifah and Chrisna Aditya inflated its revenue by nearly $600M in the first nine months of 2024. The company also reportedly claimed to have made $16M in profit in this period, when in reality, it lost $35.4M.

FTI Consulting, which has assumed acting management of eFishery, told Bloomberg that the firm is no longer commercially viable in its current form, with venture capitalists expected to receive as little as nine cents on every dollar invested.

That a star company almost serving as a model for successful startups is embroiled in such a scandal spells bad news for Southeast Asia’s climate and food tech ecosystem, with already-cautious investors likely to lose even more faith.

Southeast Asia’s faltering VC attraction

While Asia was once the leader in food tech investment, it has fallen behind North America since the year after the pandemic, according to consultancy firm DigitalFoodLab. Its co-founder, Matthieu Vincent, ascribed this to a strange decline in funding for delivery startups, and “doubts from foreign investors about their ability to invest in China”.

Speaking to Green Queen in September, he added: “We should note that there are many bright spots in Asia, from Singapore to Indonesia.” But the eFishery scandal has thrown fresh doubts over the sector’s ability to attract venture capitalists.

“eFishery is facing a significant challenge that damages its reputation and has a systemic impact on the broader startup ecosystem, particularly those in the fundraising stage,” said Dina Dellyana, head of the business incubator at the School of Business Management at the Bandung Institute of Technology. “Many startups are now facing heightened uncertainty due to this situation.”

In 2024, the total VC deal volume in Southeast Asia fell by 10% compared to the previous year, while deal value plunged by 42% to $4.6B, according to DealStreetAsia. This represents just 55% of the capital raised in 2020, the first year of Covid-19, and only a fifth of the 2021 peak.

The data chimes with figures from MAGNiTT’s 2024 Emerging Markets Venture Capital Report, which showed that total venture funding in Southeast Asia was down 45%, with both exits and the number of deals decreasing by more than 30% and 20%, respectively.

“I believe we will see investors becoming more cautious going forward. For now, some may even postpone or cancel their investment plans in the technology sector,” said Dellyana. “In today’s digital era, technology remains indispensable. The future of the tech ecosystem will largely depend on the quality of startups that can navigate and survive these challenges.”

eFishery realises implications as regulations come under scrutiny

Even eFishery itself admitted that the allegations of its misconduct will have an impact on climate tech startups in the rest of the region. “Beyond our own group, we would also like to acknowledge the broader implications for Indonesia’s startup ecosystem and the communities it serves,” its board said in a statement sent to CNBC.

“The recent revelations of alleged misconduct (including fraud) within the group have been deeply disheartening to us all and may jeopardise the confidence in the Indonesian investment climate where the principal subsidiaries of our group is located.”

Speaking on the Asian tech podcast Brave, Gita Sjahrir, head of investment at BNI Ventures, noted her disappointment with how the eFishery scandal “has impacted the entire ecosystem”.

“What ended up happening now is not just the fallout of one company. It’s basically a fallout of all the near-unicorns, all the unicorns. Potentially Indonesia as a whole, actually, because people are questioning the governance and the system since this fraud seems to be a very systemic one, dating all the way since 2018,” she said.

“That’s not good and more than that, it also is bringing a lot of discomfort from investors on investing into not just the country, but also any type of sector that is supposed to be impacting agriculture and aquaculture, which are some of the largest revenue drivers for the country.”

That point about governance is pertinent, considering that eFishery isn’t the only Indonesian startup to have run afoul of market regulations. KoinP2P, a subsidiary of fintech platform KoinWorks, has reportedly lost nearly $23M from fraudulent activities by lenders, while fellow P2P lender Investree lost its licence for failing to meet minimum requirements after its CEO was accused of siphoning off funds into his own account before going on the run.

Shrinking middle class can worsen things – but there’s a bright side

The eFishery scandal comes at a time when Indonesia’s middle-class population is declining, having slimmed by 20% in the last six years. According to the Financial Times, it’s a result of a lack of formal employment and a shortage of higher-income industries and will impede the country’s plans to boost its GDP by 8% annually and attract foreign investment.

But the eFishery saga might also present a silver lining for the startup economy in Southeast Asia, which remains the world’s third most populated region. “In the long term, this is a good thing. Companies need to scrutinise governance. Investors need to be extremely diligent with that,” Justin Hall, partner at Golden Gate Ventures, told CNBC.

“There need to be local exits. There need to be global exits. There needs to be companies that can actually return money to investors and then indirectly to their limited partners,” he added.

And despite the downturn in funding, the trials of the wider venture ecosystem may not have hit Asia-Pacific’s agrifoodtech sector as badly. A report by AgFunder suggested that while investment here was still lower than 2020 levels in terms of dollar amounts, the number of deals in the first three quarters of 2024 (616) has already surpassed the full-year totals of each of the last three years, indicating that VCs remain interested in the category, but are more cautious in doling out larger amounts to single companies.

AgFunder’s research also underscored some positive trends for the Innovative Food and Novel Tech categories, which attracted a combined $279M in funding by the end of October 2024, representing an increase from the same period in 2023.

It’s important to note that not all of eFishery’s employees knew or committed fraud – the buck really should stop with the top, as a former product manager at the firm said on social media.

“We know that the government is now focusing on modernisation and digitalisation, and focusing on the food sector. eFishery is a slice of both,” the ex-employee, who left the firm last month, wrote. “Do not let the fall of eFishery kill the hope and fighting spirit of technology activists in the strategic sector.”