Open Labs Help MSMEs Increase Business with a Brand Aggregator Approach

MSME businesses are often hindered by capital when they want to develop their business further, especially when they enter the online realm which is full of innovation. 

In Indonesia, according to the Ministry of Trade, there are more than 64 million MSMEs which collectively account for about 61% of Indonesia’s GDP.

Of the number of MSMEs, 14 million have migrated to e-commerce platforms, and as many as 330 million MSMEs are expected to carry out digital transformation in the future.

This interesting opportunity made Jeffrey Yuwono who was previously the Co-founder & CEO of Sorabel, decided to start the brand aggregator startup Open Labs.

Unlike other brand aggregators, Open Labs has prepared a program to provide funds of IDR 1.4 trillion ($100 million) to be invested in businesses that have great potential to become leading consumer brands. It is claimed that this nominal is the largest among other aggregator brands in Southeast Asia.

Jeffrey was reluctant to reveal in more detail the source of the funds, only saying that it came from one of the unicorn e-commerce companies. There is also no mention of the investment ticket size given by Open Labs per partner.

“We have received a lot of interest from investors and we are very grateful for the trust,” he explained in a virtual press conference, Thursday (28/10).

Becoming a Brand Aggregator to Help Businesses Face Challenges

However, along with their increasing growth in terms of volume and scope, the complexity of business operations also increases. In addition to the need for higher working capital, online businesses also face various other challenges.

Some of them such as how to get a measurable source of product supply, the right product range, the right price range, brand strategy, and how to do good marketing programmatically.

It also includes how to perform customer service efficiently, and how to manage complex supply chains with very specific warehousing, logistics and distribution requirements.

Here, Jeffrey sees Open Labs can play a dual role as a brand aggregator. First, with the availability of investment funds, it can meet financing needs.

Second, having the right skills to fill gaps or operational problems, while at the same time complementing the skills required by the partner portfolio. Usually, online businesses that need funds have several options, including borrowing from a bank.

There are times when their business model doesn’t match the criteria that VCs or PCs are looking for because VCs usually look for tech startup companies with a disruption model to pursue exponential growth.

Meanwhile, PE targets well-established and mature companies. Open Labs’ funding capital overcomes these limitations for capital by targeting online businesses.

Established MSME Criteria

Open Labs stipulates a number of requirements for companies that will receive funds, including annual turnover above IDR 3 billion, a business performance that continues to grow, positive profits, and dominate the market in which they are involved.

The business model is partnering for a 51% acquisition, of which Open Labs and the founder are partners; or acquire 100%, which is where the founder sells his business to be able to focus on something else.

As an illustration for the 51% option, the position of the board of commissioners will be filled by the founder and Open Labs, the board of directors is only filled by the founder, and the operational team is filled by the founder and Open Labs (if the founder agrees).

“The investment can be in the form of primary, secondary or both. If it’s a primary investment, the company will receive money and issue new shares, while if it’s secondary, the founder will receive money for the shares sold.”

As for the stages of the process of becoming a partner, it is claimed to be faster. Within one week, partners will get a yes or no answer from Open Labs.

The Open Labs operational team consists of 60 experts in various operational and regulatory aspects of the online sales business, such as branding and marketing, customer service, supply chain, logistics, financial management to compliance with tax and legal regulations.