Two cups of profit-latte to go, please

This week, On the Rise dives into Kopi Kenangan and Fore Coffee’s return to profitability and what a recession could mean for SEA cleantech firms. [Read from your browser]( On the Rise Welcome to On the Rise! Delivered every Tuesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in emerging tech. If you’re not a subscriber, get access by [registering here](. Written by Collin Furtado Journalist Hello {NAME} I love chai (tea) so much that I cannot say no to a cup whether it’s day or night. Coffee, not so much. I did try most kinds you might get at a cafe: cappuccino, latte, decaf, black coffee, cold coffee, cold coffee with ice cream, and more. Nothing hits the spot the way chai does! Coffee lovers, don’t be mad with me - today’s Big Stories are dedicated to you. These stories made me realize just how much Indonesia’s coffee startup ecosystem is thriving. And it’s also fiercely competitive. But thanks to caffeine lovers like you, two of these coffee startups returned to profitability after being hit hard by the Covid-19 pandemic. No, coffee startups don’t have much to do with emerging tech, which is the focus of our newsletter. But these coffee chains are powered by tech, so we’ll make an exception because Indonesia (and almost everyone at Tech in Asia), loves a good cuppa. My colleague, Collin, dives into Kopi Kenangan’s return to profitability after the Indonesian coffee tech startup’s earnings slumped in a pandemic-hit 2020. The secret ingredient to Kopi’s success was its shift in strategy to open more stores in residential areas, and the company is now considering expansion within and beyond Indonesia. Meanwhile, under the leadership of Vico Lamar, a food and beverage industry veteran, industry rival Fore Coffee has been upping its focus on Tier 2 and Tier 3 cities. Shadine, our new team member, reports that the startup turned profitable in the third quarter of last year. This comes after an unfortunate phase for the firm, which was forced to some of its stores and halt some ambitious expansion plans. Lamar’s bet seems to be paying off. He says the company’s stores in Tier 2 and Tier 3 cities are now the “bread and butter for Fore Coffee.” Things are definitely looking up for these two coffee chains. However, the same cannot be said for cleantech startups in Southeast Asia amid recession fears, as my colleague Tian Wen notes in Making Waves. -- Kul --------------------------------------------------------------- THE BIG STORIES 1️⃣ [Kopi Kenangan’s return to profits after a year of red]( The Indonesian coffee tech startup hit by Covid-19 got submerged in losses in 2020 only to surface back to profitability a year later. 2️⃣ [Fore Coffee brews its way to profitability]( After announcing expansion plans and then being forced to scale down in 2020, the Indonesian coffee chain has recalibrated to focus on Tier 2, 3 cities. --------------------------------------------------------------- VIDEO In 2013, Google first announced the revolutionary [Google Glass](. Now, almost 10 years later, the global tech giant is working on a massive update to its augmented reality glasses, teasing improvements to its machine learning capabilities. It also added a real-time translation feature, which could help individuals facing language barriers and those with hearing impairments. To keep up with the latest and most innovative projects in Southeast Asia, sign up for free [here]( MAKING WAVES A reckoning for SEA’s clean energy prospects Here’s what happened: - In recent years, clean energy has seen tremendous growth in Southeast Asia. - Fiscal weakness, infrastructure-related limitations, and a surge in renewable energy costs could derail plans for the adoption of clean energy. - Regionally, funding to clean energy remains strong, but startups in the space may have to reassess expectations for growth. Here’s our take: In Southeast Asia, clean energy has been on a roll over the last half a decade. Some markets like Vietnam’ have [more than doubled]( renewable energy production. A [study]( conducted by global accounting firm Ernst and Young revealed that between August to September in 2020, nearly 800 clean energy projects were in the pipeline in the region. But as economic headwinds grow and other issues seep through the cracks, could the momentum run out? The implications aren’t clear yet. Data from Crunchbase suggests that cleantech venture funding remains robust, with US$173 million being invested over five funding rounds since the start of 2022 - that’s slightly more than the total disclosed cleantech funding over the entirety of 2021. However, cleantech funding may take some time to reflect larger trends in Asia’s startup ecosystem, as some of the deals disclosed recently would have closed months earlier. The number of funding deals in Southeast Asia has [fallen in the last few months](. Could 2022 be clean energy’s deja vu moment? Lessons learnt from the [2008 – 2011 financial meltdown]( could offer insights into whether the industry is headed for choppy waters. Several factors led to the industry’s spectacular boom and bust then, but two stand out: an abundance of financial incentives after the 2008 Global Financial Crisis and price prediction for natural gas prices going awry. In the wake of the 2008 crisis, global venture investments in cleantech plummeted [nearly 40%]( from US$4.1 billion in 2008 to US$2.5 billion in 2009. Then, government investments stepped in to fill the void left by the lack of venture capital. Given the worsening economic climate currently, it’s unlikely that governments in Southeast Asia can afford to cushion the blow of an economic recession on cleantech players. In 2008, a boom in the production of natural gas also meant that generating electricity from natural gas was suddenly cheaper than from renewables. Wind-generated electricity cost US$35 per megawatt-hour in 2007, compared with just US$30 for electricity from natural gas in 2009. The financial edge renewables possessed had been erased, and companies no longer had any incentive to make the switch. This time, however, price trends are in renewable energy’s favor. While generating power from renewables is becoming more expensive, natural gas and coal prices have risen much faster than the price of renewables. Natural gas prices, for example, surged nearly fivefold from US$1.83 in February 2020 to US$8 per million British thermal units in May this year. In contrast, solar module prices continued to decline in the same time, before [rising 18%]( between January 2021 to May 2021. The impact of a surge in the price of renewables is not negligible. According to US-based energy consultancy Rystad Energy, [nearly 56%]( of utility-scale solar projects worldwide are likely to be canceled or delayed due to price surges. That does not bode well for cleantech startups. Countries still reeling from the economic fallout of the ongoing Covid-19 pandemic may become more dependent on revenue generated from non-renewable energy. The spike in fossil fuel prices has translated to a [bumper windfall]( for extractors such as Indonesian coal mining giant Adaro Energy – and a crucial boost to government coffers. Still, if renewables are cheaper than non renewables today, then why would regional governments double down on traditional energy? The answer could lie in the region’s infrastructural limitations. Take Vietnam, for example. Often seen as a poster child for solar energy adoption, the country’s National Load Dispatch announced in March 2022 that it [will not add]( any more wind and solar energy capacity to the national grid. The government agency said “insufficient infrastructure to feed renewable energy into the grid” was the main reason. There are no quick fixes here. Building advanced grid infrastructure takes significant time and capital - the latter could become more difficult to secure as economic headwinds worsen. In the meantime, cleantech players must deal with a hard cap on growth opportunities. Renewables like solar and wind have bucked decades-long price trends, but Southeast Asia’s cleantech players can’t rely on that anymore. Grid infrastructure in some markets is hitting a plateau few saw coming. For now, there’re no signs of trouble on the horizon. But as projects made in advance near completion, the real impact of a funding slowdown may soon unravel. Cleantech players will need to buckle up and sit tight. – Tian Wen --------------------------------------------------------------- NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the emerging tech scene [here](. 1️⃣ Ecommerce firms like Shein launch thousands of products a day, making it difficult for them to hire models, and shoot them with products, at scale. Well, ZMO, a Chinese startup, wants to solve this issue with its [AI-generated human bodies]( that can model clothing for fashion retailers. 2️⃣ India’s space startup ecosystem is ready to lift off. Dhruva Space aims to be at the forefront of the industry as it expects to raise up to US$25 million from its upcoming [series A round](. 3️⃣ Unravel Carbon, a Singapore-based startup focused on climate tech, has raised [US$7.4 million in a seed funding round]( led by Sequoia India’s Surge. The company aims to build Asia’s largest repository of enterprise carbon datasets. 4️⃣ Indonesia-based edtech firm Binar Academy has [raised an undisclosed sum]( in a pre-series A follow-up funding round. The startup, founded by three Gojek alumni, is currently gunning for 4x revenue growth after its topline doubled in 2021 from the previous year. 5️⃣ Thailand-based agritech firm Freshket has [raised US$23.5 million]( in a series B funding round. The startup aims to use the capital to improve its service efficiency, expand its offerings, and enter new product categories. --------------------------------------------------------------- FYI [Hollywood braced for new age of austerity after streaming splurge]( Netflix recently updated its rules for corporate culture to include “You spend our members’ money wisely." This marks the first time that the streaming service has officially mentioned expense control, reported the Financial Times. The report comes amid job cuts at Netflix and a dip in subscriber growth. --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. See you next week! [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. 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