Tech startups trying to fill tech gap

Indonesian tech startups are making big money in seafood farming. This shouldn’t come as a surprise – the archipelago is home to one of the world’s longest coastlines and more than 18,000 islands and islets.

But there’s another reason: A “technology gap” is preventing the industry from realizing its enormous potential, according to investors and startups that CNBC spoke to.

Last year, several startups raised millions of dollars from big-name investors to fill that void: eFishery ($90 million in Series C), Aruna ($30 million follow-on Series A), Delos ($8 million seed expansion) and FishLog ($8 million). $3.5 million Pre-Series A).

“Indonesia is the second largest producer of wild catch in the world after China. And we are third in aquaculture production after China and India. But if we talk about exports in terms of value, we are only 12th in the world,” Farid said. Naufal Aslam, Co-Founder and CEO of Aruna, Fisheries e-commerce startup. Aquaculture is the controlled cultivation of aquatic organisms, such as fish and shellfish, specifically for human consumption.

“A lot of decisions are based on gut feelings or what ancestors have been doing for the past 60 years,” said Guntur Mallarangeng, co-founder and CEO of shrimp farm management company Delos.

And he’s not alone in thinking this.

“Indonesia’s fisheries industry has many old-fashioned players who have passed down traditional business practices from generation to generation,” said Yinglan Tan, founding managing partner and CEO of Singapore-based Insignia Ventures Partners, which invested in FishLog.

Those in Indonesia’s fishing industry need more efficient technology and better processes, according to Tan.

“The only way the industry can grow is if farmers grow. If farmers don’t expand their businesses, we can’t really produce more fish,” said Gibran Huzaifah Emcee El Farizi, founder and CEO of eFishery. Aquatech startup.

eFishery helps farmers optimize their processes through automated feeders and mobile apps. Automatic feeders detect the hunger level of fish and shrimp by their movements, which prevents a common problem with manual processes: over- and under-feeding.

Farizi Started his catfish pond in 2009 when he was a student to supplement his family income. By the time he graduated, he was managing 76 ponds, and began exploring how technology could be used to help farmers.

He then built a prototype for an automated feeder in 2012 and launched it in 2013.

“Food cost accounts for 70%-90% of the total cost. Therefore [automatic feeding] Productivity can be increased and costs can be reduced,’ Farizi said, ‘He claims that automatic feeders can reduce feeding costs by 28 percent.

Aruna, for its part, helps connect small-scale aquaculture farmers in Indonesia with buyers. It claims to work with 40,000 fishermen in 170 locations.

Small-scale fisheries account for about 90% of the total number of fishers, according to the Journal of Ocean Policy Studies.

“In terms of productivity and efficiency, they are still very traditional,” Aslam said.

He claimed that the farmers who worked with Aruna were able to sell up to 50 percent of their catch. And according to a report by the Center for Impact Investing and Practices, Singapore Management University and Accenture, fishermen have increased their income by three to 12 times through Aruna.

“Farmers will produce what the market needs. This makes the supply chain more efficient, and increases the income of fishermen because they know what kind of fish they should catch and what they can sell at a higher price,” Aslam said.

Although the country uses only 7.38% of its total potential area for aquaculture, it already ranks among the top producers in aquaculture production, according to a 2016 report by market research firm Ipsos.

“With the right transfer of knowledge and technology of best aquaculture practices, Indonesia is in a very good position to strengthen its position as one of the world’s top aquaculture nations,” the report said.

Aakash Kapoor, vice president of Sequoia Southeast Asia, which invested in EFishery, is also “bullish” on the industry.

“Indonesia is a high-margin opportunity as it is one of the largest exporters of fish and shrimp in the world. And the government is also supporting Indonesia to become an export economy in many areas, including water resources,” he said.

“Indonesia has the puzzle pieces to become a global leader in aquaculture and seafood production. Once we figure out how to put them together, we should be able to become a seafood powerhouse in the global market,” Delos Mallarangeng said.