đ Acrostics Anatomy: eFisheryâs Fishy Accounting
How the former Indonesian unicorn deceived investors including Japanâs SoftBank, Singaporeâs Temasek and Abu Dhabiâs 42X Fund.
đ Quick Take: eFisheryâs Fishy Accounting (27 January 2025)
đ Quick Take: Indonesiaâs Bad Apples (23 January 2025)
đ Quick Take: eFisheryâs Horror Flows (28 January 2025)
đ Quick Take: eFisheryâs Can of Questions (30 January 2025)
đ Quick Take: Picking eFisheryâs Bones (1 February 2025)
đ Quick Take: Indonesiaâs Wave of Layoffs (7 February 2025)
đź Brief Take: Credit Lessons for Startups (25 February 2025)
đź Brief Take: Indonesiaâs Not-So-Unicorn (26 February 2025)
đź Brief Take: eFishery the Microlender (5 March 2025)
đ Quick Take: eFisheryâs Fishy Accounting
27 January 2025
The math doesnât add up.
Investors tend to get starry-eyed about Southeast Asiaâs potential.
Key staff exits may give a clue on whatâs happening behind the scenes.
One of the hottest topics in Southeast Asia right now is the alleged eFishery fraud and a lot of ink (pixels?) has been spilled to dissect how the Indonesian unicorn managed to bamboozle a string of marquee investors.
Thereâs quite a bit of schadenfreude in the finance and tech circles, with comments that these MBA graduates couldnât smell a stinking fish even if itâs put right under their noses. While hindsight is often 20/20, Iâm interested in the accounting side and how the rot was undetected for so long.
đ˘ The math doesnât add up
eFisheryâs sales flow is reportedly divided into two categories: 1) Sale of fish that was farmed with an automatic feeding tool on loan, and 2) Sale of the feeder itself. When the fish farms failed, eFisheryâs management covered it up and recorded the uncollectible receivables as assets, according to local newspaper Kontan.
In its financial statement, eFishery reported IDR 5 trillion (USD 309 million) of assets, but the price of each tool is only IDR 1.3 million (USD 80), Kontan quoted a source as saying. âSo how many tools do they have? Imagine how absurd and illogical this is.â
eFishery claimed to have more than 400,000 feeders, but a draft report by FTI Consultingâwhich was hired by the board to conduct an investigation after a whistleblower raised red flagsâput the actual number closer to 24,000. Even if we were to take the inflated figure of 400,000 feeders, it would still be hard to explain the remarkably high value of receivables.
Receivablesâwhich are the amount owed to your business that hasnât been paid yetâare a common tool to cook the books because they are basically a promise of a future payment. In 2018, Indonesian consumer finance firm Sunprima Nusantara Pembiayaan (SNP Finance) was discovered to have secured funding with marked-up receivables and went bankrupt.
An independent auditor that was appointed during Indonesian textile company Sri Rejeki Isman (Sritex)âs local in-court restructuring in 2021 also made an allowance for impairment losses that represented 55% of receivables totalling USD 222.7 million. These included an allowance for âdoubtful receivablesâ owed by customers that struggled to make payments.
Did eFisheryâs auditors check its receivables? Verifying receivables can be a time-consuming and labour-intensive process, but they are a potential minefield that investors should pay more attention to.
𤊠Starry valuations
Over the weekend, a banker friend sent me a link to the BRAVE Southeast Asia Tech Podcast, which raised valid points about the eFishery collapse.
One of the podcasters said that each of eFisheryâs business segmentsâfish feed, logistics and tradingâshould have its own multiple, but investors took the consolidated revenue and assigned a tech multiple. In short, they misclassified an essentially brick-and-mortar business as a tech one and gave it a peak valuation, leading to a âdouble errorâ.
Harsh Rajpal, Founding Partner of Capital Code, also wrote that eFishery should have been classified as an aquaculture or fish supply chain player, instead of an agritech startup. Core business drivers like cash conversion cycles and net working capital ought to be prioritized over tech valuation metrics like gross merchandise value (GMV) and revenue growth, according to his post.
Investors tend to get starry-eyed about Southeast Asiaâs potential, especially Indonesia with its population of around 280 million. But the lionâs share of Southeast Asiaâs economic value is in its capitals and almost all of the regionâs monetizable users are in the top 20 cities, according to a report by venture capital firm Lightspeed. In eFisheryâs case, does it make sense to sell electronic feeders to fish farmers in less developed areas that may not be as tech-savvy?
đ Key exits
eFishery founder Gibran Huzaifahâs life story sounds like something out of a fairytale. He reportedly grew near slums and ran his own catfish farm while studying at Bandung Institute of Technology (ITB), Indonesiaâs version of MIT. He started eFishery in 2013 and achieved a USD 1 billion valuation around a decade later.
Startups are often built around their founders, but as the BRAVE podcasters noted, there are âmicro signalsâ that can provide a clue on whatâs happening behind the scenes, such as the departure of eFisheryâs former Chief Financial Officer Dhianendra Laksmana last year. Senior executives are often bound by confidentiality agreements when they leave, but the board should find out the reasons for their exit.
Two investors also exited during eFisheryâs Series D round in 2023, each netting a 40x return, according to the BRAVE podcast. However, different investors may have divergent strategies and liquidity considerations, so I think it might be risky to read too much into an exit.
âĄď¸ Whatâs next?
eFisheryâs co-founders have been suspended and more details should come out after the investigation is completed. In the meantime, eFisheryâs employees are getting restless as rumours are circulating that liquidation is the top option being discussed, which may lead to mass layoffs in February.
This is a reminder that a startup involves many livelihoods and there should be accountability on what went wrong.
đ Quick Take: Indonesiaâs Bad Apples
23 January 2025
Sritex and eFishery dealt a blow to investor trust in Indonesian high-yield bonds and startups, respectively.
Investors are also growing more concerned about Indonesiaâs policy changes.
Thereâs a saying in Indonesia: âKarena nila setitik rusak susu sebelangaâ. An entire pot of milk ends up spoilt by one drop of dye.
The implosion of Sri Rejeki Isman (Sritex) dealt a blow to investor trust in Indonesian high-yield bonds and affected appetite for new issuances. Iâve written about the textile companyâs myriad of issues, ranging from undisclosed debt and related party transactions to questionable inventories and elevated margins.
I also flagged that Sritexâs job numbers keep changing even though its workforce is supposed to be the key reason for its continued existence. On Tuesday (21 January 2025), Sritex President Director Iwan Kurniawan Lukminto finally attended a court hearing and asked the judge to keep it as a going concern, instead of letting creditors cast a vote.
Itâs unclear if the judge will entertain Lukmintoâs request and some creditors have told the court-appointed administrators that they would like a comprehensive audit of Sritexâs business before making any decision. This reflects their lack of trust in Sritexâs books, which is hardly surprising.
Contrary to what a government official said, Sritex is not and should not be âthe faceâ of Indonesiaâs textile sector. There are companies that seek to upgrade their machineries or invest in new ones to move up the value chain, but they struggle to get loans because some banks have been traumatized by Sritex. If the government is serious about saving the textile industry, perhaps it should consider redirecting capital to more deserving businesses that are trying to do the right thing.
Itâs also been a bad time for Indonesiaâs startup community, which was rocked by the scandal engulfing eFishery. The fish feed unicornâs top management inflated its revenue for the first nine months of 2024 by nearly five-fold and manipulated its bottom line to appear profitable despite massive losses, according to DealStreetAsia.
The publication also reported that eFisheryâs management had kept two sets of accounting records since at least 2018 â one for selected company leadership and another for external parties including shareholders, banks and auditors.
A friend in the venture capital (VC) circle said thereâs been a huge pullback in funding for Indonesian startups because âno one trusts the corporate governanceâ there anymore. Some VC funds even opted to return money to their investors because they decided it wasnât worth the risk.
A few bad apples shouldnât taint the entire basket, but these funds would rather be safe than sorry, especially if their reputation is at stake.
Investors are also growing more concerned about Indonesiaâs policy changes, including the presidentâs last-minute decision to water down a value-added tax hike that was about to be rolled out.
Indonesiaâs move to force natural resource firms to keep all export proceeds onshore for at least a year is another surprise for investors. A credit friend who tracks coal miners said that assuming these export-reliant companies have to park most of their revenue for one year, then they might be âcash flow negative on day oneâ if they couldnât cover their bills.
This new requirement is aimed at reducing the volatility of the rupiah, which has crossed a key psychological level of 16,000 per dollar. But as my first friend pointed out, Indonesia has only been able to attract short-term portfolio flows so far and the erosion of investor confidence is the main cause of currency volatility. In short, Indonesiaâs attempt to safeguard its currency might actually backfire if investors see it as a sign of erratic policy-making.
Indonesia has long been touted as a growing powerhouse in Southeast Asia, but other countries in the region, such as Vietnam, are giving it a run for its money. In December 2024, US chipmaking giant Nvidia signed an agreement with the Vietnamese government to build artificial intelligence research and data centers in the country. This kind of stickier investment is precisely what Indonesia favours over hot portfolio money, but itâs underpinned by trust.
Trust is the most important currency â and Indonesia has its work cut out to regain it.
đ Quick Take: eFisheryâs Horror Flows
28 January 2025
While eFisheryâs inflated sales and sea of losses have been widely reported, the real horror is in the money flows.
The startupâs founder and his team allegedly created fake transactions to mislead investors and auditors.
Initial investigations into Indonesian unicorn eFisheryâs alleged fraud are like a horror accounting story. While the inflated sales and red sea of losses have been widely reported, the real horror is in the money flows.
DealStreetAsia broke the news on eFisheryâs financial irregularities, which were unveiled during a preliminary investigation by FTI Consulting. Revenue from January to September 2024 was marked up 4.8 times to USD 750 million-equivalent, while a USD 35 million loss was presented as a USD 16 million pre-tax profit.
Apart from the revenue and P&L, I think there are other details in the 52-page report that are worth highlighting. This is my summary based on the findings:
The financial manipulation started when eFishery struggled to hit its fundraising target during its Series A round in 2018. The startupâs founder, Gibran Huzaifah, inflated its revenue by around 20-25% and juiced up its profitability, helping it to get across the line.
Gibran created two sets of accountsâone for external parties and another for internal operationsâand maintained them himself between 2018 and 2020. Subsequently, he hired more people to handle these books.
Gibran also entered into operational partnerships with some companies in order to create money flows for the inflated revenue and cost of sales. But as the gap between the actual and inflated revenue widened, the partnerships alone were not enough to churn out the required flows.
In January 2022, Gibran had five nominee companies incorporated to enable a roundtripping of funds between eFisheryâs Indonesian entities to support the flows for the fraudulent transactions.
When Gibran had to present eFisheryâs actual cash position to the Board, he instructed his team to inflate the capex spent on feeders to justify the cash decline. The investigators found that based on the internal books, total capex on feeders was USD 2.8 million while the net book value of feeders in fixed assets and inventory stood at USD 2.1 million.
From the start of business until 30 November 2024, total retained losses from eFisheryâs Indonesian operations amounted to USD 152 million-equivalent.
Is there any value left in eFishery?
The unicorn has raised more funding than all of its competitors combined and may therefore have enough runway to sustain its operations for a few years, but not all investors are convinced that reviving it is worth the time and effort, DealStreetAsia reported today.
A restructuring friend believes that liquidating eFishery is the best option because itâs tough for the startup to reboot from here. âIt will be hard to salvage anything from the business given that in reality its operations were so small and the fraud so big,â this friend said. âThe brand is dead.â
However, pulling the trigger and laying off workers ahead of the Muslim festive season could be a public relations disaster for the shareholders. An eFishery employee also wrote in a viral LinkedIn post that the media coverage of the scandal has unfairly tarnished the entire staff, even though many of them are innocent. This employee added that eFisheryâs technology is real and the company has built a relationship with fish farmers overtime.
The blame game is likely to intensify, with some investors pointing the fingers at the auditors for not sniffing out the stink. Checking stocks and receivables should be a standard operating procedure, but itâs hard for auditors to do their job if the management kept multiple books, according to a friend with audit experience. âIt all goes down to the data: garbage in, garbage out,â this friend said.
Itâs a tough time for everyone involved, but hopefully there are genuine lessons to be drawn from this saga so it wonât happen again.
đ Quick Take: eFisheryâs Can of Questions
30 January 2025
How can a unicorn have only USD 2 million of key assets?
Why was the fraud undetected for so long?
Where did the funds flow to?
Why did the founder do it?
Fish (éąź) is often served during the Lunar New Year because it shares the same pronunciation as the Chinese word for surplus (ä˝), signifying prosperity for the year ahead.
As Indonesian startup eFisheryâs scandal unfolds, however, questions are the only thing in abundance as investors are facing massive losses.
đŚ How can a unicorn have only USD 2 million of key assets?
As I previously wrote, the draft report authored by FTI Consultingâwhich was engaged to investigate a whistleblower complaintâis like a financial horror novel, with everything from double books and round-tripping of funds to fictitious partnerships and inflated capex.
However, I think the newsflash is on page 19 of the report: Based on the internal system, the net book value of fish feeders in inventory and fixed assets was only USD 2.1 million. This consisted of around USD 1.5 million of feeders recorded as inventory and USD 569,000 of feeders listed as fixed assets as of 30 November 2024.
In short, if eFisheryâs shareholders were to liquidate the startup that was valued at USD 1.4 billion in its latest fundraising, they might only get a fraction of their investments back. But itâs also tricky to continue the business if thereâs actually very little business to speak of and the damage on eFisheryâs reputation has been done.
đ Why was the fraud undetected for so long?
According to one of the personnel interviewed by the investigators, the external books provided to the auditors consisted of financial statements, journal entries, as well as supporting listings that contained fictitious revenue, cost of goods sold (COGS) and feeder transactions.
Despite knowing about the dual reporting system and that the information given to the auditors contained fictitious transactions, eFisheryâs founder and CEO Gibran Huzaifah allegedly signed letters representing that the financial statements were true, fair and free from material mis-statements.
The auditors asked for an inventory count of the feeders in the warehouse, but they did not request physical sighting of the rented feeders that were installed at the farms, according to the report. The investigators said this was their understanding based on interviews with the company and they had not spoken to any of the auditors.
đ¸ Where did the funds flow to?
eFishery received USD 200 million of Series D funding in May 2024, which flowed from the Singapore entity to its Indonesian units â Multidaya Teknologi Nusantara (MTN), eFishery Aquaculture Indonesia (EAI) and Teknologi Untuk Pembudidaya (TUP â in the form of a capital injection, according to the report. As of 30 November 2024, cash and equivalents at the three units stood at USD 34 million.
The âpotential key areas of cash leakageâ arise from net operating losses, short-term investments, long-term investments, non-current liabilities, accounts receivable, and tax payables, according to the report. The investigators are in the process of reviewing the breakdown to identify potentially fictitious balances and transactions that might have resulted in money being siphoned out of the Indonesian units.
Local media also reported that three banks â Bank DBS Indonesia, Bank OCBC NISP and Bank HSBC Indonesia â lent a combined USD 78.5 million to eFishery, but the company swiftly issued a statement that it had paid all of its bank debt. Bank DBS Indonesia confirmed that its loan to eFishery was repaid and it no longer has any exposure to the startup.
đ Why did the founder do it?
Gibran came across in media coverage as a down-to-earth guy with an inspiring rags-to-riches journey and a mission to help fish farmers. He told a reporter that he was once so poor that he didnât eat for three days.
When asked in a 2022 interview about the biggest risk that he saw, Gibran said it was the risk of losing himself. âThereâs a big mission that I want to build and I do it because I want to eradicate hunger. But being at the center of various spotlight, with investors and so on, my fear is of chasing something thatâs actually not in line with my original reason for doing this.â
Gibranâs public image doesnât gel with the scale and complexity of fraud detailed in the report. The impression that I got is of someone who started relatively small, fudging the numbers to hit the fundraising target in 2018, and got sucked into a bigger and bigger vortex.
When he allegedly presented fake numbers, he also had to manufacture the flows to back these numbers, so it snowballed to the point where maintaining the bogus book was a full-scale operation.
Only Gibran knows why he did it, but the ripple effect will likely spread far and wide.
đ Quick Take: Picking eFisheryâs Bones
1 February 2025
The potential scenarios ahead are restructuring, liquidation and enforcement.
If investors keep running eFishery, the startup will likely have to be restructured as its technology is not scalable yet.
eFishery has limited assets that can be sold in a liquidation, but investors may want to cut their losses.
Investors have likely lawyered up to explore potential action against the startupâs founder and auditors.
Indonesian startup eFishery is like a fish that was paraded as a unicorn but turned out to be just fishbones.
Thereâs not enough flesh in this fish to serve a buffet of investorsâincluding Japanâs SoftBank, Singaporeâs Temasek and Abu Dhabiâs 42X Fundâwho are demanding their money back.
The fraud allegedly committed by eFisheryâs founder Gibran Huzaifah has tainted an ecosystem linking startups and employees with farmers and consumers. The ripples also spread beyond Indonesia and dampened the fundraising ability of other startups in Southeast Asia, as investors are likely to step up due diligence or pull back entirely.
As everyone starts picking up the pieces, these are the potential scenarios ahead and the likely considerations:
âď¸ Restructuring
Even without the alleged fraud, thereâs a fundamental flaw in eFisheryâs business: Itâs likely to be reliant on low-margin trading or supply chain logistics as the adoption rate of its technology is too low. eFisheryâs technology is not solving a problem or removing enough pain for fish farmers to pay for it. In short, feeders and sensors are not a must-have because farmers in Indonesia can still feed their fish manually.
Assuming the technology is real, itâs not scalable yet and will take a long time to reach the point where the cost of goods sold (COGS) can be suppressed. One option is to keep the low-margin business in Indonesia and export the technology to more developed aquaculture markets. But the startup will have to build export channels and relationships with fish breeders in these markets.
Whoeverâs in charge of eFishery has to crunch the actual cash, operating costs and cash burn to estimate the runway left. Then the shareholders must decide whether they should lengthen the runway or change the business model. If they choose to continue running eFishery, then the startup will likely need a comprehensive restructuring.
Perhaps some investors may want to give it a try because they couldnât bear to stomach the losses they are staring at right now, but others might think itâs not worth throwing good money after bad.
đŞ Liquidation
In the event of a liquidation, eFishery has limited assets that can be sold. FTI Consultingâwhich was hired to conduct an investigationâwrote in its report that based on the internal system, eFishery had a total of 20,600 feeders. These consisted of:
3,133 installed feeders that remain invoiceable to customers monthly
8,408 feeders that are installed but not invoiceable due to âcultivation breakâ and other reasons
1,044 feeders that have been installed and sold to customers
8,015 feeders in inventory (raw materials, work-in-progress, and finished goods)
Furthermore, investigators identified only 15,010 unique feeder serial numbers and were in the process of understanding the reason for overlapping numbers. While eFisheryâs Indonesian units still had USD 34 million in cash and equivalents as of 30 November 2024, this is a drop in the bucket for investors who poured USD 200 million into its Series D round.
Even if there isnât much value left in a liquidation, investors may want to cut their losses. Workers and farmers are likely to be prioritized in the distribution of liquidation proceeds, but itâs unclear if eFishery is on the hook for hidden liabilities. In short, who knows if a can of worms is still lurking out there.
eFishery was on the Financial Services Authority (OJK)âs radar in 2023 and a task force had a meeting to discuss the activities and legality of the startup, according to local media. Kompas also reported that eFisheryâs Kabayan payment scheme for fishermen and fish farmers relied on fintech peer-to-peer lending as of May 2024. In response, the company said it does not give any financing facility as this is provided by its financing partners.
As I wrote before, pulling the plug before the Muslim festive season would be a political hot potato for investors. On Friday (31 January 2025), an eFishery labour union reportedly sought help from Deputy Manpower Minister Immanuel Ebenezer Gerungan as the startup had terminated around 100 workers in January and more layoffs are feared to be in store. If shareholders were to take the liquidation route, it would likely require PR management.
đ Enforcement
Whether investors choose a restructuring or liquidation, they have likely lawyered up to explore potential enforcement against Gibran and his accomplices, such as seeking a clawback of bonuses and other personal benefits.
The investigators also suspected eFisheryâs acquisition of Dycodex Teknologi Nusantara (DycodeX) as one of the fraud methods. DycodeX was never audited, so directly acquiring it and consolidating it as a subsidiary of eFishery would have required an audit for the past three financial years, the FTI report said, citing Gibran.
Therefore, the acquisition was restructured into an âacqui-hiring arrangementâ whereby service agreements were signed between one of eFisheriesâ Indonesian units and four legal entities (CVs), according to the FTI report. A total of USD 920,000-equivalent was paid by the eFishery unit to the four CVs and DycodeX employees were recruited as eFisheryâs workers.
Some investors may also consider taking action against the auditors, but this will hinge on the agreed scope of audit and whether the auditors followed the standard operating procedures. As a defense, the auditors may argue that thereâs nothing more they could have done if the management was hell-bent to deceive them.
The eFishery saga is likely to turn uglier in the weeks ahead.
đ Quick Take: Indonesiaâs Wave of Layoffs
7 February 2025
Indonesia is facing a wave of layoffs in its textile and startup sectors.
Startups are experiencing a funding crunch due to the ripple effect from eFisheryâs scandal.
Indonesia is facing a wave of layoffs in its textile and startup sectors, posing a risk to its economy thatâs already growing at the slowest pace in three years.
An analyst at the Parliamentary Analysis Center of the House of Representatives (DPR), Hartini Retnaningsih, projected that at least 280,000 workers could be laid off by 60 textile companies this year, state news agency Antara reported. This would be more than triple the 77,965 layoffs recorded by the Ministry of Manpower in 2024.
The drivers for the potential layoffs include a value-added tax hike, reduced government subsidies, and higher premiums for the national health insurance program, according to Antara.
The health insurance scheme â which covers 219 million active policy holders â was estimated to run a IDR 20 trillion (USD 1.2 billion) deficit last year, piling pressure on its manager, BPJS Kesehatan, to increase premiums.
The rising costs couldnât have come at a worse time for workers who are losing their jobs in the beleaguered textile industry. The poster boy of Indonesiaâs textile crisis, Sri Rejeki Isman (Sritex), was declared bankrupt and the court-appointed administrators have accepted IDR 29.8 trillion (USD 1.8 billion) of claims from creditors.
Sritexâs management said it will prepare a proposal for its business continuity, but the administrators requested an independent audit to determine the feasibility. One of the administrators, Denny Ardiansyah, told reporters that Sritexâs independent director was of the view that the company would incur more losses and limited working capital if it were kept running.
In the startup sector, embattled aquaculture company eFishery has terminated more employees, after laying off around 100 workers in January, Kompas reported on Thursday (6 February). In a few weeks, eFisheryâs shareholders are set to vote whether to wind down, restructure, or sell the company entirely or partially, according to Bloomberg.
As I wrote last week, the potential scenarios ahead for eFishery are a restructuring, liquidation, and enforcement against the perpetrators of the alleged fraud. A sale will likely be difficult because of eFisheryâs limited assets and tarnished reputation, unless the potential buyers are bulletproofed from any further stinker.
I was expecting more layoffs after the Muslim holidays due to the PR risks, but eFisheryâs management probably had to act sooner rather than later to stem the losses. The appointment of FTI Consultingâwhich investigated the alleged fraudâto temporarily run eFishery also sent a signal that shareholders are roping in an independent third party to choose the best path objectively.
The fact remains, however, that eFisheryâs shareholders are staring at a dwindling pool of recovery, as the startup may have to pay severance and Hari Raya Allowance (Tunjangan Hari Raya) to the affected workers. Itâs also uncertain whether they can claw back money from eFisheryâs founder Gibran Huzaifah and his accomplices.
For now, the damage has been done. The eFishery scandal has delivered another blow to investor sentiment in Southeast Asia, where the startup ecosystem has been braving a multi-year funding drought, CNBC reported.
The founders of another Indonesian startup, Ula, are winding it down and offering to return around 30% of its total capital to investors, DealStreetAsia reported. The âwarung-techâ companyâs backers were given the option to either redeem their investments or roll them into founder Nipun Mehraâs upcoming venture, according to the publication.
If layoffs in the startup and textile sectors were to accelerate, the affected workers and their families would likely tighten their belts. The aggregate numbers are unclear at this point, but weakening consumption may undermine the Central Bankâs efforts to stimulate growth by cutting interest rates.
At the end of the day, bread-and-butter issues can make or break an economy.
đź Brief Take: Credit Lessons for Startups
25 February 2025
The fallout from the eFishery scandal is still unfolding, but there are lessons from the credit world that can be applied to startups.
đ Cash is King
In credit, cashflow is king.
No matter how pretty the sales or P&L numbers are, a borrowerâs ability to generate cash to service its debt is most important. While a startup is probably more equity-centric, shouldnât cashflow also be a key consideration?
A veteran banker friend said that investors should constantly monitor cash movements and cross-check them with bank statements. If the cash is actually non-existent or being round-tripped, alarm bells should start ringing.
đŚ Check the Stocks
Inventories and receivables are the easiest to manipulate because the culprits are betting that auditors and investors wonât bother to check.
The common excuse is because people cannot verify them one by one, but this can be mitigated by taking a random sample or doing spot checks. Some metrics that might also be useful are the cash conversion cycle, net working capital, and ratio of work-in-progress to total inventories.
đ° Show Me the Money
The value of a companyâs assets is an important factor, especially if it goes into a restructuring or liquidation.
Asset value might be a more nebulous concept in the startup world because the key asset tends to be the technology. But asking âHow much can I actually sell this for?â could be a reality check to ground some heady valuations.
đź Brief Take: Indonesiaâs Not-So-Unicorn
26 February 2025
eFisheryâs technology is not solving a problem or removing enough pain for fish farmers to pay for it.
Assuming the technology is real, itâs not scalable yet and will take a long time to reach the point where the cost of goods sold can be suppressed.
Indonesian aquaculture startup eFishery is no longer commercially viable in its current state and the bulk of its business should be shut down and its intellectual property monetised or spun off, DealStreetAsia reported, citing a draft report by the forensic auditors appointed to review the company.
Evelineâs Take:
đ¸ I wrote back on 1 February that even without the alleged fraud, thereâs a fundamental flaw in eFisheryâs business: Itâs likely to be reliant on low-margin trading or supply chain logistics as the adoption rate of its technology is too low.
đ¸ eFisheryâs technology is not solving a problem or removing enough pain for fish farmers to pay for it. Assuming the technology is real, itâs not scalable yet and will take a long time to reach the point where the cost of goods sold (COGS) can be suppressed.
đ¸ In the event of a liquidation, eFishery has limited assets that can be sold. Workers and farmers are likely to be prioritized in the distribution of liquidation proceeds.
đ¸ Whether investors choose a restructuring or liquidation, they have likely lawyered up to explore potential enforcement against eFisheryâs founder Gibran Huzaifah and his accomplices.
đ¸ Some investors may also consider taking action against the auditors, but this will hinge on the agreed scope of audit and whether the auditors followed the standard operating procedures.
đź Brief Take: eFishery the Microlender
5 March 2025
eFishery seems to be more of a microlender with a side fish business, rather than a tech startup revolutionizing Indonesiaâs traditional aquaculture industry.
Its model has a similarity with TaniHub, a supposed agritech startup that also had a peer-to-peer lending platform called TaniFund.
Beleaguered Indonesian startup eFisheryâs Kabayan financing was a major cash drain that accounted for a sizeable chunk of its account receivables and bad debt, DealStreetAsia reported on 3 March 2025, citing a draft report by FTI Consulting.
Evelineâs Take:
đ¸ eFishery seems to be more of a microlender with a side fish business, rather than a tech startup revolutionizing Indonesiaâs traditional aquaculture industry. As a friend described it, the automatic fish feeders were a âmarketing gimmick to put the âeâ in eFisheryâ and its real business is microlending.
đ¸ If thatâs the case, then eFisheryâs model has a similarity with TaniHub, a supposed agritech startup that also had a peer-to-peer lending platform called TaniFund. Both struggled to manage the fallout when the farmers defaulted on their payments, as itâs notoriously difficult to collect debt in Indonesia.
đ¸ A police spokesman told local media that they received reports in early 2024 against two eFishery executives with the initials âGâ and âCâ (itâs standard practice for Indonesian police not to name suspects when investigations are ongoing). The startupâs co-founders are Gibran Huzaifah and Chrisna Aditya.
đ¸ This raises questions why the police took so long to investigate the case, which only surfaced in late 2024 after a whistleblower approached the eFishery board and an initial report by investigators was leaked to the public. A task force in the Financial Services Authority (OJK) also reportedly placed eFishery on an âillegal investment listâ in February 2023, but took the startup out of that list two months later.
đ¸ eFisheryâs co-founders and former directors could face a police investigation in Singapore over USD 253 million in alleged losses, DealStreetAsia reported on 25 February. The potential options presented by investigators in their latest report also included continuing prosecution against âfraudstersâ and pursuing a negligence suit against auditors.
đ¸ I wrote on 1 February that there wasnât enough flesh in eFishery for investors trying to claw back their money. I also flagged that eFisheryâs Kabayan payment scheme could be a can of worms, but the extent of the alleged misrepresentation of the business still impressed me. When the dust settles, eFishery will definitely be a case study for investors and startups.