Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Five years after launching his tech company in Indonesia, Gabron
Speaker 2: Huseeifa found himself in deep money trouble. The startup he built,
Speaker 2: E Fishery, that lets farmers feed fish from their phones,
Speaker 2: was just three months away from running out of cash.
Speaker 1: This company had less than nine thousand US dolars in
Speaker 1: its accounts. It had been trying to raise money unsuccessfully
Speaker 1: from the region's biggest and smallest investors.
Speaker 2: David Ramley is a Bloomberg investing reporter based in Singapore,
Speaker 2: and Gabron told David and a team of Bloomberg reporters
Speaker 2: that back then in twenty eighteen, his company's one hundred
Speaker 2: employees were counting on him, and he felt he couldn't
Speaker 2: let his company go bust. On top of that, he
Speaker 2: actually believed he had a good business. He just needed
Speaker 2: more money and time to grow. But where was he
Speaker 2: going to find the money? Gabron told Bloomberg he spent
Speaker 2: a long time just staring at an Excel spreadsheet of
Speaker 2: E Fishery's finances on his laptop. He thought long and
Speaker 2: hard about what he could do.
Speaker 1: What he started to do very slowly at first was
Speaker 1: he just started to play with the numbers. It was
Speaker 1: almost the thought experiment. He just started tweaking the numbers
Speaker 1: to what he thought investors would want to see.
Speaker 2: And once he started, he just kept going. Within an hour,
Speaker 2: he had done what years of hard work couldn't turn
Speaker 2: his business into a winner, at least on paper. He
Speaker 2: hit the send button to show his investors and he
Speaker 2: was certain he'd get caught. Only he didn't.
Speaker 1: Actually, what happened was his existing investors were extremely excited,
Speaker 1: while the others who had previously said but not really interested,
Speaker 1: was suddenly extremely keen. He went from being someone that
Speaker 1: no one wanted to being someone who was how did
Speaker 1: for investment opportunities in the space of a few months
Speaker 1: thanks to that one spreadsheet.
Speaker 2: So Gabron kept on faking the numbers year after year,
Speaker 2: and investor's money kept rolling in. By twenty twenty three,
Speaker 2: E Fishery had become one of the hottest startups in
Speaker 2: Southeast Asia. It was valued at more than a billion
Speaker 2: dollars and had raised millions from some of the world's
Speaker 2: biggest money managers, including SoftBank, Sequoia India and Southeast Asia,
Speaker 2: and Singapore's State investor Temasek, but the more money he got,
Speaker 2: that bigger his lies became.
Speaker 1: Once he tweaked the numbers, everything looked good on paper,
Speaker 1: but the reality was he still didn't have those numbers,
Speaker 1: so he had to come up with them. What happens
Speaker 1: is the claims become too big and the expected growth
Speaker 1: becomes too big for that method to work.
Speaker 2: Gabron's house of cards eventually came crashing down after a
Speaker 2: whistleblower report last November blew apart his entire scheme. Some
Speaker 2: top investors lost hundreds of millions of dollars. A subsequent
Speaker 2: internal investigation found that in the first nine months of
Speaker 2: twenty twenty four, E Fishery claimed revenues of more than
Speaker 2: seven hundred and fifty million dollars, while the true number.
Speaker 1: Was just a fifth of that.
Speaker 2: David and his colleagues spoke to over twenty e Fishery investors,
Speaker 2: staff and clients, and Gibraun himself to piece together this
Speaker 2: insider account.
Speaker 1: I wanted to know what made this guy go from
Speaker 1: being a relatively honest Phish farmer slash student to someone
Speaker 1: who had cost investors hundreds of millions of dollars while
Speaker 1: still living a relatively modest lifestyle. He doesn't have private jets.
Speaker 1: He's driving a Hyundai Ionic five. What we're trying to
Speaker 1: find out is how did he do it? But the
Speaker 1: big question I thought was why.
Speaker 2: This is the big take Asia From Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today in the
Speaker 2: show The Rise and Fall of e Fishery, how did
Speaker 2: a young entrepreneur from Indonesia create such a headache for
Speaker 2: some of the biggest investors in the world and what
Speaker 2: does it say about the risks of venture capital investing
Speaker 2: in Southeast Asia. Gibron Huzaifah was raised near the slums
Speaker 2: of East Jakarta. He's the son of a homemaker and
Speaker 2: a construction worker. He did well in high school and
Speaker 2: went on to study biology at the Bundum Institute of Technology,
Speaker 2: known locally as the MIT of Indonesia, and that's where
Speaker 2: he picked up interest in aquaculture.
Speaker 1: The reason why he took an aquaculture class is because
Speaker 1: he heard the lecturer gave easy a's that's it. He
Speaker 1: wanted an easy credit on his transcript, so he signed up.
Speaker 1: But he actually got inspired, in his words, inspired by
Speaker 1: the story of aquaculture in Indonesia and its potential.
Speaker 2: Indonesia is the third largest seafood producer in the world,
Speaker 2: after China and India. The fishery sector was worth around
Speaker 2: twenty seven billion dollars in twenty twenty one, that's according
Speaker 2: to a World Bank report. And young Gebron saw an opportunity.
Speaker 1: He wanted to be the Raja Leile, the king of
Speaker 1: catfish in Indonesia, and so he hustled. He started speaking
Speaker 1: with people who had hundreds of fish ponds and were
Speaker 1: pretty big in the industry, and he asked them like,
Speaker 1: what do you need? What is the issue? And they said,
Speaker 1: you know, at some point, as you get bigger, your
Speaker 1: issue becomes feeding the fish. Because feeding fish requires both
Speaker 1: regularity as well as precision, and you need big farms.
Speaker 1: It takes a long time to get from one side
Speaker 1: to the other. It'd be great if I had a
Speaker 1: machine that could do that for me.
Speaker 2: So Gabron went off and made a prototype of an
Speaker 2: automated fish feeder. The initial machine was scrappy. Imagine an
Speaker 2: old school milkcan upside down with a spinner that's actually
Speaker 2: a retrofitted CD player, spitting out fish food. For months,
Speaker 2: Gabron traveled across Indonesia to rural villages trying to sell
Speaker 2: his machine.
Speaker 1: He had the early prototype strapped to the back of
Speaker 1: a motorbike and he would take that down various lanes
Speaker 1: to the ends of nowhere and rural farms, going from
Speaker 1: farm to farm trying to sell that machine to people.
Speaker 2: His persistence paid off slowly, some farmers began buying or
Speaker 2: renting the machines. Meanwhile, Gabron enrolled himself into multiple startup
Speaker 2: competitions in Jakarta, which gave him access to the venture
Speaker 2: capital community, and that paid off too.
Speaker 1: His first pre Series A investments came from a highly
Speaker 1: niche Dutch aquaculture specific and investment firm called Aquaspark, as
Speaker 1: well as a local VC. The entirety of the pre
Speaker 1: Series A was just seven hundred and fifty thousand US dollars.
Speaker 2: The money wasn't enough. The company was burning through cash.
Speaker 2: Investors weren't buying Gabron's pitch for new funds, so he
Speaker 2: went back to the well to his first investor, Aquaspark.
Speaker 1: Aquaspark believed in the model enough that they were willing
Speaker 1: to stump up one point five million dollars for his
Speaker 1: Series A round, but it came with caveats. The first
Speaker 1: two thirds of the money would be sent over, but
Speaker 1: the last one third, five hundred thousand dollars wouldn't be
Speaker 1: sent unless he could find other investors for the rest
Speaker 1: of the round.
Speaker 2: But how would he convince those other investors. They had
Speaker 2: all turned him down already. When Gabron asked other Indonesian entrepreneurs,
Speaker 2: he got answers that were vague and coded. Gabron says,
Speaker 2: the way he heard it, the tip was essentially to
Speaker 2: fudge the numbers.
Speaker 1: In twenty eighteen, as he's facing the conundrum between basically
Speaker 1: losing everything in his eyes or fudging the numbers like
Speaker 1: everyone else he speaks to in his community, and providing
Speaker 1: exactly what the investors want to see, continuation growth and
Speaker 1: a poff to actually making a sustainable business, he chose
Speaker 1: the letter.
Speaker 2: Gabron was sure he'd get caught, except he didn't. Investors
Speaker 2: were keen to come on board. In the end, the
Speaker 2: Series A round was a huge success. The company raised
Speaker 2: more than four million dollars in total, but Gabron had
Speaker 2: just replaced one problem with another. The investors he'd brought
Speaker 2: on expected him to grow and attract even more investments,
Speaker 2: so Gabron decided to keep faking the numbers. That created
Speaker 2: a whole new set of math problems. That's after the break. Gebron,
Speaker 2: whose Ipha, may have lied through his teeth about the
Speaker 2: success of his e fishery business, but he still knew
Speaker 2: how to tell a good story, one that hooked investors
Speaker 2: big time. Here he is talking about his ambitions to
Speaker 2: bring the company's tech to fish farmers all around the world.
Speaker 3: We're really excited about the future because we're pioneering this sector.
Speaker 3: We're technically creating this category of fish tech, of aquaculture
Speaker 3: technology that then has a really big upside on building
Speaker 3: the market and building the sector even further. For us,
Speaker 3: its sky is the limit.
Speaker 2: The story appealed to an investment community obsessed with the
Speaker 2: idea of impact investing, a way to generate social or
Speaker 2: environmental benefits while making money, And after the success of
Speaker 2: that first round of funding, the money kept coming. In
Speaker 2: twenty twenty two, after a flurry of interest SoftBank, Temasek
Speaker 2: and Sequoia India pumped more money into the company, valuing
Speaker 2: it at four hundred and ten million dollars. But the
Speaker 2: more funds Gebron raised, the more creative he had to get.
Speaker 2: To cover his tracks. He asked farmers to move their
Speaker 2: existing business onto his platform in exchange for a commission fee.
Speaker 2: He began to operate with two sets of books. David
Speaker 2: You and the Bloomberg team spoke to Gabron extensively on
Speaker 2: how it all went down. Did he tell you about
Speaker 2: what was going through his mind as he was fudging
Speaker 2: these numbers?
Speaker 1: Gebron told us that his moral compass was quite mathematical.
Speaker 1: In his exact words, if the number of impacts that
Speaker 1: I can create at a given time outsizes the potential
Speaker 1: risk and damage that might be created, then it's still
Speaker 1: a net positive and you should still do it as
Speaker 1: long as it's a net positive.
Speaker 2: As evaluatestions got higher, Gabron found new and bigger ways
Speaker 2: to make the numbers add up. That included setting up
Speaker 2: at least five subsidiaries and thousands of fake accounts to
Speaker 2: make artificial purchases for me.
Speaker 1: One of the key red flags was the lack of
Speaker 1: impact that his business was having on the feed industry.
Speaker 1: If you have tens of thousands of farmers who are
Speaker 1: buying fish feed on your platform, that should have a
Speaker 1: seismic impact on the fish feed industry of Indonesia. But
Speaker 1: some of my sources were saying that they were speaking
Speaker 1: to the fish feed providers, and they in turn were
Speaker 1: very confused because there was almost no impact.
Speaker 2: Last year, rumors began to surface on social media pointing
Speaker 2: to inaccuracies in sales numbers, and then in November came
Speaker 2: an allegation of financial misconduct.
Speaker 1: The real straw that broke the camel's back was a
Speaker 1: whistleblower report that basically said the numbers that investors are
Speaker 1: getting did not match up the real numbers inside the company.
Speaker 2: The report, sent to an E Fishery board member, brought
Speaker 2: the whole thing crashing down on Gabron. In December, he
Speaker 2: came clean to his colleagues and investors. He was suspended
Speaker 2: and replaced, but the damage was already done. He had
Speaker 2: inflated revenue by almost six hundred million dollars in the
Speaker 2: nine months through September of last year. More than three
Speaker 2: hundred million dollars of investor money was gone. Gabron denied
Speaker 2: taking any of it. He said he agreed to speak
Speaker 2: to Bloomberg to state publicly he didn't steal money, and
Speaker 2: claims it was all paid out to employees, business partners,
Speaker 2: and creditors. David E Fishery had the backing of some
Speaker 2: of the biggest investors in the world. I mean, we're
Speaker 2: talking about Japan's soft Bank and Singapore's Temasek. The accounting
Speaker 2: firm Grant Thornton audited E Fishery's financial statements in twenty
Speaker 2: twenty two. How is it that Gabron was able to
Speaker 2: get away with this.
Speaker 1: And for so long? So I think something important to
Speaker 1: remember is that Indonesia is an incredibly difficult market to
Speaker 1: operate in because you don't have a single land mass,
Speaker 1: you have seventeen thousand islands spread out. One key problem
Speaker 1: was it's really hard to find these farms without E
Speaker 1: Fishery support, and that in turn gave Gibron the chance
Speaker 1: to quote unquote brief the local area managers about the
Speaker 1: numbers that would have been expected to come out of
Speaker 1: that part of the world.
Speaker 2: SoftBank, Temasek, and Sequoia, India and Southeast Asia declined or
Speaker 2: didn't reply to Bloomberg's requests for comment. A spokesperson for
Speaker 2: Grant Thornton said it's deeply concerned over the allegations and
Speaker 2: is working to understand the full extent of the situation.
Speaker 2: There was another factor that worked in Cabron's favor, a
Speaker 2: surge and investor interest in impact investing with a particular
Speaker 2: focus on his part of the world.
Speaker 1: At the time that E Fishery was getting a lot
Speaker 1: of money from globally investors, Southeast Asia was incredibly hot.
Speaker 1: E Fishery was a real gem. This is a business
Speaker 1: that's doing impact investment work. It's helping farmers, it's using technology,
Speaker 1: and I wouldn't say this is all impact investing. They
Speaker 1: all thought profitable business, higher revenue growth, hockey stick projections,
Speaker 1: emerging market. They all want to put an allocation into
Speaker 1: Southeast Asia.
Speaker 2: The fallout from E Fishery has resurfaced questions about whether
Speaker 2: the traditional venture capital model really works in emerging markets.
Speaker 1: There's a reason why you haven't seen the scale of
Speaker 1: investing in Indonesia that you see in China or the US.
Speaker 1: This really brings to question whether or not the unit
Speaker 1: economics of Indonesia makes sense for a lot of business
Speaker 1: models that have been brought there. The average middle class
Speaker 1: citizen of Indonesia does not spend the same amount of
Speaker 1: money in sheer dollar terms that the average middle class
Speaker 1: citizen of China or Australia do.
Speaker 2: Now, investors are still trying to figure out how to
Speaker 2: wrap up the E Fishery business. Most of the staff
Speaker 2: have been laid off. Many of the fish feeding devices
Speaker 2: were sold to recyclers for about six dollars each, and
Speaker 2: that's according to people familiar with the matter. The illusion
Speaker 2: that Gabron built over thirteen years took less than three
Speaker 2: months to collapse.
Speaker 1: And as for Gabron, at the moment, a lot of
Speaker 1: his life looks much like it did at the start
Speaker 1: of E Fishery. He's selling frozen seafood. He's trying to
Speaker 1: help former colleagues create fish farming collectives so that they
Speaker 1: can continue the business in some way, shape or form,
Speaker 1: and he's trying to work out what his options are.
Speaker 1: There is an investigation underway, so they could well be
Speaker 1: more consequences for him.
Speaker 2: This is the Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 2: This episode was produced by Young Young and Naomi m.
Speaker 2: It was edited by Patty Hirsch and Emily Cadman. There
Speaker 2: was additional reporting by Olivia Poe and Forrest Makdar. It
Speaker 2: was fact checked by Eddie Dwan and mixed and sound
Speaker 2: designed by Taka Yasuzawa. Our senior producer is Naoli Shaven.
Speaker 2: Our senior editor is Elizabeth Ponzo. Our deputy executive producer
Speaker 2: is Julia Weaver. Our executive producer is Nicole Beamster Bower.
Speaker 2: Sage Bowman is Bloomberg's head of podcasts. If you like
Speaker 2: this episode, make sure to subscribe and review The Big
Speaker 2: Take Asia wherever you.
Speaker 1: Listen to podcasts.
Speaker 2: It really helps people find the show. Thanks for listening,
Speaker 2: See you next time.