Venture Capital in Indonesia

Photo credit: Indonesia Travel

With a population of ~260M (~40% of SEA) and an economy growing at a clip of ~5%, Indonesia has been touted as one of the next wave of fast growing countries that will contribute significantly to the prosperity of SEA, with some going as far as setting sights on it to be the next China / India. While GDP growth is slower-than-hoped (Jokowi had set a 7% target when he took office in 2014), currency weakening that has dragged on the economy and a culturally and geographically diverse society (albeit aided by the internet), there is no doubt that the country exhibits several characteristics that seem promising for a vibrant start-up / entrepreneurship ecosystem that has, testament to that, seen an inflow of venture capital.

The state of the start-up and VC ecosystem in Indonesia

In my opinion, venture capital can have an out-sized impact to the ecosystem here, largely because of the nascent and blossoming entrepreneurial landscape. I heard from a podcast that the rise of a unicorn (a startup valued at ≥US$1B) has a positive impact on a country and perhaps Go-Jek, being one and frequently featured in the news this day, might have contributed to that. The knowledge that right in your backyard there is someone who managed to grow a start-up successful provides some form of assurance and inspiration that makes one hopeful that one day, that much celebrated founder could be you too. This contrasts with Malaysia or Vietnam, which have yet to claim a unicorn.

Indonesia has come a long way since. There are now at least 3 other unicorns, Bukalapak, Tokopedia and Traveloka, and earlier in 2018, the communications minister boasted that the country is likely to have >5 more unicorns by 2019, with healthcare and education being the most likely sector to spawn them. The acknowledgement of the importance of, and willingness of the government to participate in, the development of the ecosystem is also immensely helpful. Three such examples are the investments made into Bandung, touted as Indonesia’s own Silicon Valley, the collaboration with Singapore on Nongsa Digital Park, Indonesia’s first large-scale commercial project, opened in March 2018, in hope of bringing together digital entrepreneurs from the region, and lastly, direct financial benefits such as the Indonesia government’s decision to give income tax incentive for VC firms investing in technology start-ups also helps.

-update 10 Jan 2019 – Article on “Indonesia’s Financial Services Authority (OJK) has issued a regulation on equity crowdfunding, which will allow startups to raise funding through the stock market

In addition, there is also the Next Indonesian Unicorn International Convention (NextICorn), an initiative by the Ministry of Communication and Information Technology, in collaboration with the Indonesian Venture Capital and Startups Association (AMVESINDO), global consulting firm Ernst & Young, and the founders of Indonesian unicorns Go-Jek, Tokopedia, Traveloka and Bukalapak, to promote growth of the country’s digital sector. The second of which took place in October 2018. This convention / programme aims to streamline and promote Indonesia’s most investable startups to global investors and also connect startups with potential investors, to launch a centralised directory of startups for potential investors to browse in.

Responding to the gap in funding, VCs have poured money into the country. A Google-A.T. Kearney study estimates it to have doubled from 2016 at nearly $3B of YTD Sep 2017, and it remained at healthy levels given the $1.5B raise by Go-Jek early 2018. In 2016, VC investments in Indonesia accounted for 0.15% of GDP, compared to a SEA average of 0.28% and U.S. of 0.73%. This suggests that there could still be a long runway for growth, made particularly attractive by the projected 140M internet users in the country by 2022. The type has changed over recent years, and unfortunately the size has not. There is a change from a focus in debt to equity now, but funding has still been concentrated in either at the seed stage or unicorn-level, leaving a gap in Series A/B. This could be problematic as highly promising startups that burn cash quickly could find themselves in a cash crunch before they know it, fizzling out before they can reach the required scale to survive and be self reliant.

The significance of VC in Indonesia

The start-up ecosystem in Indonesia has a lot to benefit from VC funding, and similarly, VC investment in Indonesia has increasingly become more compelling.

The public market starting to appreciate technology, a space that has been most loved by VCs (and investors in general) in Indonesia (although with the caveat that the Indonesian Stock Exchange still refuses to accept listings from companies that are unprofitable or lack hard assets) means less worry about the exit. This again ties back to the aforementioned point on the importance of technology in the country and promotion of the unicorns, which are all in technology. The increased investment in developing a strong and deep talent pool also helps and bodes well.

Indonesia startups in particular, compared to countries in the region, like Singapore, with more developed financial systems, stand to benefit from VC funding. Access to funds is, and will probably remain, a pain point of start-ups and small companies. It is a distraction from what they should be prioritizing, getting their product right, hiring the right people and advancing their strategy and operations.

Moreover, the bigger startups / unicorns not just in Indonesia, but also SEA and the broader Asia region, are getting so much funding that they can, and are, simply buying up smaller startups that fall into their strategic plan. Newer and smaller startups are realizing that it is important for them to get into partnerships, something that VCs can provide a door to given their relationships. Building on this point, startups also need access to quality talent, a problem particularly pertinent for talent-starved Indonesia, who will most likely have more confidence in a startup should it be funded by a respectable VC.

The emergence of alternative of funding

Corporate funds are getting increasingly prominent as well. Take Bank Rakyat Indonesia/Bahana Artha Ventura, Bank Central Asia/Central Capital Ventura and SoftBank/Indosat as examples. Corporations have started to realize the importance of, and significant impact that these, early-stage startups can have on their company. Compared to a traditional VC fund, these corporate funds look to reap benefits either directly through integration of the startups’ products into the company, or indirectly through the portrayal as an innovative company which then appeases investors and could also be attractive for potential talent. Startups stand to benefit from having less to worry about regarding capital since they gain access to a much larger balance sheet, as well as having logistic and operational support from the parent company.

In addition, in early 2017, the Indonesian venture capital and startups association (AMVESINDO) was reported to push for the setting up of a national VC fund. However I have not heard of, nor been able to find, any news relating to this. Their official website also does not seem to have any relevant information. It sounds like a good idea to have a government-linked/backed VC fund, much like

Players in the space

  • 500 Startups: Early stage VC and seed accelerator that has invested in over 30 companies in Indonesia, including Bukalapak, Kudo,, HIJUP, Kredivo, and others
  • Alpha JWC Ventures: focuses on high technology companies, which includeSpacemob (acquired by Wework), Sale Stock, Carro, AsmaraKu, Jualo, and Style Theory
  • Convergence Ventures: focuses primarily on technology products and internet services
  • EV Growth: Launched by East Ventures, SMDV, and Yahoo! Japan Capital to address the gap in Series B funding round and beyond
  • Gobi-Partners: Chinese VC that launched in Oct 2018 a $10M fund to invest in early-stage Indonesian startups, issuing up to $1M per deal
  • GREE Ventures: Tokyo-based early stage mobile and internet VC which recently invested in Crowde, an agriculture-focused P2P lending platform and is also an investor in Bukalapak. They also launched in Aug 2018 SKALA, an accelerator programme in Indonesia together with community-driven startup initiative Innovation Factory, offering seed investment of $30K in exchange for 5% equity.
  • Ideosource: One of Indonesia’s earliest VCs, with a $15M tech fund, through which it invested in 27 early-stage tech startups, including eCommerce service provider aCommerce, online jewelry retailer Orori, and auto fish feeder e-Fishery. It most recently is looking to raise $15M to invest in the local movie scene as it shifts its focus away from tech investments
  • Kejora Ventures: VC for early and growth stage investments with a focus in Southeast Asia. Investments include C88 Fintech Group, Qareer Group Asia, Etobee, Investree, Pawoon and MoneyTable
  • KMKLabs: VC arm of Emtek, one of the largest media groups in Indonesia, and has invested in ecommerce site Bobobobo, Bukalapak, Muslim fashion estore HijUp, and online-to-offline ecommerce player Kudo
  • Openspace Ventures: SEA-based early-stage VC firm that has invested in tech startups like Go-Jek, FinAccel, Sale Stock, and Halodoc in Indonesia
  • Sequoia Capital: American VC which invested in Go-Jek and recently led an investment round in Indonesian cloud-based point-of-sale (POS) software provider Moka
  • SMDV: Tech VC arm of Sinar Mas, one of the largest and most powerful conglomerates in Indonesia
  • Venturra Capital: Lippo- backed VC, focused on investing in early stage technology-based businesses

What are the latest VC fundraises in Indonesia / funds recently mentioning a focus on Indonesia?

  • 18 Dec 2018: Convergence Ventures said to be raising $50M second fund
  • 17 Dec 2018: China’s early-stage investor ZhenFund trains sights on Indonesian startups
  • 8 Dec 2018: Bus giant-affiliated TNKapital joins Indonesia VC space
  • 5 Dec 2018: Indonesia’s Telkomsel to launch growth stage fund with Telkom and Singtel
  • 30 Oct 2018: Indonesian VC Ideosource seeks to raise $15M fund to invest in local films
  • 17 Oct 2018: $10M Gobi-Agung Fund launched by Gobi Partners
  • 15 Oct 2018: Top Indonesian entrepreneurs set up early-stage VC firm Kolibra Capital
  • 8 Sep 2018: GREE ventures partnered with Innovation Factory/Block71 (a Salim Group initiative) to launch SKALA an accelerator in Indonesia

Further reading

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