In the past year, Indonesia has seen the emergence of many new players in the venture capital space, including a few that have been keeping a low profile. Among them is Jakarta-based Arkblu Capital, which invests both directly and indirectly in the country’s startups.
Though it makes venture capital investments, Arkblu describes itself as a ‘private investment firm’ rather than a VC firm, as its structure is akin to a family office.
In an interaction with DealStreetAsia, Arkblu partners Edric Satyaka Widjojo and Francisco Widjojo said one difference between the company and most other VCs is its “twofold venture capital strategy” of backing not only startups but also VC funds.
“We have a direct investment strategy, where we acquire equity or equity-related interests in early-stage tech companies, and we also have a fund of funds strategy, where we acquire LP interests in venture capital funds that focus on Indonesia,” said Francisco.
Francisco said the company does not raise external capital. The firm’s funds are derived from the balance sheet of its affiliate companies, which operate primarily in the consumer goods industry, and also the FMCG, health and manufacturing industries.
Edric and Francisco remained tight-lipped on the identity of these affiliate companies, but their Linkedin profiles show that the cousins hold key positions in the local pharmaceutical and consumer goods giant Ultra Sakti.
In fact, the duo’s foray into the venture capital space was spurred by brainstorming sessions in one of their affiliate companies, which operates in the consumer goods and health sector. “Those discussions revolved around how we could adopt technology in the operations of that company, but then it evolved from technology adoption to technology investment, and what that could look like for us,” said Francisco.
Deploying patient capital
Arkblu made its first direct, startup investment in January this year and has since sealed five deals, including backing the seed round of travel tech startup IZY.ai and Series A round of eatery solutions startup Wahyoo.
The firm cuts cheques of up to $500,000 per investment to back Indonesian companies at pre-seed to Series A stages in various sectors.
“We are sector agnostic, but we like B2C, B2B2C, and startups with a consumer goods element given that these are the businesses that we know best and can add the greatest value to, by virtue of the industries of our affiliate companies, the background of our network and the background of our broader team,” said Edric.
Apart from the domain expertise and industry insights from its affiliate companies, Arkblu claims to also bring value to startups through what it calls “patient capital”.
Unlike regular general partners (GPs) that are commonly bound by limited partner agreements (LPAs), which require them to follow a strict three- to four-year investment period and a four-year harvesting period, Arkblu can stay and support portfolio companies for much longer.
“Our investment time horizon is unlimited. We don’t have to strictly invest within four years. For example, with Wahyoo, we believe we want to hold that business for the long term, we want to really see it grow,” Francisco said.
While Arkblu continues to be on the look-out for prospective deals, it does not expect to close as many deals in the latter half of 2020, primarily due to COVID-19. As is the case with most venture capitalists across the world, travel restrictions brought about by the pandemic has made due diligence difficult.
Arkblu says the deals it pursues must “tick a lot of boxes”, such as companies whose business model the firm understands, and being joined by reliable co-investors that it has dealt with in the past.
Backing VC funds
Like its direct investments, Arkblu’s fund of funds strategy was also kicked off early this year, though it declined to disclose details. To date, the firm said it has invested into “several” funds that target startups in Indonesia.
Investing in funds is not an uncommon move among family offices and conglomerates in Indonesia. Names like Sinarmas, Emtek and Djarum are known to be prominent LPs in the VC space.
Arkblu’s decision to venture into the LP space also came about after speaking and learning from more experienced peers. It believes that investing in funds not only enables diversification but also expands its network and allows it to better understand the ecosystem.
Though its fund of funds strategy will obviously be separate from its direct investments, Arkblu believes that the twofold strategy will prove to be beneficial for its investee companies.
“The way we see it is that venture capital, inherently, is an industry that requires a lot of collaboration. By making direct investments as well as fund investments, we can better enhance the quality of our portfolio, whether it’s through co-investments alongside GPs or follow-on funding for our startup portfolio,” Francisco said.
