MDI Ventures aims to disburse $25 million per year, with “dozens” of millions have been spent within 10 months since the program started in January 2016. The company has invested in 10 startups within the period of time, and is now targeting to close three more deals before year-end.
Herdi Sularko, venture partner at MDI Ventures said, the firm is looking for startups whose businesses can be synergised with Telkom’s. Most of these ventures operate in business to business (B2B) rather than business to customer (B2C) sector.
“B2C companies normally have much higher costs than B2B; they will most likely spend on marketing. Besides, Telkom has always been more of a “background” player, an enabler, rather than providing services directly to customers,” said Sularko in Jakarta.
There is only one B2C venture that MDI Ventures had agreed to invest in: YesBoss, an Indonesian startup that previously provided free text-based personal assistant service.
YesBoss users can order anything from transportation, cinema tickets, food, to making travel reservations. But due to high costs, YesBoss is now forced to change its business model completely.
In October, YesBoss announced that it will launch a new platform that connects brands and consumers by utilizing artificial intelligence (AI) technology. The new platform would be called Kata.ai. In the light of this launch, YesBoss will end its human-assisted B2C service starting November 2016.
Like any other corporate VCs, MDI Ventures’ investments require portfolio companies to align their businesses with Telkom’s. However, Sularko said that MDI Ventures is always pushing their investees to keep increasing value through businesses with external parties.
“We want their business activities with Telkom to be equivalent with the businesses they do with external parties. Relying on Telkom too much is actually not good, because they would not be able to expand,” said Sularko.
Within MDI Venture’s portfolio are advertisement technology platform Geniee, payment service provider Red Dot Payment, aCommerce, Ematic, Adskom, Goers, Kata.ai, and three other undisclosed startups. Most of these ventures have a strong base of operations in Indonesia.
Local startups, global visions
With big investors now eyeing Indonesia as their target, MDI Ventures is now more confident in disbursing its funds.
The company aims to spend as close as $25 million allocated for the year, Sularko said, hoping to find more Indonesian startups with global visions, led by founders with greater ambitions than just conquering local markets.
“Unfortunately most Indonesian startups don’t have these visions. Unlike startups from other countries – such as Grab – they are quick to be satisfied with local markets, despite the potential that they have,” said Sularko.
According to him, the lack of global mentality will hurt startups who are looking for investments from international investors. They will be less competitive from other startups in the region who have presence in several different countries.
“International investors are more comfortable with startups with presence in big cities in the region, such as Kuala Lumpur and Singapore. Yes, Indonesia has a huge market potential, but in terms of infrastructure it still has a lot to catch up with,” Sularko explained.
MDI Ventures participates as minority investors in most of its portfolio companies – up to 20 per cent in equity – with ticket size ranging from half a million dollars to about $5 million.
Significant contribution to Telkom’s revenues from MDI Ventures’ activities are expected to come in the fifth to seventh year, Sularko said. However, he claimed that Telkom’s shares have tripled due to increasing value, which MDI Ventures has helped to create.
“What we offer to our portfolio companies is the strong synergy with each other, as well as with Telkom’s businesses. This is what sets us apart from other VCs,” he said.
Exciting year ahead
In a bid to become a top-tier global venture capital, MDI Ventures is to “stray” from its norms as corporate VC starting next year. Sularko revealed plans to partner with external funds, in order to expand its investment reach to the global landscape.
“We want to prove that we can be on the same level as Google Ventures and Intel Capital, that we can also attract private funds,” Sularko said.
In August, MDI Ventures announced agreement with Australian carrier Telstra’s VC arm Telstra Ventures to jointly explore investment opportunities in the Southeast Asia. The two companies will be looking at opportunities seen in areas like e-commerce, e-health, the internet of things (IoT) and fintech.
Over the past five years, Telstra Ventures has invested over A$200 million in more than 30 different technology companies. Telkomtelstra, a joint venture established in the previous agreement with Telkom, supplies network application services – corporate computer and telecommunications services – to large companies and enterprises based in Indonesia. The company is 51 per cent owned by Telkom.