Indonesia Stock Exchange’s business incubator programme is targeting to assist up to three more of its participating startups to tap the public market route this year, as it looks to reap the rewards of a shift in strategy it quietly undertook mid-2019.
IDX Incubator – which launched in 2017 as an early-stage business incubator – decided to pivot and focus on serving later stage startups to help them fulfill all the requirements to list on the Indonesian bourse.
Speaking exclusively to DealStreetAsia, IDX Incubator partnership coordinator Alan Fatih explained that instead of targeting seed-stage startups, the programme now eyes mature startups that have already monetised their business and are looking to an IPO within the next three years.
The new IDX Incubator format has also replaced its business mentorship content with legal and accounting assistance for its companies.
With the new model, IDX Incubator functions more like a startup accelerator than an incubator, Fatih said.
“This is because IDX Incubator is part of IDX, so it is hoped that the current programme is more in line with the objective of IDX that is to create a more inclusive capital market – not only for large companies but also medium and small-sized companies,” he said, adding that the programme does not take any fee or equity from startups it assists.
The decision to shift focus came after the programme delivered only one startup IPO in almost three years. With its renewed focus on later-stage startups, it has already enabled two firms to list on the IDX in a single year.
The two startups are travel planning company Pigijo and mobile point-of-sale operator Cashlez, who listed on the IDX acceleration board in December 2019 and April 2020, respectively.
The acceleration board, which was introduced last year to encourage small and medium enterprises to list their shares on the IDX, offers SMEs a cheaper listing fee of around $1,786 (the listing fee for mainboard is up to $17,803) and allows for simpler accounting standards.
As part of its effort to encourage more startups to pursue the IPO financing route, the IDX Incubator programme is present in Jakarta, Bandung and Surabaya. It is currently working with a total of 43 companies. Next year, Fatih said the programme plans to open two batches of 15-20 startups each in these cities.
Cashlez, which raised a Series A round led by Sumitomo Corporation and joined by Mandiri Capital Indonesia in 2019, was the first VC-backed startup to go public in Indonesia.
Fatih is hopeful more VC-backed startups will follow Cashlez’s path soon. IDX Incubator, he said, has started teaming up with venture capital firms to identify companies that may benefit from joining its programme. For VCs, the initiative by IDX is much welcomed, as an IPO would represent an opportunity to exit and liquidate their investments.
Last week, IDX formalised a partnership with BRI Ventures, the VC arm of local state-owned lender Bank BRI, designed to help more local startups pursue IPOs on the local exchange. The partnership, Fatih said, was not an exclusive one, as IDX will be looking to engage in similar collaborations with other VCs too.
At the moment, of the 42 companies in its programme, as many as 10 are VC-backed startups. However, Fatih was unable to disclose the names of the companies.
Startups in the region have shown a preference for tapping private capital route that often involves less scrutiny on strategies and financials.
A September 2019 study by INSEAD found that of the 131 startup exits across ASEAN in 2018, only seven were through IPOs. The study projected a similar number of listings for 2020, with the majority of startups choosing to exit via acquisition.