<article><a href="https://www.dealstreetasia.com/tag/Go-Jek/">Go-Jek</a>&#8216;s $1.5-billion funding round, the largest raised by an Indonesian startup to date, served yet another reminder that the country&#8217;s conglomerates are a force to be reckoned with in the venture capital space.</article>

<a href="https://www.dealstreetasia.com/tag/Go-Jek/">Go-Jek</a>&#8216;s $1.5-billion funding round, the largest raised by an Indonesian startup to date, served yet another reminder that the country&#8217;s conglomerates are a force to be reckoned with in the venture capital space.
Two Indonesian conglomerates with a very different venture investment track record were involved in Go-Jek’s funding round. One was tobacco giant <a href="https://www.dealstreetasia.com/tag/Djarum">Djarum</a>, which has been carrying out its tech investments through VC arm Global Digital Prima (GDP) Venture, while the other is automotive giant <a href="https://www.dealstreetasia.com/tag/Astra-International">Astra International</a>.
For Astra, the deal was its first publicly known investment in a tech startup. While the company has subsidiaries focusing on IT development, giving birth to startups such as on-demand service marketplace platform Mytra.id, it has never previously made direct or indirect investments in external tech startups and in the past had not seemed interested in such ventures.
The Go-Jek funding could be a turning point for Astra and prompt the company to join the list of Indonesian conglomerates that have enjoyed the benefits of allocating a fund dedicated to tech investments.
Djarum Group, on the other hand, is regarded among the pioneers in the country&#8217;s VC space. Run by the Hartono family, regarded as the richest family in Indonesia, Djarum set up its VC arm GDP Ventures in 2010. Led by Martin Hartono, GDP has invested in consumer Internet industry, focusing on companies in media, commerce, and digital communities. Its most notable investments include online community Kaskus and e-commerce site BliBli, through which Djarum made the investment in Indonesia’s first unicorn Go-Jek.
Then there is also the Riady family-controlled Lippo Group, one of the largest real-estate development firms in Southeast Asia and owner of Matahari Department Stores, one of the biggest department stores in Indonesia. The company has been very aggressive in its pursuit of digital domination, manifested through the development of startups like OVO through its in-house venture builder, as well as direct investments into external tech companies like ride-hailing giant Grab.
Lippo’s venture investments are done through its VC arm, Lippo Digital Ventures, which in 2015 was transformed into Venturra Capital. Headed by Lippo founder’s grandson John Riady, Venturra manages a fund of $150 million, raised mostly from Lippo’s balance sheet. It prioritizes investments in startups from Indonesia and rest of Southeast Asia. The startup targets range from e-Commerce, financial services, healthcare, and education.
The latest conglomerate to form a VC arm is Sinar Mas, a company founded by a Chinese Indonesian tycoon, Eka Tjipta Widjaja, and operates in different sectors such as pulp and paper, real estate, financial services, agribusiness, telecommunications, and mining.
Having previously been a backer of existing VCs including Ardent Capital, Sinarmas in 2015 launched its own VC named Sinar Mas Digital Ventures (SMDV), which has invested in startups of various stages and verticals, with names like HappyFresh, Orami and Sale Stock its list of portfolios.
Earlier this year, SMDV has teamed up with East Ventures and Yahoo Japan to raise $150 million to be invested into growth stage startups in Southeast Asia through a joint venture called EV Growth.
In recent interviews with DEALSTREETASIA, conducted separately, both Venturra and SMDV admitted that one of the main reasons for setting up a VC unit is to enable the companies to keep up with technological developments, and, by doing so, remain relevant in their respective industries.
“Big companies form CVCs for innovation. They are slow, like a big ship. The resources may be big, but it’s too heavy to manoeuver. Startups are like speedboats, they don’t have many resources with them but they can speed around. They have a different DNA than big companies. It’s hard to create a startup within companies, so they just invest in existing startups to stay involved in the game,” said SMDV Managing Partner Roderick Purwana.
<h3>Flow of family funds</h3>
Though currently only four have VC arm, other conglomerates cannot be counted out of the VC equation, as not only do they still invest in startups directly from their balance sheets (as is the case with Astra and others like EMTEK), some are also backers of existing VCs.
For example, Bakrie Group, one of Indonesia’s largest business groups with 10 subsidiaries listed on the Indonesia Stock Exchange, is said to be a limited partner (LP), or investor, in Convergence Ventures, while Kompas Gramedia, the largest media conglomerate in Indonesia, is an LP in Skystar Capital.
According to Nicko Widjaja, CEO of Telkom Indonesia’s VC arm MDI Ventures, Indonesia’s current VC landscape mostly involves conglomerate money, one way or another.
Widjaja uses the term “patrilineal funds” to describe the kinds of tech investment carried out by conglomerates in Indonesia.
“As most of Indonesia’s large corporates are held by family patriarch conglomerates, the term ‘patrilineal fund’ essentially means that the investment operation is managed by the son or daughter (or sometimes grandchild) of the original business titan,” said Widjaja in an exclusive interaction with DEALSTREETASIA.
He goes as far as to say that the Indonesian VC and startup may not even exist in the first place without these funds from conglomerate families.
“Many of the VCs in Indonesia get their money from second or third generation of these conglomerates&#8217; children, whether it is as an LP in a fund like Bakrie or a GP in their own fund like Djarum and Lippo,” said Widjaja who started out as one of the fund managers for the earliest family funds in 2010.
He added that even companies like Astra, which do not seem to place emphasis on the VC space, have young families that are involved in the country’s VCs.
“One thing to keep in mind that most of them are the generation that were well exposed to what’s happening in the US at from the late 90s — the dot com boom and bust — through the 2000s with Google, Facebook, and the rise of new generation of Silicon Valley VCs such as Andreessen Horowitz,” he said.
As the Indonesian VC space matured over the years, Widjaja noted that there has been a change in the investment approach of conglomerates, who initially adopted the ‘spray and pray’ way as advised by their fund managers.
Now, conglomerates are going into deals as controlling shareholders with an aim of consolidating their digital assets.
“For example, Lippo Group is looking to marry its investment on-demand ride-hailing app Grab with its internal payments company OVO, while, Djarum Group recently acquired tiket.com to complete its e-commerce ecosystem within Blibli,” he said.
<h3>Ideal investment structure</h3>
Building startups through incubators and venture builders has become a key component to a few conglomerates in their pursuit of innovation.
In the case of Lippo, which has produced companies like OVO and MatahariMall.com through its in-house venture builder, developing its very own startup is preferable in sectors that will significantly support the company’s existing businesses.
“We will build the ones where we think we will have a lot of synergies to make it a success. So if you take OVO, and give it our 70 malls, department stores, hypermarkets, that gives it a good use case, that’s why we built payments,” said Lippo Group Director John Riady.
GDP Venture runs Indonesia’s first tech and digital incubator, Merah Putih Inc, while other conglomerates like Ciputra Group and Salim Group are also known to back startup incubator programs to help them ride the tech wave and in doing so contribute to the startup ecosystem.
Another important role conglomerates play in the VC game, which sometimes goes overlooked, is their ability to provide an exit option for venture capital firms.
Indonesian conglomerates have been responsible for a number of non IPO exits of startups in the country. Among the more notable acquisitions by conglomerates over the years is the purchase of highly popular online news platform detik.com by CT Corp for a reported $60 million back in 2011 and the acquisition of e-commerce Elevenia by Salim Group last year.
Another exit that took place last year was that of online travel agent Tiket which was acquired by Djarum through its e-commerce company Blibli for an undisclosed fee.
While acquisitions are a fairly common business activity for big companies, Indonesian conglomerates have started to employ a different approach when it comes to acquiring tech companies, according to serial startup executive Sukan Makmuri.
The current UangTeman CTOO, who previously held leadership positions at Kudo when it was still backed by Emtek and also at GDP Venture’s Kaskus, said conglomerates are becoming “smarter as they adapt to the tech ecosystem”.
“It used to be like “okay we take 80% ownership and we run it our way”, as that used to be good for the old style, pre-tech. Nowadays they are more hands-off and more careful in selecting the startups they want to acquire and startup founders who can make the company go on,” he said.
While Indonesian conglomerates have been investing in startups for a while, none has put in place the ideal tech investment structure that equip them to carry out almost all kinds, stages and size of investments, according to Edward Ismawan Chamdani, a board member at the Indonesian Venture Capital and Startup Association.
Chamdani, who is also a Managing Partner at local VC Ideosource, believes state telco firm Telkom Indonesia, one of the earliest companies to engage in tech investments in the country, has a model that conglomerates could look to replicate.
“The one that seems to have the right structure is Telkom. They set up Indigo (Creative Nations), which is like an incubator, and then they have a VC arm called MDI (Ventures). They also have Metranet, which does corporate investments and then Telkom itself will acquire the biggest companies. So the stages are clear and the mandate is clear. There are no gaps,” he said.
<h3>Government wants more</h3>
While supplying startups to the ecosystem through incubators and offering an exit through acquisitions is essential, providing the capital to help startups grow and scale is still seen as the most urgent necessity, particularly in the eyes of the Indonesian government.
Since 2015, Communication and Information Minister Rudiantara has been urging the country’s conglomerates to contribute to a pool of fund to be invested in some of the country’s budding startups.
At the time, the minister’s said the target was a fund of $1 billion and had vowed to go on a “roadshow” to meet and talk to a number of the country’s conglomerates about the idea, with the hope of collecting the targeted amount of fund by the end of the year.
While the plan has yet to be realized three years on, the minister earlier this month told reporters that the plan is now close to fruition. An Indonesian tech venture capital fund backed by the country’s largest conglomerates, he said, will be launched within the next six months.
Despite the minister’s assured statement, not many in the field are convinced that many of the conglomerates will be eager to be involved given the potential clash of interest between companies who are likely to each have their own agendas and plans.
The minister, however, seems confident that he can persuade the country’s powerhouses to play a bigger role in the ramping up the country’s startup ecosystem and financially support the inception of more unicorns in the country.
Clearly, he feels Indonesian conglomerates have done much but could do much more.
“While two national conglomerates such as Djarum and Astra became investors in a “unicorn” such as Go-Jek, it is not enough,” he said.
Also Read:
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/conglomerates-backed-indonesian-vc-tech-fund-to-be-launched-in-6-months-101424/">Conglomerates-backed Indonesian VC tech fund to be launched in 6 months</a>
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/indonesian-conglomerate-astra-invest-150m-go-jek-92311/">Go-Jek confirms $150m investment by Astra, ‘substantial’ funding by GDN</a>
<a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/lippo-john-riady-98359/">Need to think omnichannel in Indonesia, not just e-commerce: Lippo’s Riady</a>

Go-Jek’s $1.5-billion round not only marked the biggest round of funding ever raised by an Indonesian startup but also highlighted the presence of conglomerates as a force to be reckoned with in the venture capital space.

Indonesia's conglomerates continue to shake up the VC landscape

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