Want to invest in Indonesian startups? Show $3.6m in paid-up capital, tie up with local partner & obtain licence

Visual from the OJK website

Want to be a Venture Capital (VC) firm or investor in Indonesian startups? Aspiring venture capitalists will now be required to have a paid up capital Rp 50 billion ($3.6 million) to operate in this space.

International VCs must also have a local partner that will hold a minimum 15 per cent equity stake in the firm.

These are among the new rules that Indonesia’s Financial Services Authority (OJK), which oversees the banking and non-banking industry, has set out for alternative asset class or venture capital industry to operate in the country, and establish legal business entities.

This portal had earlier reported that Indonesia was tightening norms for the VC industry by mandating that foreign entities form joint ventures with local companies, and apply for business licences to operate in the country.

The development comes even as early-stage VC funds are proliferating to tap into the demand created by the booming startup ecosystem in the country.

The mushrooming of startup hubs in the largest market in South East Asia, which accounts for over 50% of the population in the region, has also led to investors from Singapore, Japan, West Asia, Malaysia among others, rushing in to seek the first-mover advantage.

Besides, Indonesia is also poised to become the biggest e-commerce hub in the region, and has been attracting major VC interest in consumer internet-oriented businesses.

The guidelines for VCs, which came into effect December 31, 2015, now require a venture capital fund or investor to set up a limited company (PT) with a minimum paid-up capital of Rp 50 billion ($3.6 million) or a limited partnership/cooperative for Rp 25 billion ($1.8 million).

Overseas venture investors can hold up to 85 per cent in the JV.

The decision is seen as an effort by the government to protect the local venture capital industry.

In the case of an Islamic-based venture capital company, the minimum paid-up capital requirement is Rp 20 billion for a PT and Rp 10 billion for either a cooperative or CV.

The Indonesian regulator had imposed new rules to supervise inflow of foreign funds, particularly in the venture capital space, into the country. The regulator is of the view that these steps will help to monitor the capital flow as well as help prevent money laundering.

OJK is also planning to work with the Ministry of Communications and Information to regulate online companies offering various financial services.

Earlier this month, this portal had reported that Indonesia had granted business licenses to four VC firms, and these include  PT Nusa Makmur Ventura, PT Reliance Venture Capital, PT Cakrabuana Ventura Indonesia and PT Corpus Prima Ventura.

These VC firms are learnt to have got permits to operate under the new rules.

The new VC industry regulations covers aspects related to licensing and institutional matters, doing business, corporate governance as well as direct supervision by the OJK.

Venture capital companies are expected to help fund innovative breakthroughs for small businesses and startups struggling to expand, Dumoly F Pardede, Deputy Commissioner of Non-Bank Financial Institutions of FSA, said.

The regulator is already coordinating with the Investment Coordinating Board (BKPM) to discover angel investors, including the majority of overseas investors, who were scouting for promising startups in the country.

“We will also intensify monitoring of the foreign venture capital firms which have entered local incubators,” he said.

Pardede added that the Creative Economy Agency (BeKraf) would regulate the tax relief from the government as a move to stimulate the growth of these incubators.

Also Read :  Indonesia’s regulator grants licences to 4 venture capital firms  

Indonesia to tighten norms for foreign VCs; wants them to form JVs with local firms

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.