Niche funds, active angels needed to boost Indonesian startup ecosystem: DSA Summit

(L-R)Deepak Shahdadpuri, Founder and Managing Director, DSG Consumer Partners; Retno Dewati, SEA Regional Manager, Fenox Venture Capital; Jahja Suryandy, Co-Founder and Managing Director, Kresna Graha Investama; Arya Putra Ketut Masagung, Venture Partner, Gobi Partners; Alexander Rusli, Founder, DigiAsia BIOS

Even though it is the largest markets in the Southeast Asian region, Indonesia’s startup and investment ecosystem is still at a nascent stage, leaving much room for maturing.

Towards making a more cohesive and evolved ecosystem, there is a need for various types and classes of investors to come together and collaborate more, according to participants at a panel discussion on ‘Seed-stage fund deluge and deficit from Series B onwards’ at the DEALSTREETASIA’s recent Indonesia PE-VC Summit in Jakarta.

“If there is one thing that I could change in the Indonesian ecosystem, it is the cooperation between the mainstream market and startups,” said Arya Putra Ketut Masagung, Venture Partner, Gobi Partners, an early stage venture capital firm focusing on IT and digital media investments.

Fellow panelists also agreed that there was a need to tap angel investors and high networth individuals who could help plug various gaps in the ecosystem.

“If a company wants to raise funds, HNIs may also be a good source to approach because you would be surprised that you can raise quite a lot of funds from them because they also have a lot of appetite if they know the sectors,” said Jahja Suryandy, Co-Founder and Managing Director, Kresna Graha Investama, a public listed investment firm based out of Indonesia. “I also do hope that family offices become more mature faster and collaborate more.”

“We can figure out how to work better with angel investors, from my perspective, angel investors are the first investors that entrepreneurs should reach out to when they start out then later go to incubators or VCs or us together on the funding,” added Retno Dewati, SEA Regional Manager, Fenox Venture Capital, which manages over 20 funds globally.

There was also broad consensus that there was a need for different kinds of funds apart from only equity funds, as well as more sector-focused funds.

 “I would like to see more sector specific funds, I would like to see more knowledge gained and shared by having fintech-only funds or other such sector-focused funds,” said the session moderator Deepak Shahdadpuri, Founder and Managing Director, DSG Consumer Partners, which itself is a consumer-theme focused investment firm.

With its potential consumer base and growing digitalisation, Indonesia has emerged as a hot market for investors having managed to throw up regional giants such as Go-Jek, Tokopedia, Traveloka, and Bukalapak. Shahdadpuri drew parallells with the India which has seen its share of investment cycles and after almost a decade has started providing exits and returns to investors. Indonesia is still at the nascent stage of the cycle where the exits and return multiples are yet to be seen.

“I think now there is a lot of competition for people to put money in seed or pre-Series rounds, small cheque sizes, getting a concept off the ground. Round A seems to get a lot of interest in Indonesia, but when it starts to get more serious and needs more money to scale up then that’s where a limitation becomes relevant,” said Alexander Rusli, Founder, DigiAsia BIOS.

However, a trend that was spotted was of some Indonesian startups hitting the public markets at an earlier stage, for example, Indonesian tech startup M Cash raised around $22 million through its IPO a couple of years ago.

IPO is not the end, it’s just the beginning

A common question for the panelists was the right timing and the stage at which companies should opt for an initial public offering.

“Going public is not the end. Going public is a mode of liquidity, both for the founder, the management team and the investors who go in early. It’s the start of a journey. The exit is very company dependent and investor dependent. There is no one answer for every founder,” said Shahdadpuri.

You have people coming into the market earlier on, then you also have examples of investors like Alibaba, Tencent and so on coming in and delaying IPOs of very largest businesses and kept them private for longer,” he added.

According to Kresna’s Suryandy, the main difference between a public and private company is transparency, where any publicly-listed company would have to have its financial books in order and reviewed, with quarterly answers given to the shareholders.

“If you list a company, one thing you have to bear in mind is that you have to be transparent. If you’re a private company then your valuation is just someone saying, ‘you’re worth $1 billion’, but in a public company it is all very transparent,” Suryandy said.

On whether it was preferable to list a company on the local Indonesian stock exchange or go in for overseas listing, Suryandy said, having taken three of its portfolio companies public, his preference was for the domestic stock exchange.

He reasoned that the company was likely to receive a better response in the local market where it is better known to the public as compared to a foreign territory. Secondly, for late-stage investments, the allocations by large institutional investors including pension funds was limited mostly for unicorns, leaving public listing as a good viable option.

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