An Overview of Indonesia’s Venture Capital Industry

“Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions. However, it does not always take just a monetary form; it can be provided in the form of technical or managerial expertise.” — Investopedia

After the economic collapse of 1998, the economy of Indonesia has charted impressive economic growth. The country’s GDP per capita has steadily risen, from US$780 in the year 2000 to US$3,847 in 2017. According to IMF’s World Economic Outlook Database, currently Indonesia positioned as the 16th largest economy in the world by the nominal of GDP and the world’s 7th largest economy in terms of GDP based on purchasing power parity (PPP).

Indonesia’s per capita GDP has increased almost ninefold over the past 30 years (source: Google, World Bank)


With a population of 265 million peoples (the world’s fourth most populated nation), and a growing middle-class and young people, Indonesia represents a huge market for international companies and the localization industry. The government also pours plenty of both public and private investment, to increase Indonesia’s economic expansion. Particularly investment in infrastructure and manufacturing industry with the aim to improve connectivity across the country and reduce traditional Indonesian dependence on (raw) commodity exports. Moreover, according to a recent WeAreSocial report, Indonesia also has a thriving digital economy and creative economy due to the huge population that is increasingly connected to the Internet. Becoming one of the most number of internet user countries in APAC, with over 132 million internet users out of a population of 265 million. The Ministry of Communication and Information also projects that in 2020 the digital economy in Indonesia can grow to reach US$130 billion, the value is equal to 20% of Indonesia’s total gross domestic product (GDP).


These conditions, combined together, have created a favorable environment for the startup companies in Indonesia. A joint study by management consulting firm A.T. Kearney and internet behemoth Google has shown that investment in Indonesia’s startup market jumped 68 times in the last five years to around US$1.4 Billion in 2016. Also, raised US$3 Billion Investment with 91 deals in 2017 from 18 deals only in 2012. The local investors have also become more VC-friendly: Out of the 91 deals in 2017, foreign investors engaged in only 46 deals, while local investors accounted for a surprising number of 54 deals. Most of the investments are still in the seed or early stages, but late-stage investments are generating most of the value.


This article, then, will attempt to account for the development of Venture Capital industry in Indonesia over the years, comprehend the current blossoming of VCs in Indonesia both in fund and deal sizes, and offer a prediction of the near-future growth.


The Early Starters


By definition, the Venture Capital industry in Indonesia has been developing since 2010, with the establishment of East Ventures, founded by Batara Eto, Taiga Matsuyama, & Wilson Cuaca. Between 2010 and 2014, East Ventures invested in 22 portfolio companies, spreading across a wide variety of internet industries, both B2B and B2C. Three of their most high-profile investments include Tokopedia (Indonesia’s 2nd unicorn startup, which was invested by Alibaba in 2017, China’s largest e-commerce platform), Traveloka (Indonesia’s 3rd unicorn startup, which was invested by Expedia in 2017, America’s largest online travel agent), and Berrybenka (recently invested by SB-ISAT Fund).


Another early riser in this industry is CyberAgent Ventures (CAV), a Japan-based VC fund that entered Indonesia in 2011. They have invested in over 6 companies in Indonesia, including some of the potential Internet- and mobile-based services in Indonesia. Some of the most noteworthy investments made by CAV include Tokopedia (Indonesia’s 2nd unicorn startup, recently invested by Alibaba group), Touchten (recently invested by Discovery Nusantara Capital), and Ralali (recently invested by SBI Group, AddVentures, & Digital Garage).


Finally, one cannot miss 500 Startups, a Silicon Valley famous seed fund and accelerator founded by PayPal, Facebook, and Google alumni. Entered Indonesia in 2013, 500 Startups had invested close to 70 million USD in a range of businesses, with their most high-profile investment include Bukalapak (Indonesia’s 4th unicorn startup, recently invested by EMTEK Group), and Alo Dokter (#2 Indonesia’s Startup Ranking, recently invested by Softbank Venture Korea).


The Current State


A map of the Indonesia’s Startup Ecosystem 2018 (source: Hebronstar Analysis)


Although the Indonesian startup ecosystem might be relatively young, but now it has started to grow rapidly and shows a positive trend for Venture Capital Investors in Indonesia. According to Google-AT Kearney’s report, the total investment of Indonesia startup reaching US$3 Billion in 2017 or doubled from the previous year. E-commerce and transport industry dominate deals and investment values with the largest funding rounds have been led by Indonesia’s own startup unicorn such as GoJek, Tokopedia and Traveloka. Indonesia’s startup investment growth is not only because of the support from the government, with an active role from their Indonesia Creative Economy Agency (BEKRAF) and several policies issues to open access to investors so startups could get funding. But also because of the recent successful fundraises of several existing funds as well as the establishment of new funds.


East Venture is one of the existing early stage funds that successful raising trend, and has been actively investing in Indonesia since 2010. With more than 50 startups in their portfolio, includes Indonesia’s own startup unicorn, Tokopedia and Traveloka, East Venture is arguably one of the most active investor in Indonesia with 12 funding in 2017. According to TechinAsia article, In September 2017, East Ventures announced that it had disbursed US$30 million in new investment funds. The focus of the fund was the seed and Series A investments for Indonesian startups. Moreover, at the beginning of 2018, they were reportedly preparing the seventh investment fund with a value of around US$100 million. The nominal is larger than the nominal investment fund they have received so far.


In 2017-2018, Chinese investors became heavily involved in Indonesia’s startup environment, with 95% of investment value comes from Chinese investors. Indonesia’s startup unicorn Gojek, Tokopedia, and Traveloka has get funding from Chinese investors respectively. One of Chinese investors that fund Indonesia’s startup is Tencent Holdings. Since 2016, Tencent has invested US$20.8 billion in various startup. One of them is Indonesia’s ride hailing startup, namely Gojek. Gojek raised US$1.2 billion from Tencent Holdings in 2017 and another US$1 billion from Tencent and Warburg Pincus early 2018. This injection of funds reportedly to support Gojek’s expansion to other countries in Southeast Asia. Tencent’s other portfolio in ASEAN includes Shopee, Airpay, Pomelo, and

Other Chinese investors that involved in Indonesia startup ecosystem is Chinese e-commerce giant, Alibaba Group. Besides controlling 80% of Lazada’s shares, Alibaba also invest in Indonesia’s e-commerce startup, namely Tokopedia. Tokopedia reportedly raised US$1.1 billion investment led by Alibaba in August 2017 and will use this funding to build a research and development center in Southeast Asia, increase the scale and quality of Tokopedia services to its users, while making it easier for Tokopedia’s sellers and partners to expand their business to all corners of the country even to the corners of the world.


The Future Prospect


According to Google-AT Kearney-Amvestindo’s research by interviewed more than 25 Indonesia’s local and foreign investors in 2017, shows that both local and foreign Venture Capitals are optimistic about the Indonesian startup ecosystem. VCs are also confident in the strong macroeconomic fundamentals and favorable demographics in Indonesia. However, investors are still concerned about few issues regarding investing in Indonesia. Among them, major challenges faced by startup community in Indonesia are talent development, fiscal incentives, funding, exit options and startup facilitation.


The challenge is not only faced by startups but also by Venture Capital, especially local ones. Local Venture Capitals are still constrained by its funding to invest in startup. Realizing this obstacle, Indonesian Financial Services Authority (OJK) has provided space for local Venture Capital to form a venture fund to get potential investors in the form of full of fund venture funds that have been regulated in POJK (OJK Regulation) No. 35 / POJK.05 / 2015, but not many local VCs have dared to take the risk. As a solution, the government will establish a national venture fund or endowment fund where the government acts as an initiator. In addition, the government also plans to support startups by providing incentives to Venture Capital through the revision of Minister of Finance Decree No 200 of 1995. With the aim that income received by venture capital companies would no longer be treated as an object of income tax. In this way, investment in small and medium enterprises (SMEs) and startups are expected to increase.


Regardless of the obstacles face ahead, it is projected that there are two investment sectors that will continue to increase in Indonesia, namely financial technology (Fintech) and healthcare. Fintech is still promising and attracts massive interests from regional investors. According to Statista data, Indonesia’s fintech market will hit US$22.4 million in 2018 and will reach US$37.2 million by 2022. Also, there are approximately 57.9 million Micro, Small, and Medium Enterprises (MSME) players with growth of around 2.4% per year and 80% of them are not eligible to get financial support from bank based on the data from Indonesia’s Central Bureau of Statistics (BPS). This is such a great opportunity for investors and venture capital in Indonesia who invest in fintech startups.


Top fintech e-payment companies in Indonesia (source:


However, Hogan Lovells report in 2018 saw that healthcare as the another key sector to watch in Indonesia. Indonesia scores comparatively poorly in terms of the percentage of its GDP being spent on healthcare, the number of doctors and available hospital beds, meaning there is plenty of spare capacity for growth in Indonesia’s burgeoning healthcare sector. The potential in healthcare can be seen in recent transactions, such as CVC’s August 2016 investment of US$165 million for a 15 per cent shareholding in Siloam International Hospitals, an Indonesian healthcare provider. In addition to healthcare, they also see one of the key battlegrounds ahead in Indonesia as the race to become the pre-eminent payment platform. Both Grab and Go-Jek have made acquisitions in this space and it is to be expected that Alibaba/Alipay will join the fray in the not-too-distant future.


Furthermore, Google-AT Kearney projected that next few year’s investments in e-commerce and social media will decline by 60% and 10% respectively. This happens because many e-commerce players and markets have similar business model and it is projected that there will be only 2-3 e-commerce players who will survive and become market leader in the future.




Indonesia undoubtedly has the population and the growth trajectory to support its position as the next great land of potential for Venture Capital and private equity investors that willing to take an educated risk. With Indonesia’s startup investment up to US$3 billion in 2017, or double the 2016 figure, the early signs would appear to indicate that both local and foreign VCs are optimistic about the Indonesian market. The positive outlook is driven by the fact that Indonesia is still under-tracking regional peers on investment value versus GDP and Internet users, which indicates high room for growth.