Indonesia retained its position as the second-largest venture capital market in Southeast Asia as Malaysia remained in the third position and Singapore continued to lead the rankings.
A recent report by Deal Street Asia showed that Indonesia-based venture capital companies (VCs) raised a total of US$582 million last year, a 79 percent increase from $325 million in 2018.
Meanwhile, Singapore-based VCs were still leading with around $2 billion in funds raised, 58 percent of the total $3.6 billion in fresh funding in the region last year. Meanwhile, Malaysian VCs were in the third position with $484 million, more than five times the $90 million raised in the previous year.
“Indonesia can absolutely surpass Singapore’s funding,” Venture Capital and Startup Indonesia Association (Amvesindo) chairman Jefri Rudyanto Sirait told The Jakarta Post on Thursday. He added, however, that the start-up investment ecosystem in Indonesia was not as favorable as in Singapore.
He went on to say that Singapore had a stronger investment ecosystem with better legal clarity and ease of establishing a VC, which made the city-state more attractive for investors.
Jefri added that Indonesia had the potential to become the fourth-biggest economy in the world given its large population. The country also ranked fifth in global start-up rankings with around 2,100 start-ups, just behind the United States, India, the United Kingdom and Canada.
“Indonesia has a bigger market than Singapore, the challenge is making that market attractive for all stakeholders,” he said. Even though Singapore still leads the ranking, its funding share in the region has dropped 77 percent since 2018 as other SEA markets expanded.
Thailand’s share, for example, more than doubled to 7 percent in 2019 from 3 percent in the previous year led by KASIKORN Vision (KVision), the investment arm of lender KASIKORNBANK, which announced a $245 million fund allocation.
Meanwhile VCs in Cambodia, the Philippines and Vietnam also started to invest in SE Asian start-ups last year.
Deal Street Asia predicted that Indonesia would retain its place as the second-largest market in 2020 as local VCs have announced ambitious plans. BRI ventures, for example, has set a target of raising $250 million funding while MDI Ventures plans to launch a new fund of up to $500 million.
The report also showed that Indonesia-based VC East Venture was the most active in investing in start-ups. According to its co-founder and managing partner Wilson Cuaca, East Venture has invested in around 300 start-ups globally, with around 170 in Indonesia.
“I cannot say how much East Venture’s target funding is or how many start-ups we’re going to invest in because we don’t know what entrepreneurs are going to make,” he said over the phone on Thursday. “What we do see is potential and we have always invested in the people behind the idea.”
Willson said that the VC had prepared $75 million in fund VI for seed funding, and another $250 million in a growth fund, totaling $325 million last year. This sum is less than around $375 million prepared in 2018, according to the report.
When asked about the effect of the COVID-19 pandemic on East Venture’s plan, he said that the VC would halt investments in new start-ups while helping their portfolio companies with capital efficiency.
“All of our portfolio companies’ revenue is down along with the economy, so we are not going to be aggressive in new investments,” he said, adding that East Venture would also start crowdfunding for the development of coronavirus test-kits by one of its portfolio companies, Nusantics.
Meanwhile, Jefri said that the pandemic could become an opportunity for start-ups to stress test their business and to create a mitigation plan if similar situations were to occur in the future.
He went on to say that some start-ups such as those in e-commerce, food delivery and telemedicine services might even see an increase in their client base and revenue since people are staying indoors to avoid the coronavirus infection.
However, some start-ups such as those in travel and hotel aggregation were seeing drastic changes that required them to make efficiency savings, even going as far as reducing staff wages by up to 80 percent, Jefri said.
“I think all start-ups must still seek transactions and try to maintain or grow their business even if it’s slow to ensure that the economy still functions,” he added.