Senior analyst for Singaporean RegTech startup Datarama
As a digitally connected nation, Indonesia is well-positioned to be the next key destination to groom tech startup giants. (Shutterstock/File)
More Southeast Asian second-generation scions are venturing into startup companies, signaling a possible shift from traditionally capital-intensive industries.
The second and third generations of Indonesian family-owned conglomerates are increasingly making their own mark and gaining prominence in the business world. For these wealthy individuals, the focus seems to be on the ever-growing digital landscape through investments in a plethora of tech and e-commerce startups.
It is no wonder why. As a digitally connected nation, Indonesia is well-positioned to be the next key destination to groom tech startup giants. Out of a total population of 256.2 million, the fourth largest in the world, 132.7 million Indonesians are internet users, with 63.1 million connected through smartphones.
Indonesia’s startup scene is also thriving. E-commerce startups are the most common, with many young entrepreneurs looking to capitalize on an industry that is anticipated to grow 39 percent annually, according to a study by Google and Temasek in 2016. E-commerce in Indonesia is projected to reach US$130 billion by 2020, coming in third among Asian economies, behind China and India. By 2025, Indonesia is expected to dominate 52 percent of e-commerce activity in Southeast Asia.
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These ventures are gaining traction and attracting attention from around the region, such as from Japan, Singapore and India, as well as pulling in substantial capital from major global venture capital firms like Northstar and Sequoia Capital.
Big name backing
Local tycoons who have long been a feature in the Indonesian economic landscape continue to make their presence felt within the country’s nascent and growing startup scene. In particular, this phenomenon is being led by second-generation millennials who are likely to have a firmer grasp on the unique risks and opportunities that startup ventures carry. These savvy individuals are quick to spot promising business ventures and add them to their family’s portfolio.
One scion spearheading his family’s move into the startup scene is Martin Basuki Hartono, who founded Djarum Group’s subsidiary Global Digital Prima (GDP Venture), a private venture builder known for investing in tech startups. In an interview with the Wall Street Journal in 2012, Martin revealed that GDP Venture was initially funded through his family’s wealth. GDP Venture’s investments include PT Darta Media Indonesia, which runs Kaskus, Indonesia’s largest digital forum, and PT Merah Putih Colony, which runs the Merah Putih Incubator -- the country’s first tech and digital incubator.
John Riady, grandson of Mochtar Riady of the Lippo Group, is also leading his family’s e-commerce venture. He previously fronted the announcement of Lippo’s $500m investment in Matahari Mall in February 2015, then touted to become the “Alibaba of Indonesia.” In October 2015, John launched a new venture capital firm called Venturra Capital, with Stefan Jung, former managing partner of Rocket Internet Southeast Asia, and Rudy Ramawy, former country director at Google Indonesia. The Lippo Group was one of the largest backers of the $150 million venture fund, which primarily invests in early stage and seed funding for consumer-driven tech startups.
These second-generation businesspeople go beyond providing financial backing for promising ventures. Junita Ciputra, daughter of Ciputra and managing director of her family’s business dynasty, proffers startup education and valuable business contacts through Ciputra Group’s entrepreneurship programs. The Ciputra GEPI Incubator (short for the Global Entrepreneurship Program Indonesia) nurtures the startup ecosystem by providing mentorship, facilities and services for early-stage startups. According to Junita, the company aims to educate 4 million local entrepreneurs by 2030.
Indonesian conglomerates having also been making the shift toward digital ventures that -- though not ostensibly led by second- or third-generation family members -- are undoubtedly influenced by the views of the groups’ younger generation of leaders. The digital arm of Sinar Mas Group, Sinar Mas Digital Ventures, counts Ardent Capital, Gift Card Indonesia, and Bareksa among its portfolio investments. The Bakrie family also has its fingers in the digital pie, having acquired a minority stake in social network Path in January 2014 (albeit the network has performed poorly in recent years).
Beyond Indonesian scions, the phenomenon of deep-pocketed millennials turning their investment gaze to early-stage startups can be witnessed elsewhere in Southeast Asia as well.
In December 2016, a new private investment firm called RHL Ventures was founded by three Singaporean and Malaysian millennials, initially funded through their families’ wealth. RHL Ventures is led by Rachel Lau, daughter of the late Lau Boon Ann who built his fortune in real estate and investments -- along with Raja Hamzah Abidin, son of Malaysian politician and businessman Utama Raja Nong Chik, as well as Lionel Leong, son of property tycoon Leong Hoy Kum. The fund has backed two startups since its debut last year.
The move toward startup investment might signal a shift from the typically capital-intensive industries that conglomerates have traditionally held. This points to a larger shift in the global economy, in which rapid flows of capital enter startup markets that are nimbler, more flexible and at the forefront of disruptive technological advancements that can change the way people live and work in the future.
These ventures are also attractive to young scions who are digitally savvy and, having the funding and brand name of wealthy families at their disposal, are well-positioned to take smaller risks in funding a promising young tech or e-commerce venture that can one day yield significant benefits. Coupled with the global shift toward Silicon Valley-type ventures and the quest for the next tech unicorn, there is no doubt that this trend of startup investment by conglomerates will remain within Indonesia and beyond. (kes)
Sharifah Nursyafiqah is a senior analyst for Singaporean RegTech startup Datarama, which provides digitally enhanced due diligence. She enjoys writing, traveling and meeting new people. Get in touch at [email protected].
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