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Crowdfunding: Kick-starting startups
In the past few years, startups have been growing exponentially in Indonesia as one of the ripple effects of technological progress and an increasing number of creative people. However, the early-stage companies struggle to get capital, because they hardly succeed in attracting venture capitalists or angel investors.
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Crowdfunding (Shutterstock/File)
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n the past few years, startups have been growing exponentially in Indonesia as one of the ripple effects of technological progress and an increasing number of creative people. However, the early-stage companies struggle to get capital, because they hardly succeed in attracting venture capitalists or angel investors — as the typical funding sources of early-stage companies — because of the level of risk of the business.
The issuance of Financial Services Authority (OJK) Regulation No. 37/2018 on equity crowdfunding, effective as of Dec. 31, 2018, gives startup owners an alternative source of capital. For comparison, the United States enacted similar regulation back in 2012 under the Jumpstart Our Business Start-ups Act, later updated in 2015. Essentially, crowdfunding is the practice of funding a private company by raising small amounts of money from a large pool of investors, in exchange for capital ownership in the company.
Since this mechanism allows the private company to offer and sell shares in a way that is similar to an initial public offering (IPO), the OJK attempts to control the crowdfunding practice and ensure that the consummation of crowdfunding will not alter its objective, especially through the criteria for providers, investors and issuers (the three main parties involved) and disclosure requirements.
A business providing crowdfunding services must be registered as a limited liability company or a service-based cooperative with minimum capital of Rp 2.5 billion (US$175,750). It needs to secure 2 licences, both from OJK and the communications and information minister to conduct the business.
