Two years later on Aug. 4, 2016, Go-Jek secured $550 million from a VC consortium to become the country's first technology unicorn and inadvertently opened the floodgates to VC financing.

“The trend of VC [financing] skyrocketed in Indonesia and will certainly continue into 2019, thanks to the proven successes of Go-Jek,” Steven Okun, the ASEAN representative of the Emerging Market Private Equity Association (EMPEA), said on Jan. 24 during the Asia PE-VC Summit 2019.

In less than a year, Tokopedia, Traveloka and Bukalapak followed Go-Jek as the first generation of Indonesian unicorns, all of which won VC funds in their first few rounds from firms like East Ventures, NSI Venture, Gree Ventures and Sequoia.

It was these four success stories that planted confidence among venture capitalists in Indonesian start-ups while also setting a trend among start-ups to seek VC financing.

EMPEA's data shows that venture capital investments in Indonesia skyrocketed from $2.3 million in 2014 to $136 million in 2017 at an average compound annual growth rate (CAGR) of 290 percent.

In comparison, venture capital investments in Southeast Asia grew at a slower CAGR of 40.9 percent from $180.3 million in 2014 to $504 million in 2017.

Venture capital’s soaring popularity even prompted two of Indonesia's largest banks, Bank Mandiri and BCA, to form their own venture capital investment arms, respectively Mandiri Capital Indonesia in 2016 and Central Capital Ventura in 2017.

The latest EMPEA data shows that Indonesia captured 17.8 percent of the $731 million VC investments in Southeast Asia during the first three quarters of 2018.

Reflecting similar investor confidence, a Google-Temasek report found that Indonesian start-ups captured 25 percent ($6 billion) of the region's $24 billion in VC funds from 2015 until the first half of 2018.

However, venture capital’s popularization also had a detrimental effect on private equity (PE) investments in the country, even though PE investments have greater monetary value.

“PE investment had a record year in Southeast Asia, but had its worst year in four years in Indonesia,” Okun said during a panel discussion at the summit.

EMPEA data shows that private equity investments in Southeast Asia reached a 10-year record high of $7.495 billion in January-September 2018.

In comparison, only $285 million in PE investments were made in Indonesia during the same period, the lowest since 2014 when the country captured $223 million in PE investments.

Nevertheless, representatives from major private equity firms Creador, Emerald Media, TAEL Partners and UOB Venture Management agreed during the panel discussion that they would remain in Indonesia with slight adjustments, motivated by the country’s solid fundamentals.

TAEL co-founding partner Ati Sugiharti said that her firm remained enticed by Indonesia’s 5 percent economic growth, but that it would also invest in more start-ups from Vietnam, which had higher growth of 6.9 percent.

The firms also reminded investors, particularly venture capital firms, that they “must remain disciplined” in vetting businesses to avoid bursting the bubble as Indonesia became an increasingly hot market.

Sebastian Togelang, a founding partner of venture capital firm Kejora Group, expressed certainty that investors – including venture capitalists – would remain disciplined in the years to come since the US unicorn crisis of 2016.

“Investors have calmed down now,” said Sebastian.

Okun, who is also a business advisor, added that if private capital investors wanted to succeed in Indonesia, they needed to possess solid local knowledge such as in health care and education, offer operational assistance such as in cross-border expansion and recruiting a chief financial officer, and be oriented toward environmental, social and corporate governance (ESG).

“Sectors [related to] domestic consumption would be the most attractive. Not just in fast-moving consumer goods, but also those related to education and health care,” he said.

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