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Investors upbeat on start-ups despite global headwinds
Global venture capitalists remain upbeat about investing in Indonesian start-ups despite a rising fear that the global headwinds, caused by the escalating the trade war between the United States and China could hurt the country’s economy
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span>Global venture capitalists remain upbeat about investing in Indonesian start-ups despite a rising fear that the global headwinds, caused by the escalating the trade war between the United States and China could hurt the country’s economy.
Singapore-based Golden Gate Ventures founding partner Vinnie Lauria said she believed the growing world uncertainty would not hurt flows of global investments but could instead boost investment in Indonesia and other countries in Southeast Asia.
“The Indonesian government is progressive on this issue as it has made it easier for foreign investment in digital sectors. There is nothing to fear because it is easier to do business now compared to a few years ago,” Lauria told The Jakarta Post in Jakarta on Tuesday.
Lauria said the Indonesian digital market had great potential, and that the growth of the country’s young population and mobile internet adoption would drive the digital economy further.
“However, there is still room for improvement such as internet infrastructure and mobile speed, but there is a huge project taking place under President Jokowi, and we are optimistic about what is on the horizon.”
East Ventures managing partner Willson Cuaca remains optimistic about the country’s digital economic potential as he believes the US-China trade war will not impact his company’s investment decisions.
“Indonesia is pretty stable as the government has been pushing hard to reduce regulations and increase ease of doing business, and more people use digital services,” said Willson during a discussion which was also attended by Lauria on Tuesday.
Sequoia Capital India managing director Rajan Anandan told the Post that investment in Indonesia had slightly slowed but there was much potential for growth in the digital economy with 150 million internet users in the country.
Despite the relatively optimistic venture capitalists investing in Indonesia, data from business information platform Crunchbase revealed that venture funding dropped 17.5 percent in the second quarter of 2019 year-on-year (yoy) globally, in part due to the rising trade tension between the US and China that has curbed investment spending.
The venture capitalists’ statements are supported by the e-Conomy Southeast Asia study, released recently by American tech giant Google, Singaporean holding company Temasek and management consulting firm Bain & Company.
The study says that funding for start-ups in Southeast Asia remains healthy despite global headwinds, with US$7.6 billion raised in the first half of the year, a yoy increase of around 6.5 percent from $7.1 billion in 2018.
It also found that since 2015, start-ups operating in Southeast Asia raised $37 billion until the first half of 2019, with $24 billion invested in Southeast Asia’s 11 unicorns — start-ups valued at $1 billion — $5 billion invested in more than 70 aspiring unicorns such as health app Halodoc and online fashion store Zilingo, and $7 billion invested in nearly 3,000 start-ups mostly in the e-commerce, financial technology and health technology sectors.
The study also found that Indonesia, the second most funded country in the region after Singapore, is on track to match 2018 funding record of $3.8 billion this year as the digital economy has booked $1.8 billion investment in the first half, with fewer but larger deals from 157 in 2018 to 124 this year.
Since 2016, Indonesian start-ups have raised $9.8 billion until first half this year.
“Even as global tech funding takes a hit, Southeast Asia has remained a bright spot. Funding flows into the region continued to grow at a healthy pace, from the high base of record-breaking 2018,” Google, Temasek and Bain & Company research says, adding that “investors remain bullish on Southeast Asia largely because of structural drivers in place: a young population, growing internet connectivity and rising income levels.”
Lauria said Golden Gate Ventures aimed to fund more small and medium start-ups operating in the logistics sector, as the venture considered it one of the most attractive in Indonesia. “There is a multibillion dollar opportunity in the logistics sector, we are looking for more logistics companies to invest in.”
During the first three quarters of the year, venture capital firms have already invested $96.7 billion in 7,862 funding deals, according to a report by venture capital database PitchBook Data Inc. and National Venture Capital Association. In 2018 the investment value hit a record of $137.6 billion.
