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Indonesia remains Southeast Asia’s gem for venture capital

Yunindita Prasidya (The Jakarta Post)
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Jakarta
Mon, October 26, 2020

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Indonesia remains Southeast Asia’s gem for venture capital In the business sense, a unicorn is any privately held start-up valued at over US$1 billion. The choice of the mythical animal alludes to the rarity of such start-ups. (Shutterstock.com/fatmawati achmad zaenuri)

D

espite the challenging environment the COVID-19 pandemic has created for start-ups seeking to raise funds, investors have signaled there is still an appetite to invest in Indonesia, albeit with more calculations involved.

During a webinar hosted by The Jakarta Post in August, Sequoia Capital Singapore managing director Abheek Anand noted that Indonesia was one of the few large economies in the region that could support multiple stand-alone domestic businesses that made sense for large investors like Sequoia to invest in, suggesting that the country’s potential for start-up growth lay in its ever-expanding domestic market.

“The reality is that the overall dollar of venture capital that is coming in for start-ups in Indonesia is far more than what’s coming into any other country in Southeast Asia,” Anand said. 

According to data from start-up information platform DealStreetAsia, out of the US$2.7 billion in fundraising deals booked in the Southeast Asian region in this year’s second quarter, 45.8 percent went to Indonesian start-ups. This made Indonesia the biggest absorber of investment funds during the period. Singapore came second by booking 33.2 percent of the deals, while Vietnam followed with 7.9 percent.

However, in the third quarter of this year, deal-making in Indonesia was “sluggish”, according to the DealStreetAsia review, with fundraising dropping by more than 50 percent relative to the second quarter and year-on-year. Singapore replaced Indonesia as the region’s top investment destination in the third quarter, the report notes.

“The most important thing to understand is that there are different types of investors. Some investors are more suited to a different stage of a company’s life,” Anand went on to say, noting that start-up founders would have to pitch to different investors at each stage of their company’s journey.

Equity crowdfunding, also known as crowd-investing or investment crowdfunding, is essentially the practice of funding a private company in exchange for equity. The option is better suited for small businesses that are looking for smaller amounts of investment that can be obtained through multiple investors. 

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