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Analysis: Merah Putih Fund targets “soonicorns” with $300 million initial funding
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Minister of State-Owned Enterprises (BUMN) Erick Thohir while attending a Working Committee Meeting (Panja) with Commission VI of the House of Representatives (DPR) at the Parliament Complex in the Parliament Complex , Senayan, Jakarta, on Wednesday January 29. 2020. The meeting is scheduled to discuss the failure of the JS Saving Plan policy worth Rp 12.4 trillion, due in October and December 2019, and to find solutions to return policyholders and savings plan holders. (JP/Dhoni Setiawan)
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ive state-owned corporate venture capitals (CVCs) have formally launched the Merah Putih Fund, raising US$300 million in its first fundraiser targeting “soonicorns”, or start-ups expected to soon become unicorns.
Mandiri Capital Indonesia, Telkom Group’s MDI Ventures, BRI Ventures, BNI Ventures and Telkomsel Mitra Inovasi (TMI) signed the participation agreement to establish the new venture capital fund on Sept. 4. MDI Ventures and TMI are each expected to invest $100 million, followed by Mandiri Capital Indonesia and BRI Ventures with $82.5 million, and $35 million from BNI Ventures.
The Merah Putih Fund aims to provide alternative funding for late stage start-ups, specifically those ready to expand before gaining unicorn status by achieving a valuation of $1 billion or holding valuations exceeding $100 million. According to Eddi Danusaputro, who heads the project management office (PMO) for the Merah Putih Fund, the targeted valuation ranges between $50 million and $300 million.
Eddi added that the fund was targeting soonicorn start-ups across a variety of sectors including technology, education technology (edutech), financial technology (fintech) and logistics. Aside from receiving funding, the start-ups would also be involved in the state-owned enterprises (SOEs) ecosystem, potentially leading to their collaborating with SOEs that require their services or operate in the same sector.
Start-ups must meet several criteria to be deemed eligible for the Merah Putih Fund. First and foremost is that a start-up’s founders must all be Indonesian citizens. It must also have a significant operational presence in the country. Lastly, the start-up must have an exit plan, whether through a merger, an acquisition or an initial public offering (IPO) at either the Indonesia Stock Exchange (IDX) or another bourse in the region.
While the Merah Putih Fund has no specific target for the number of start-ups it invests in, Eddi said the fund would conduct a rigorous selection process of start-ups. This was particularly so given the tech winter plaguing the local industry, which also prompted the fund to target a return on investment of 14-15 percent for each start-up.
Eddi added that the fund would continue with its fundraising activities alongside the selection process. Following the signing of the participation agreement, the fund would proceed with subscription agreements and only after these were issued would investors deposit their money into the fund.
