This post first appeared on Venture Capital Indonesia
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This article talks about the Venture Capital Indonesia ecosystem where it answers the basic questions of what is venture capital, why do companies require a venture capitalist to listing down venture capital companies in Indonesia. Lastly, we provide several tips in helping you find the right venture capital firm for your company.
What is Venture Capital?
A venture capitalist or VC is an investor who either gives funding to startup ventures or supports small organisations that desire to expand but do not have access to equities markets. Venture capitalists are willing to invest in companies that fit in those criteria because they have the potential to earn a huge return on their investments if these companies end up being successful.
Some of the aspects that venture capitalists look for are strong management team, large potential market and a unique product or service with a strong competitive advantage. Also, they seek for opportunities that they are familiar with, and the opportunity to possess an enormous stake of the business so that they can influence its direction. Here at NEXEA, we are interested in tech start-ups as this is our expertise.
Why do companies require a Venture Capitalist?
You may be thinking, “Why do I need a VC? or What kind of value can a VC bring in to my business?” Well, it is true that not many Venture Capitalists are able to bring in much value. This is because they are too busy managing 10-20 companies per partner as well as managing their Limited Partners (investors).
Nevertheless, any VC is more than just providing funds. Since they will become part the owner of your business, they would want to see the company grow as well by providing any necessary help succeed a startup. At NEXEA, we offer to our invested startups ex-entrepreneurs who can guide young entrepreneurs with their business as well as provide some advice to avoid making the mistakes that they have made in the past.
For entrepreneurs and CEO of rapidly growing companies, most of them are inexperienced and they do not always know what to look out for. That is why a lot of startups need venture capitalist and in order to lessen the risk for a venture capitalist, it is important that startup founders are being connected to industry experts.
“You will need to do the due diligence in order to really understand if a VC is going to add value in addition to capital. This value can be introductions for potential partnerships, their network of other successful founders or the infrastructure the firm brings.”
Venture Capital Indonesia – Environment
Currently, the ecosystem of venture capital Indonesia is the second-largest in Southeast Asia, with Singapore maintaining its position as the leading market and Malaysia is in the third position. According to Deal Street Asia, Indonesian venture capital companies has raised up to US$582 million in 2019 which is a 79% increase from the previous year.
Being a country that has a large population, Indonesia has the potential to become the fourth-biggest economy in the world, surpassing Singapore. McKinsey noted that Indonesia’s e-commerce sales are expected to rise around 17%-30% within the next five years. With such potential for technology disruption and growth especially in the focused industries, such as e-commerce, fintech and halal lifestyle, the Indonesian tech story is just beginning.
Very Early Stage Investment Firms in Venture Capital Indonesia (<US$1m)
Later Stage Investment Firms in Venture Capital Indonesia (>US$1m)
Finding the right venture capital firm for your company
The first step to finding the right venture capital Indonesia firm for your company is to know what stage your company is at right now. After figuring out the stage of your business, you can start applying to venture capital. Remember to prepare an informing pitch deck so that you have a higher chance of getting funded when pitching your company. Here are some examples of how a pitch deck should look like made by other successful companies.
Secondly, in order to find the best VCs, you should look out for their infrastructure and “speciality”. It is best to find VCs that specialised in the industry that your company is in because you will then be provided with the best support tailored to your needs. Venture Capitalists like First Round Capital, Y Combinator or 500 Startups have a dedicated team of marketers, recruiters, experts and other necessary resources to bring into the company that they invest in. At NEXEA, we have dedicated lawyers, regional level CFOs, a lot of world-class CEOs that mentor and invest in startups as well as other supportive infrastructure in place.
Lastly, it is important to set some boundaries for yourself. If your company are one of those companies that are founded by multiple people, it is very important that there is a mutual understanding between each other on what you are willing to give away. Giving away is not only in terms of equity but in time as well. When a venture capitalist invests in your firm the whole working dynamic can change as you hopefully transition your company into a fast-growing firm.
Steps to finding the right venture capital firm
Besides that, here are some additional tips on how to find the right venture capital firm for your company. We’ve made it into several easy steps where you can easily implement through the list of companies in Venture Capital Indonesia to see which ones that fit well with your firm’s needs.
- Geography: The location of your startup should be in the region which the VC is operating in. At NEXEA, we invest in tech startups in the SEA region. However, for some programs, we prefer companies that are based in Malaysia as our HQ is located in Kuala Lumpur. Thus, do some research on the VC to know if your location is applicable to them.
- Sector: Usually VC’s only invest in companies that operate in fields of business where they have a lot of experience in. That goes to show why at NEXEA we invest in tech startups because we have a lot of expertise in tech-related companies. For us, a company which has a traditional business model would not be applicable.
- Portfolio conflict: A VC will typically not invest in a company which is a direct competitor of a company in their portfolio. So before applying to a VC, you should find out about their portfolio and see if you can identify any direct competitors to your company.
- Involvement: There are two types of VC firms. The first group are the VCs that are very involved. These type of VCs typically do not invest in a lot of companies as they do not have the time to be highly involved in all the companies that they invest in. The second group of VCs are the opposite where these firms are not very involved in the companies they invest in. This is usually due to the number of startups they invest in. They simply don’t have the time to have a meeting with each startup every week.
At NEXEA, we are highly involved with each startup due to our startup mentor network. For a startup, it is essential to know from each founder whether they prefer a highly involved VC or less involved VC. - Fund size: A startup has to know beforehand what series a VC invest in. It does not make sense to apply for a pre-seed startup while you are doing your A-series. Furthermore, if you plan beforehand that you want to do your B-series and A series with the same VC to ensure good collaboration, you should check whether or not they invest in both series.
Venture Capital Indonesia Summary
The number of venture capital firms in Indonesia has been growing rapidly which is reflected by the growing number of startups that are starting and growing in the region. For startups wanting a venture capital, it is crucial to first identify the stage of their company is as well as setting boundaries for the company in order to find the right expertise needed for the company.
We hope this article has provided you with a head start on what you should be looking for in a venture capitalist. Let us know in the comments section if there is anything else that you would like to know more about venture capital Indonesia.
If you’d like to know more about venture capitalists in other Southeast Asian countries such as Malaysia, Singapore, Thailand, Vietnam and the Philippines, check out the Southeast Asian Venture Capital article.
Learn More About NEXEA Venture Capital & How We Provide More Than Just Money
References:
- https://www.thejakartapost.com/news/2020/03/27/indonesia-retains-its-position-as-se-asias-second-largest-venture-capital-market.html
- https://e27.co/indonesia-singapore-vietnam-the-most-attractive-fintech-hubs-in-sea-study-20200907/
- https://blog.edx.org/5-criteria-identify-right-venture-capitalists/
- https://www.inc.com/bubba-page/5-steps-to-finding-the-right-venture-capital-investor.html
- https://www.forbes.com/sites/alejandrocremades/2018/08/02/how-venture-capital-works/#1d3377831b14
For more, check out NEXEA
For Startup Investments check out https://www.nexea.co
source https://www.nexea.co/venture-capital-indonesia-nexea/
source https://nexeaaccelerator.blogspot.com/2020/09/venture-capital-indonesia.html