In Momentum Works’s 2019 predictions for Southeast Asia, we mentioned that as more VCs and more startups are emerging in the region – it is becoming harder for both parties to find the best deals.
Indeed, when we look at Indonesia, since 2016 (when Go-Jek raised US$550 million and Alibaba took over Lazada), more and more VCs are either being set up or entering the country.
The active VCs in Indonesia are typically either locally set-up or with their structure in Singapore. And some of our readers, hearing about news on their counterparts ‘buying’ a VC in Indonesia, asked us “how”?
The basics
To understand how to ‘buy’ a VC, it is important to understand the regulations on VC, i.e. what makes a VC legal.
Here are some of the regulations of which Indonesia’s Financial Services Authority (OJK) has released:
- POJK No 34/POJK.05/2015; concerning the business license & organization of venture capital
- POJK No 35/POJK.05/2015; concerning the business implementation of venture capital
- POJK No 36/POJK.05/2015; concerning good corporate governance of venture capital
- POJK No 37/POJK.05/2015; concerning direct inspection of venture capital
Setting up VC Firm in Indonesia
Based on article 2 POJK 34/2015, VC is established in the form of business entity, which can take one of the following types:
- Limited Liabilities (PT)
- Cooperatives
- Limited Partnership (firma)
In the establishment of VC firms, the ownership of shares are limited for the following sides:
- Individual Indonesian Nationals
- Indonesian Legal Entity
- Foreign Institution
- Local Government
- Central Government
A foreign institution is allowed to acquire shares at a VC firm by using either direct method (purchasing the issued shares) or indirect method (purchasing other financing instrument). However, foreign ownership (both direct or indirect) are limited to 85% of the firms.
Similar to other financial institutions, a VC firm also required to have a minimum paid-up capital, in this case, would be IDR 50 Billion, roughly US$ 3.5 million.
VC firms are also allowed to trade 85% of shares in the stock exchange.
Applying for VC License to OJK
VC licenses in Indonesia are issued by OJK. In order to obtain a license, the director of the firm must fulfill and submit the completed application to OJK.
The requirements are as follows:
- Legality documents of VC
- Identity documents of VC Shareholders, Directors, and Commissioners
- Evidence of Operational Readiness, such as List of Assets, Evidence of Building/Office Ownership, Agreement Templates, and Tax Documents
- Business Plan for the first 5 (five) years
- Organizational Structure
- Anti-Money Laundering and Anti-Terrorism Funding Implementation Guidelines
- Good Corporate Governance Guidelines
- Evidence of full payment of the licensing administrative fee
After submitting the requirements, OJK will verify the authenticity of the documents, business plan, and legal compliance in a maximum of 30 workdays. Licensed VC needs to run the business for a period of 6 months and give a performance report to OJK at least 10 days after getting the license. Along with the reports documents needed to be entailed are:
- Copy of VC license
- Copy of stay permit for using foreign workforce or having a foreign board of directors, given by authorized institution
Registered Indonesian VCs
As of October 2018, there are 65 registered VC in Indonesia
- PT Astra Mitra Ventura
- PT Bina Artha Ventura
- PT Celebes Artha Ventura
- PT Ivaro Ventura
- PT Lima Ventura
- PT Sarana Kalsel Ventura
- PT Sarana Lampung Ventura
- PT Sosial Entreprener Indonesia
- PT Vasham Kosa Sejahtera
- PT Ventura Ginat Asia
- PT Ventura Investasi Prima
- PT Ventura Investasi Utama
- PT Venturas Tunai Capital
- PT Sarana Jakarta Ventura
- PT Dana Mandiri Sejahtera
- PT Mitra Bisnis Keluarga Ventura
- PT Sarana Jatim Ventura
- PT Sarana Sulut Ventura
- PT Maju Raya Sejahtera
- PT Sarana Jabar Ventura
- PT Sarana Sumatera Barat Ventura
- PT Bahana Artha Ventura
- PT Sarana Sulteng Ventura
- PT Selaparang Finansial
- PT Sarana Kaltim Ventura
- PT Sarana Surakarta Ventura
- PT Sarana Bali Ventura
- PT Sarana Jateng Ventura
- PT Sarana Papua Ventura
- PT Sarana Sulsel Ventura
- PT Sarana Jambi Ventura
- PT Sarana NTB Ventura
- PT Sarana Yogya Ventura
- PT Sarana Kalbar Ventura
- PT Sarana Nusa Tenggara Timur Ventura
- PT Sarana Sumut Ventura
- PT Sarana Sultra Ventura
- PT Sarana Riau Ventura
- PT Sarana Maluku Ventura
- PT Insan Mulia Investasi
- PT Ventura Cakrawal Investama
- PT Sarana Kalteng Ventura
- Suwadana Ventura Capital
- PT Sarana Aceh Ventura
- PT Techo Venture Business Synergy
- PT Esta Dana Ventura
- PT Mandiri Capital Indonesia
- PT Nusa Makmur Ventura
- PT Corpus Prima Ventura
- PT Cakrabuana Ventura Indonesia
- PT Reliance Modal Ventura
- PT Modal Ventura YCAB
- Capital Global Ventura
- PT Asia Pasific Ventura
- PT Central Capital Ventura
- PT Kresna Ventura Kapital
- PT PNM Ventura Capital
- PT Sarana Bengkulu Ventura
- PT Modal Nusantara Ventura
- PT Karya Ventura
- PT Nasorasudha Mega Ventura
- PT Permodalan BMT Ventura
- PT PNM Ventura Syariah
- PT Amanah Ventura Syariah
- PT Persada Ventura Syariah
Buying a VC
In 2018, the largest state-owned bank, Bank Rakyat Indonesia (BRI), acquired a registered VC Bahana Artha Ventura and rebrands it as BRI Ventures.
This was done publicly through Indonesia Stock Exchange (IDX) with BRI owning 15,874 shares in BRI Ventures, equal to 97.61% stocks in BRI Ventures, with total transaction amounting to 3.09 billion rupiah (US$ 217,005).
This action also inspire a fellow state-owned bank, Bank Tabungan Negara (BTN), to acquire 30% shares in PNM Investment Management, a local VC previously owned by other state-owned company, Permodalan Nasional Madani as of April 2019.
BTN aims to acquire 85% of shares in PNM Investment Management in a three-step acquisition plan to become the majority shareholder in the local VC.
Time-wise, building a VC takes a substantial amount of time and effort compared to acquiring an existing VC. Time intensive process such as getting PT PMA license, public accountant audited financial statement, and business eligibility statement from home country investment authority make the option to acquire an already licensed VC a more popular option.