5 reasons to become an angel investor in Indonesia today

Indonesia’s high-net worth individuals are becoming increasingly persuaded by Jakarta’s venture capital scene that it’s a good idea to put their money into early stage venture funds. A move toward VC investing can also be seen on the conglomerate level, as most of Indonesia’s large family businesses have already become active in the startup scene to one degree or another. Lippo Group is building Lippo Digital Ventures – not to mention its ecommerce site MatahariMall – and Sinar Mas has created Sinar Mas Digital Ventures. However, neither of the VC firms are ready to go on record with Tech in Asia just yet.

But becoming a limited partner in a venture firm comes with its own set of risks and challenges, and for investors who want to be more hands-on with company development, a VC fund may not be the best way to go. For this reason, we have angel investing. Those who are less experienced with investment lingo often don’t understand the distinction between a VC and an angel. The important difference is that an angel investor has direct access to the entrepreneur in most cases, and gives the startup money out of their own pocket without using a venture fund as an intermediary.

Angel investors typically give more favorable terms than other lenders, as they are usually investing in the person rather than the viability of the business. They are focused on helping the business succeed, rather than reaping a huge profit from their investment.

See: Indonesia’s ANGIN will introduce second startup fund by mid-year

In January, Fortune named Indonesia as one of the world’s seven best emerging markets to invest in. But if the rules and regulations involved with venture capital aren’t your style, here are five reasons – in no particular order – to become an angel investor in Indonesia.

1. Valuations are still low, for now

Indonesia’s startup ecosystem is maturing quickly, but at this point it’s still in an early stage. Part of this means that it’s relatively easy to find fresh tech companies that need US$500,000. It’s less common, however, to find startups that need US$5 million. The next three to four years will be an interesting window of opportunity for individuals with money who want to back a promising startup from its inception. A lot of VCs are setting their ticket size for Indonesia at around US$200,000 to US$300,000 and calling it pre series A stage. Others are just calling this amount seed funding. But regardless of what you want to call it, the amount that a typical Jakarta tech company currently needs is not outrageous for a semi wealthy individual who wants to dabble.

Of course, valuations in Indonesia are sure to rise in coming years, and some recorded investments have potential to manipulate valuations in particular verticals. Using ecommerce as an example, the benchmark for how much cash that should be put into an early-stage growth company will surely be affected by events like Tokopedia grabbing US$100 million from Sequoia Capital and SoftBank or Lippo Group dumping US$500 million into MatahariMall.

The key thing to take away from all the big activity is that putting a small amount of money into your nephew’s Indonesian tech startup today may just give you substantial ownership of tomorrow’s heavy hitter.

See: This is MatahariMall’s gameplan to beat Rocket Internet

2. An abundance of promising bootstrappers attacking real problems