Indonesian startups thirsty for capital flock to IPOs as VC funding dries up

Last year, the number of initial public offerings by tech companies on the Indonesia Stock Exchange (IDX) reached a record high, even as VC funding and M&A activity were sluggish.

According to Tech in Asia data, 17 startups and tech companies went public via the IDX in 2023. This represents a 70% increase compared to 2022 and is the highest number in the past seven years.

However, the amount raised was only 2.8 trillion rupiah (US$172.3 million), much lower than in 2021 and 2022.

At its peak in 2021, the average tech IPO deal on the IDX raised US$287 million. That figure plummeted to just US$10 million in 2023.

The increase in IPO activity on the IDX was foreshadowed in Tech in Asia’s story from July 2023.

In an era of high interest rates, many VC firms have delayed investment plans. This has resulted in tighter liquidity, according to Rivan Kurniawan, director of investment consultancy firm Indovesta Utama Mandiri.

In 2023, the number of funding deals for startups in Indonesia decreased by 43% to 144 compared to the previous year, while the total amount raised declined by 2.4% to US$3.6 billion.

At the same time, companies are not making as many acquisitions. According to data from Tracxn, only nine startups engaged in M&As in 2023, 55% lower than the previous year.

This reflects a decline in general M&A activity in Indonesia, where the number of deals fell from 300 in 2022 to 116 in 2023.

What makes an IPO attractive?

Many Indonesian startups are now choosing the IPO route because it’s considered an easier way to raise funds, Kurniawan says.

This is supported by the success stories of notable names such as GoTo Group, Bukalapak, and Blibli, which raised US$952 million, US$1.5 billion, and US$513 million, respectively, through their IPOs.

“The advantage of an IPO is that if executed well and timed correctly, the funds raised can be substantial,” Kurniawan tells Tech in Asia.

The three IPOs mentioned above raised a total of nearly US$3 billion, compared to the US$3.6 billion raised from 144 startup funding deals in 2023.

Photo credit: AsiaTravel / Shutterstock

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