Corporate VC fuels Indonesian startup growth. What’s the catch?

Corporate venture capital (CVC) has gained significant traction in Indonesia in the last five years, driven by the startup industry boom and corporations’ desire to share in the benefits of innovative and disruptive tech.

From January to September of this year, for example, CVC was involved in 45% of the 91 funding deals secured by startups in the country, according to Tech in Asia Indonesia data.

This is no surprise, as CVC plays a major role in the world’s startup ecosystem. It accounts for 28% of global VC deals, which is crucial amid a challenging funding climate, Silicon Valley Bank’s State of CVC 2024 survey reveals.

In the middle of the tech winter, CVC-funded startups have shown greater resilience than those backed by traditional VC firms. Resilience indicators include higher chances of moving to the next funding stage, more exits, lower failure rates, and higher valuations in each round.

A safety blanket

Startups funded by CVC firms are resilient because they receive stronger financial support from their backers’ parent companies, says Edward Ismawan Chamdani, treasurer of the Venture Capital Association for Indonesian Startups (Amvesindo).

CVC firms can step in if the startups have negative cash flow, lack follow-on funding, or release products that end up not gaining traction, explains Chamdani, who is also a partner at real estate developer and investment firm Braxton Capital.

Ronald Simorangkir, CEO of CVC firm Mandiri Capital Indonesia (MCI), agrees. He cites state-owned Bank Mandiri as an example, noting that it’s in a strong financial condition as the parent company of MCI. He adds that this is due to the bank’s status as one of the largest in the country.  

Additionally, he points out that the fundraising process tends to be faster with CVC. Unlike traditional VC firms that require startups to raise funds from various limited partners (LP), a CVC firm needs to talk with only one investor, which is the parent company.

Another benefit offered by CVC is the integration between startups and the ecosystem of the CVC firm’s parent company. 

Edmund Carulli, vice president of investment at Living Lab Ventures, a CVC firm formed by Indonesian conglomerate Sinar Mas Land, says CVC is mandated not only to generate financial benefits for the corporation but also to create synergies between portfolio startups and companies.

This gives startups access to the parent company’s resources, including a solid customer base. 

Downsides

How to gain support from a CVC firm