At an event introducing Indonesia’s new national VC fund, the US$300 million Merah Putih Fund (MPF) on 15 December, Indonesia’s Minister of State Owned Enterprises launched into a familiar gripe.

“Once startups evolve into mid-size companies or unicorns, normally the financial support comes from foreign investors. We don’t want Indonesia’s big market to be used to grow the economy of another nation,” the minister, Erick Thohir, said.

Nationalistic sentiments are common in Indonesia’s economic discourse. They often serve to align diverging interests. That day, Thohir was rallying support for the new fund named Merah Putih—or Red and White, as a nod to the colours of Indonesia’s national flag. Its role, he said, is to take stakes in Indonesian “ soonicorns soonicorns soon-to-be unicorn A startup whose valuation is on the way to the billion-dollar mark ,” so that Indonesia can reap the benefits of its rapidly growing digital economy.

Initially, the fund had an icy public reception. Pro-consumer groups like the Indonesian Digital Empowerment Community criticised the fund’s structure, calling it inefficient as it overlaps with existing investment vehicles.

The US$300 million for the inaugural of MPF comes from five of Indonesia’s top State Owned Enterprises (SOEs): State telco operator Telkom Indonesia, its mobile subsidiary Telkomsel, and three state-owned banks—Bank Mandiri, Bank Rakyat Indonesia (BRI), and Bank Negara Indonesia (BNI).

Only, most of these SOEs are already active startup investors.

Telkomsel’s MDI is currently deploying deploying Bloomberg Indonesia's MDI Ventures Closes New $500 Million Startup Fund Read more a US$500 million corporate venture capital (CVC) fund, following its maiden US$100 million fund. BRI Ventures and Mandiri Capital have hundreds of millions of dollars of assets under management between them, and BNI is in the process of setting up its own CVC. So why pool more money in a separate fund, which could cause an overlap of functions and responsibilities?

MPF will also collide with the existing CVCs in terms of personnel. Donald Wihardja, the CEO of MDI Ventures, and Eddi Danusaputro, the CEO of Mandiri Capital, are both involved in the conception of MPF and are part of the new fund’s leadership team.

MPF’s focus on later-stage startups, specifically those who are already nearing billion-dollar valuations, has also been criticised. It’s the wrong focus, said a former manager of a now-inactive government programme called “1,000 Startups Movement”. “In my opinion, the government should focus on early-stage startups. The big ones should not have problems getting investments,” they said, under the condition of anonymity.

These concerns are relatable. State-linked VC funds in Southeast Asia, with some exceptions, don’t have the best track records.

AUTHOR

Nadine Freischlad

Nadine is based in Indonesia. She covers Southeast Asia's super apps, the changing nature of work and employment, and other structural shifts happening as a result of digital disruption.

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