China’s angels swooping down on Indonesia’s startup space

• Also looking at Turkey, but Indonesia has more Chinese connections
• Investing in early stage startups, to join forces with local VCs and universities

 
INVESTORS from China are now looking to expand their investments into the technology startup ecosystem in Indonesia, rather than sticking to traditional sectors such as mining and resources.
 
In 2015, Indonesia’s Investment Coordinating Board (BKPM) reported that China was the ninth biggest investor in the country, with US$628.3 million worth of investments spread across 1,052 projects.
 
Singapore was still the No 1 investor, having pumped in US$5.9 billion into the country, or 20% of all foreign investments in Indonesia in 2015.
 
BKPM also reported that most Chinese investments were in smelters and recent infrastructure projects, such as the high-speed railway between Jakarta and Bandung.
 
However, it looks like the investors are now looking closely at the country’s startup ecosystem. Victor Yuan Yue, chairman of China’s leading public opinion and polling firm Horizon Research Consulting Group, said that Indonesia is a very promising market for startups.
 
However, for Chinese investors to come into the market, collaboration with local stakeholders was a must, he said.
 
“We need to build the ecosystem first by collaborating with local angel networks and universities, incubators, and getting to know the many local startups,” he added.
 
China’s interest in Indonesia’s startup ecosystem comes not only from angel investors, but also from technology companies and investment firms, according to Yuan, also the chief executive officer of Feimalv, an entrepreneurial management service.
 
“It is a scalable market with a rising economy and a growing middle-income population – and one great thing about Indonesia is its multiracial background,” he said.
 
He compared Indonesia with Turkey, another potential scalable market that has caught the attention of Chinese investors.
 
“There are lots of Chinese-Indonesians in the country, and also Indonesians who understand Chinese culture and language,” he said.
 
“If we compared this market with Turkey, which has great potential as well, Indonesia is a lot easier to enter since I have not seen many Chinese connections there,” he added.
 
Now is the right time
 
Highlighting the young population Indonesia has, Yuan (pic) believes that there is no better time to enter the country and help grow the startup community.
 
“The Indonesian population is younger than China’s, and that means more creative ideas, more productivity, and more enthusiasm in the sector.
 
“If we can collaborate and join forces now, it will be a great time both for investors and the startups – the momentum is there,” he added.
 
According to the United Nations’ World Population Prospects: 2015 Revision, the median age of China’s population in 2015 was 37.0, to go up to 43.2 in 2030. Indonesia, however, had a median age of 28.4 in 2015, which will age to only 31.9 in 2030.
 
Yuan also argued that if investors were to enter Indonesia now, the outlook would be very promising three to five years down the road.
 
He also said that Indonesia’s current startup ecosystem reminds him of China six to seven years ago, when venture capitalists (VCs) were limited and funding was not widely available.
 
“That was when Chinese investors including myself built an angel investors’ club – today, the club is pioneering investment activities in China and abroad,” he declared.
 
The local twist
 

 
Yuan’s short visit to Indonesia was marked by a pitching session with a few domestic startups, organised by Indonesian VC firm Convergence Ventures.
 
The pitch session was attended by Yuan and six other Chinese investors: ZhenFund founder Bob Xu; Longling Capital founder and Meitu chairman Wensheng Cai; Innovation Works chairman Kai-Fu Lee; Zero2IPO Group chairman Zhengdong Ni; Shenzhen Resource Investment founder Xiangyang Yang; and venture capitalist Charles Xue.
 
All seven men are in the angel investors’ club Yuan had referred to earlier, and who actively invest in Chinese as well as regional startups.
 
“What I have been seeing is that Indonesian startups tend to put several services or products on one platform, and I think that is a good idea,” said Yuan.

He said that most Indonesian startups seem to be paying attention to what their China counterparts are, but then add their own innovation on top.
 
This is similar to China’s startups which copied most business models from the United States, and innovated on top of these.
 
Indonesia following that pattern could be the quickest way to build the business and make some money, he suggested.
 
Speaking on behalf of the angel investors’ club, Yuan said that they are willing to invest in early-stage startups that need pre-seed and seed funding.
 
This means it would be a volume game. “The rule of thumb of investing in early stage startups is that you cannot invest in only a few,” he said.
 
“If you invest in 100 startups, you will only have 10 to 15 successful investments; if you invest in only five startups, then you will lose all of it,” he added.
 
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