BRI Ventures Manages New Venture Fund “Sembrani Nusantara”

BRI Ventures launched a new management company called “Sembrani Nusantara Venture Fund”. Fund This is a new vehicle for BRI Ventures to fund startups early stage who play in non-fintech segments, such as education, agro-maritime, retail, transportation, and health.

As a non-CVC fund, the concept of Sembrani Nusantara is similar to a managed fund Centauri Fund initiated by MDI Ventures and South Korea's KB Financial Group, although they have some fundamental differences.

The name Sembrani Nusantara was chosen as a symbol of the startup philosophy in the future. Sembrani, the riding horse of Batara Wisnu in the wayang story, is a representation of a unicorn with local wisdom.

At the launch today (24/6), BRI Ventures targets to raise funds of IDR 300 billion. BRI, as General Partner, has also invested in fund and has received a number of commitments from institutional investors as Limited Partners.

In managing venture funds, BRI Ventures has received the approval of OJK after the submission started at the end of last year. The venture fund is an investment contract scheme between PMV itself and the custodian bank, which was created by the OJK so that the venture capital company industry is more daring to enter equity participation.

So far, the majority of local PMVs have played in profit-sharing financing, which in fact is not much different from what finance companies do.

CEO BRI Ventures Nicko Widjaja explained that the background for the launch of Sembrani Nusantara was the desire to prepare a wider investment climate, but with the rules of the game that remained on the radar of OJK supervision.

“BRI Ventures wants to build an ecosystem that has been controlled by foreign PMVs and we were not ready yesterday. Now is the time for us to start which might also change the ecosystem in ASEAN," he said.

The issue of high taxation, which has been the pretext for many local PMVs to escape and flee to neighboring countries, can actually be overcome with a number of adjustments. He explained, BRI Ventures lowers costs management and other costs.

“Instead of waiting for the rules to change, why don't we change the way we think. We talked to the [BRI] group, we changed it carry profit and management fee, [because] we realize we can't ask plek ask the government to change With Sembrani Nusantara, we are trying to redefine the VC industry in Indonesia. [Those two things] We adjust to make the industry more competitive. It's like a startup that initially provides subsidies."

Of the total managed fund of Rp300 billion, BRI Ventures will invest in the early stages to 10-15 startups engaged in the non-fintech sector for time deployment between the next two to three years.

Nicko said that Sembrani will continue to be reviewed in the future progresshim, considering that this is the first time BRI Ventures has made a fund and managing external funds. So far, every time you invest in startups, BRI Ventures has always been single LP.

“The challenge is in managing venture funds, so we communicate more because there are various investors and most importantly, provide education which has been lacking so far.”

First movers

The presence of Sembrani Nusantara is a breath of fresh air for the local startup ecosystem which continues to be dominated by foreign funding. The position of those who have been registered with the OJK can be considered as first mover because they agreed to obey the rules in the country.

For the record, many venture capital players, even though their offices are in Indonesia, their legality is in Singapore because it is more tax-friendly there. The stipulation of the paid-up capital limit is considered to be incompatible with the pattern of VC players who mostly play in technology startups and raise funds from external investors.

In addition, the imposition of a large income tax (PPh) is still a challenge for local investors to compete with foreign investors. According to PMK PMK No. 48 of 2018 concerning Tax Treatment of Equity Participation of Venture Capital Companies in Micro, Small, and Medium Companies, it is considered not friendly to accommodate tax rules capital gain.

The application of the capital gains tax for PMV reaches 25% of the increase in equity value, while for individual investors it is 30%. This large number has made foreign investors prefer to channel their capital through PMA, rather than collaborating with local PMVs. Meanwhile, the capital gains tax in Singapore is only 5%.

The majority of local PMVs that fund digital startups and are registered with the OJK are part of the bank's subsidiaries, namely Central Capital Ventures (CCV), BRI Ventures, and Mandiri Capital Indonesia. The three majority focus on funding fintech startups to support their parent business in accordance with the mandate of the regulator.

According to OJK data as of March 2020, there are 61 PMVs that have obtained permits, consisting of 57 conventional PMVs and four of them in the form of Sharia. As of April 2020, the performance of the majority of PMVs came from profit sharing financing of 77%, 19% equity participation, and 4,1% convertible bonds. This figure is a change compared to last year's position. The share of profit sharing financing reaches 99%.

"We encourage BRI to become a digital PMV [financing startup]. In addition, Sembrani Nusantara can be well received by investors, so it can support the PMV industry which is still very strong limited [for equity participation in startups," concluded the Head of the OJK 2B IKNB XNUMXB Supervision Department, Bambang W. Budiawan who was present on the occasion.