Discussing Startup's "Exit" Strategy with Venture Capitalists

In addition to getting profit from the startups they fund, in the end the ultimate goal of a company is venture capital is exit. Although IPO is not the only option, for most startups this step is the main goal.

In Indonesia, most of the processes mergers and acquisitions (M&A) is mostly done by corporations to startups. However, in foreign countries such as Japan, for example, IPOs are preferred by startups.

According to Ryu Hirota of Spiral Ventures, if a founder have no plans exit strategy appropriate, it is difficult for investors to then provide support to them. It's good when the process fundraising done, they already have the strategy.

"As VCs, we certainly want to support startups financially up to added value other. However, in contrast to startups in Japan, which are supported by related parties to conduct IPOs, in Indonesia there are not many startups that then carry out IPOs with the existing considerations," said Ryu.

In general, with the proceeds from the IPO, a startup can expand to a higher level. But in addition to the potential to pocket a very large amount of money, IPOs also have other challenges even though the journey to the stock exchange floor is not easy.

"We see that many technology-based startups, which are relatively young, have submitted an IPO process in Japan. This can happen because the Tokyo Stock Exchange has dedicated team which can help startups launch their IPO plans," said Elsia Kwee of Genesia Ventures.

Mergers and acquisitions of Indonesian startup options

In article Previously DailySocial noted that startups taking M&A actions were still bigger than those who chose to take the floor on the stock exchange. Startup Report 2018 from DailySocial shows that throughout 2018 there were 12 startups that carried out M&A, while those that took IPOs were only 4 companies. One of the benefits of M&A, which is sometimes also a motivation, is getting the desired human resources.

According to Kevin Wijaya from CyberAgent Capital, the IPO process is a process that relies entirely on numbers. Make sure the startup has a positive profit and business growth before the IPO process is carried out. However, if it is not ready, the M&A process is indeed the best choice and it turns out that startups in Southeast Asia are mostly doing it.

For those who have plans to conduct mergers and acquisitions, make sure the targeted company can provide benefits for the startup business. And of course don't hesitate to seek support from more than venture capital which has given funding to startups.

"For ourselves, apart from our local network, we also provide opportunities for startups that are included in our portfolio to be acquired by Japanese companies that are relevant to the startup business. Thus, the opportunity to carry out the merger and acquisition process becomes more open globally," said Elsa.