Merah Putih Fund Ready to Invest in Startup Soonicorn

Funds managed by the BUMN joint venture, Merah Putih Fund (MPF) will soon be disbursed to startups soonicorn in Indonesia with a first phase investment commitment of $300 million (around IDR 4,5 trillion).

Almost two years planned from 2021, MPF now inaugurated through the signing of the Participation Agreement on Monday (04/9). MPF is a government initiative to accelerate Indonesian startups that are approaching status unicorn or soonicorn.

It is said that the establishment of the MPF took a long time to ensure that the managed fund has good governance and has the approval of the OJK. His party stated that they had prepared joint governance with independent parties for the investment process and MPF management to meet the requirements of Good Corporate Governance.

The MPF's first phase of funds is collected from five SOEs which will be managed by five Corporate Venture Capital (CVC), among others Mandiri Capital Indonesia (MCI), MDI Ventures, BNI Ventures, BRI Ventures, and Telkomsel Innovation Partners (TMI). At this signing, it was agreed that MCI would become the Fund Manager, while Bank Danamon was appointed as the custodian bank.

"So far [BUMN] has been investing on its own. Now there is an initiative to collect and manage together. However, more funds are needed to invest in prospective investors. unicorn. MPF will be targeting growth and late stage in the hope of giving birth unicorn new," said the Head of the Project Management Office (PMO) Eddie Danusaputro when found at the signing of the 2023 MPF Agreement in Jakarta.

Also introduced were members of the Investment Committee from representatives of each CVC, including Eddi Danusaputro (BNI Ventures), Donald Wihardja (MDI Ventures), Nicko Widjaja (BRI Ventures), Dennis Pratistha (MCI), and Mohamad Ramzy (Telkomsel Innovation Partners). Then two Independent Members, namely Rizal Gozali (former Credit Suisse) and Diota Marsudi (CEO of Aladin Bank).

Meanwhile, the targeted startups are sector agnostic with pre-money valuation between $50 million-$300 million. Other criteria, founder Must be a native Indonesian with a company domiciled in Indonesia. MPF will not invest in early-stage sectors because the startups it invests in must have a plan exit in Indonesia.

MPF will utilize the BUMN ecosystem with a value of BUMN assets of more than $ 600 billion in 12 clusters. This ecosystem includes the financial, health, telecommunications & media, infrastructure, and logistics sectors,

Offer it to private LPs

Eddi continued, the MPF fundraising will not only come from the five CVCs, but will also be offered to other SOEs and the private sector. His party assesses that investment interest from private and foreign parties is driven by their efforts to build the company's digital competence.

"The plan is for the second fundraising to be offered to other SOEs and the third fundraising to the private sector," said Eddi.

Apart from that, continued Eddi, his party will also place around 10% of BUMN in startups to guide them towards cash flow and exit. This is done considering that the technology industry has been declining in recent years. As a result, investors are increasingly selective and startups are required to have a clear path to profitability.

However, his party has not been able to reveal when the first investment will be disbursed including the startup targets being targeted. "Target [ticket sizes] about $20 million to $25 million for 1 or 2 companies. Of course we are looking at the market because quite a lot will be invested with this $300 million fund," added MDI Ventures CEO Donald Wihardja on the same occasion.

Meanwhile, BRI Ventures CEO Nicko Widjaja added, "target return have to take it benchmarking from outside [investment], namely around 14%-16%. There needs to be best practice to know the performance indicators per portfolio. We will also look at potential synergies with BUMN. In fact, this synergy has already existed, but MPF will encourage it scale up synergies that have been realized. We will see how other state-owned companies look for what startups have to offer."