Sembrani Nusantara Structure Similar to Mutual Funds, BRI Ventures Also Launches “Venture Debt”

BRI Ventures (BVI) last week announced the closing of the first round Sembrani Nusantara Venture Fund. This fund recorded 150 billion Rupiah under management from a number of investors. Not just an ordinary managed fund, Sembrani has a relatively new structure in the Indonesian digital industry landscape. The structure in the form of a Joint Investment Contract (KIB), which adopts a concept similar to a Collective Investment Contract (KIK) in mutual funds. The Net Asset Value (NAV) calculation index will be issued quarterly by the custodian bank.

As a fund registered with the OJK, BVI wants to comply with applicable laws. Meanwhile, currently in Indonesia there are no official rules regarding limited partnership agreements (Limited Partners) which are usually adopted by venture capitalists to manage fund they. A form similar to a mutual fund is expected to make it easier for the public to accept the concept adopted by Sembrani.

"The structure of this fund is very unique, because the participating investors could subscribe and redeem from the Sembrani Nusantara Venture Fund on every window of subscriptions which is open every quarter. It's something that can't be done by limited partners with VC model fund existing ones," explained BVI VP of Investment Markus Liman Rahardja.

With this structure, BVI claims to be able to offer a level of flexibility and liquidity that cannot be had VC fund existing (from abroad). Backers of funds can choose to deposit and redeem their funds for a certain period. This mechanism encourages Sembrani's claim to be similar to a mutual fund scheme that is already common among the Indonesian people.

In addition, it is hoped that this venture fund can be a more effective way for organizations or individuals with high wealth (high net worth individually) to participate in investing in Indonesia's fast-growing tech startup ecosystem. Previously, when they wanted to invest in Indonesian startups, the most common practice was to enter into limited agreements with venture capitalists registered in Singapore.

"For now, we are still selecting investors who are members. Given the age of the venture capital industry which is still very early and the risk is quite high, we limit it to those who have experience investing in startups. Investors also continue to discuss with us to increase industry development venture capital in Indonesia," added BVI CEO Nicko Widjaja.

Venture debt with Investree

BVI has also signed a cooperation with investree to offer capital in the form of venture debt. In the initial phase, BVI has prepared funds of 60 billion Rupiah through Sembrani. Investree is a BVI portfolio and is also an investor in Sembrani Nusantara.

Model productive financing considered to be able to provide solutions for early-stage startups, especially for those who still do not have tangible assets and sufficient cash flow to apply for traditional debt instruments.

This option can be an option for founder in obtaining capital funds while retaining ownership of their business, plus simpler governance. They don't need to allocate seats board for investors, grant voting rights to multiple stakeholders, and so on.

Investree plays a role in conducting the initial screening process and due diligence on startups that apply. Later, startups that have successfully paid off the first phase of the loan can reapply to the next stage with a higher value.

There are several benchmarks that startups must meet in order to qualify. First, the capital objective must be related to the company's expansion, which means it must have a validated business model.

Second, startups must not have a history of worrying debt over the past 12 months and must pass a risk and credit assessment according to the requirements set by PT Pemeringkat Efek Indonesia (Pefindo).

"Venture debt done in the form productive financing. Investree, as experienced in doing productive financing, will help us in doing assessment nature initial screening and KYC for startups. Funds for this will come from the Sembrani Nusantara Venture Fund," said Nicko.

According to Investree Co-Founder & CEO Adrian Gunadi, productive financing is often the preferred initial financing option for startups over equity investments. If a company is really healthy, it can pay back debt rounds without compromising business ownership. Because, usually equity (which has been given) is very difficult for startups to get back.

"There are not many debt financing options available for technology startups, because of their risk. [..] We believe that our ability to provide an assessment allows us to capture the risk profile of the startup," said Adrian.

Markus added, "In recent years, there have been several players who claim to have offered venture debt in Indonesia, but in fact they are not active in the market. For that, we believe we can call ourselves the first local VC to offer productive financing. [... ] This is one way to identify early on which companies are achieving sustainable growth and real profitability. It will also help us better understand which startups will be eligible for an IPO in the near future."