Riyadh is set to become one of the largest venture-capital players in Indonesia with a co-investment stake in a national startup fund. The other fifty percent will be held by a consortium of Indonesian institutions. While the size of the joint fund is still unclear, “hundreds of millions” may translate into $500 million-to-$1 billion, given the Saudi penchant for thunderous deal activity.
The bilateral announcement came on the back of a G-20 working group in Bali focused on the digital economy. One Singapore-based executive in our network asserted, “The news flash is an attempt by the Saudis to outmaneuver the Emiratis” in reference to Arab interests in the region. Jakarta and Abu Dhabi completed a free-trade deal earlier this year. Regardless, the announcement bodes well for a startup ecosystem that can be overshadowed by nearby markets, ranking behind Singapore and Taiwan, for instance, by some measures.
There may be more questions than answers at this time about capital-allocation and fund-management issues. What is clear is that the primary startup beneficiaries will be late-stage ventures in Indonesia with possible knowledge-transfer or other commercial benefits for Saudi Arabia. There is no shortage of candidates. Tracxn, an India-based consulting firm that monitors startup activity worldwide, indicates that there may be as many as 50 “minicorns” or “soonicorns” in the Indonesian market.
The Saudi Ministry of Communications and Information Technology (MCIT) is partnering with the Jakarta-backed NextICorn Foundation on this project. While MCIT is enriching the effort with its helicopter drop of cash, NextICorn is vested with responsibility for organizing the consortium of local venture-capital firms. We suspect this will include the Indonesian arm of Silicon Valley-based institutions.
The NextICorn Foundation was set up by the Indonesian government in 2019 to bolster the startup ecosystem from a policy-advisory and startup-mentoring perspective. At the time, Jakarta looked to drive entrepreneurship beyond the first cohort of unicorns in the market. These names included Gojek, Traveloka, Tokopedia, and Bukalapak. Gojek and Tokopedia merged in May 2021, amid pandemic pressures, to become the regional leviathan GoTo. Other unicorns, such as Xendit and Ajaib, have since been added to this blue-ribbon list.
The timing of the joint-fund announcement affords much needed relief for Indonesian entrepreneurs. Characterizing the spirit of local sentiment, Bloomberg published an article in August entitled, “You Thought China’s Tech Slowdown Was Bad.” As elsewhere, Indonesia-focused analysts debate the impact of soaring inflation and higher interest rates on consumer spending. The Indonesian central bank just raised its policy rate by 25 basis points, representing the first increase in almost four years. ■
Our Vantage Point: Cross-border investors will find Indonesian ventures more interesting in the wake of the Saudi-Indonesian pledge, given a promising outlook for startup valuation measures. One feature of the arrangement is the coalescing of interests in the two nations’ e-commerce and digital-finance industries.
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