INDONESIA Law and Practice Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
receive funding or foreign venture capitalists would directly invest in the PT. Further, Indonesia continued to experience widespread lay-offs across many tech start-ups in 2024, including the likes of Tokopedia (e-com - merce, efficiency following the acquisition by TikTok), Mekari (company SaaS platform), Xen - dit (fintech), as companies pursue profitability. Other companies, such as eFishery (agritech) and Investree (peer-to-peer lending), have been under investigation for fraud involving inflated assets and revenues or embezzlement. These events have also affected investors’ risk appetite even though they do not necessarily reflect the management practices of all tech companies. For the record, eFishery had just bagged USD200 million funding in 2023 enabling them to reach unicorn status, while Investree had raised a total funding of at least USD230 million. These cases have provided important lessons for the Indone - sian VC industry. It serves as a clear reminder that even well-funded start-ups with unicorn status are not immune to internal fraud or mismanage - ment. One key takeaway is the need for strong internal controls, independent audit committees and a professionally structured board, especially as start-ups grow in scale. Involving third-party audits and oversight mechanisms should also begin as early as the growth stage, while bal - ancing the need for founders to implement their vision. Additionally, investors must avoid plac - ing excessive trust in a founder’s charisma or vision alone. A more rigorous founder vetting process, covering character references, conflict of interest reviews and background checks, is essential. Likewise, founders should also work to build greater trust by maintaining transparent communication with their shareholders, embrac - ing founder accountability — including avoiding blurred lines between personal and company
assets or decision-making, and strengthening governance structures. 1.3 Key Industries Lately, investors tend to not have preferences for specific industries, but rather focus on the sus - tainability aspect of the potential investee. Com - panies that are already profitable or have a clear roadmap towards profitability are more attractive for investors compared with those that are not yet profitable. However, there are indications that fintech continues to dominate the space of recent financing rounds in Indonesia, while more are seen venturing into healthcare, green energy and natural resources. At the same time, more venture capitalists are looking to exit later-stage tech companies or get partial liquidity. The operation of venture capital funds is specifi - cally regulated by the Indonesian Financial Ser - vices Agency ( Otoritas Jasa Keuangan , or OJK). Pursuant to the relevant OJK regulation, in order to establish a fund, the relevant entity must apply to the OJK for a venture capital licence and ful - fil the relevant requirements, such as minimum paid-up capital requirements. Although there are several options, most local venture capital funds are organised as a PT, with a very few firms oper - ating as a Sharia business unit. 2. Venture Capital Funds 2.1 Fund Structure Further, the establishment of a venture capital fund for the pooling and management of inves - tors’ funds must be made through a mutual investment contract entered into by the licensed venture capital company and the appointed cus - todian bank. This mutual investment contract serves as an underlying for:
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