INDONESIA Trends and Developments Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
Indonesia that discussed these provisions – for example, how a shareholder can exercise the drag-along rights to compel other shareholders to sell their shares or how investors are com - pensated in the event of a down round. Hence, it is difficult to anticipate how Indonesian courts or arbitrations would interpret and apply these provisions in the event of disputes. Exits The ease of exiting is a key consideration for investors when entering a new market. Reflect - ing on the IPO experiences of Bukalapak and GoTo as explained above, IPOs still appear to be an alternative for exit, aside from second - ary sales or finding potential buyers to take over the company. IPO discussions naturally revolve around market conditions. Based on data issued by the Indonesia Stock Exchange (IDX) at the end of 2024, the growth of investors on the IDX shows a positive trend, with a recorded number of approximately 15 million investors with single investor identification, where retail investors still hold the highest portion. The government and IDX are actively support - ing companies’ IPO efforts, including tech start- ups, by issuing regulations tailored to industry characteristics. One notable regulation is the introduction of multiple voting shares (MVS) allowing a single share to carry more than one voting right based on specific tiering thresh - olds. This new voting share class system aims to strike a balance between the developmental needs of tech start-ups, which still heavily rely on the vision of their founders, and the inter- ests of shareholders (including public share - holders). With the presence of MVS, founders can maintain their control over the company. Additionally, while requiring companies to achieve certain metrics on profits, revenues, and/or assets for them to be listed on its Main
Board, the IDX offers alternative avenues such as the Development Board and the Accelera - tion Board with easier-to-meet requirements, particularly regarding the company’s financial capabilities. Hence, it is easier for tech compa - nies to become public companies. In addition to the above, recent developments in the industry, including prominent management fraud cases and the establishment of Danantara, will be highlighted in the following sections. Prominent Management Fraud Cases Leading tech start-ups such as e-Fishery (agr - itech) and Investree (peer-to-peer lending) have recently come under investigation for fraud involving inflated assets and revenues, as well as potential embezzlement. Although these incidents do not necessarily reflect the broader management practices of all tech companies, they have nonetheless impacted investor confi - dence and risk appetite in Indonesia’s start-up ecosystem. Notably, e-Fishery secured USD200 million in funding in 2023, attaining unicorn status, while Investree has raised at least USD230 million to date. These cases have offered important les - sons for the Indonesian VC industry, serving as a stark reminder that even well-funded start-ups are not immune to internal fraud or mismanage - ment. A key takeaway is the need for robust internal controls, independent audit committees and professionally structured boards, particularly as start-ups grow in scale. Third-party audits and oversight mechanisms could be introduced as early as the growth stage, while still being mind - ful to provide founders room to implement their vision.
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