Indonesia’s Venture Capital Landscape in 2023: A Comprehensive Analysis by AC Ventures and Bain & Company

A Transformational Year in Indonesia’s VC Sector

AC Ventures and Bain & Company have jointly released their much-anticipated report, ‘Indonesia Venture Capital Report 2023’. This comprehensive document sheds light on the dynamic changes and challenges within Indonesia’s venture capital landscape. In the past year, the sector has navigated a path of recalibration influenced by global economic factors. Despite an initial surge in deal flow in 2021, increasing uncertainties and a more cautious investment approach marked the latter half of 2022.

2023 Projections: Caution and Maturity in the VC Landscape

The report paints a sobering picture for 2023, predicting a significant decline in deal values, estimated between 70% to 80% compared to the previous year. The funding pace as of Q3 2023 remains slow, indicating a cautious approach in the sector. However, this period of recalibration is also seen as a stepping stone towards a more mature VC environment in Indonesia. Investors are shifting focus to startups with strong fundamentals, including solid unit economics and sustainable paths to profitability.

Indonesia’s Resilience in a Global Context

A key highlight of the report is Indonesia’s exceptional performance compared to global trends. While worldwide VC deal values faced declines, Indonesia maintained a stable VC deal value in 2022, recording US$3.6 billion. The country also experienced a 20% year-over-year increase in deal volumes, underlining its resilience and potential as a lucrative market for startups and investors alike.

Macroeconomic Fundamentals and Emerging Investment Themes

Indonesia’s robust macroeconomic fundamentals position it as a beacon of opportunity. With a growing middle class and a significant increase in household consumption, the country’s digital economy is booming, reaching US$77 billion in 2022. The report also delves into evolving investment themes, highlighting a shift towards fintech, climate tech, health tech, and direct-to-consumer brands.

The Future Outlook: IPOs and Sector-Specific Trends

The report anticipates a shift in exit strategies, with a growing preference for IPOs over traditional trade sales. However, it also cautions about the potential impact of current market pressures on the enthusiasm for mega-IPOs. Looking forward, sectors like electric mobility and healthcare are poised to dominate VC activity, with a clear focus on profitability and sustainability.

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Voices from the Industry

Adrian Li, Founder and Managing Partner of AC Ventures, emphasizes Indonesia’s resilience and potential for growth, stating, , “Our research with AC Ventures highlights the shared optimism towards the long-term attractiveness of Indonesia as an investment destination. Macro headwinds and a tougher funding environment will help to shape a stronger and more resilient ecosystem and future growth will be delivered by a clear pipeline of opportunities in emerging sectors coupled with a maturing investor base ready to provide capital to those companies.”

Tom Kidd, Partner at Bain & Company, echoes this optimism, noting, “Our research with AC Ventures highlights the shared optimism towards the long-term attractiveness of Indonesia as an investment destination. Macro headwinds and a tougher funding environment will help to shape a stronger and more resilient ecosystem and future growth will be delivered by a clear pipeline of opportunities in emerging sectors coupled with a maturing investor base ready to provide capital to those companies.”

For the full insights and detailed analysis, the complete report can be accessed at AC Ventures’ website.

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