Venture capital encourages synergy between startups and business ventures
From the perspective of Donald Wihardja, CEO of MDI Ventures
Indonesia is estimated to be Southeast Asia’s biggest player in the digital economy. What are the challenges to encourage the reinforcement of the digital economy in Indonesia?
The main challenge of digital development in Indonesia is product innovation, such as designing the most advanced technology. From the startup point of view, this challenge is related to the operational aspect. Indonesia has a huge market, but the challenge is the technology creators and its users are not yet well-literated with technological advancement. As a result, the competitive advantage belongs to startups that are capable of utilizing technology to solve current issues. Hence, we can see that the problem lies in the operations.
However, most big operation solutions in Indonesia needs an enormous investment. We see unicorns in Indonesia are actually solving operational problem such as transportation by ride hailing app and logistics problem by e-commerce. Apart from requiring huge investment, they also need to educate people. Thus, we need to deepen our understanding and reorientation from the investors, that the future of tech startups are bright, but they needs industry to support, they need funds. Advanced technologies require more operational costs and digital talents. Therefore, fundraising became one of the challenges.
What are the characteristics of startups funded by MDI Ventures that are now evidently growing fast?
Startups that generate a revenue stream, growth, and capability to justify their profit margins. In unit economics, we have set the scale for revenue, marketing cost, retention, and so on. The main issue is market suitability. When startups have reached the measured unit economics that translates to growth, they will generate more profits. Eventually, they will come to a phase where profits outnumber the fixed cost.
Regarding startups funded by MDI Ventures, how do you improve innovation and competitiveness of fostered partners?
Unlike any other VC firm, we support startups not only by funding but also opening up business opportunities through synergies. Additionally, we hold events designed to bridge startups with potential business ventures with State-owned Enterprise (BUMN), e.g Telkom Indonesia, Pos Indonesia, Pupuk Indonesia, and many others.
It is the duty of our synergy team to open doors through an event ‘Next Billion Ecosystem Festival’ (Nex-BE Fest) to introduce startups to the commissaries of BUMN and their holding company. Then we keep a record on which investment or synergy to follow up.
Considering the huge market potentials in Indonesia, digital adoption has become a prerequisite. What synergies have MDI Ventures forged with other stakeholders to support digital distribution in regional areas?
First, MDI connects startups with business opportunities. For example, in the health care sector, we bridge between health care providers (Alodokter, Halodoc, and mClinica) and business opportunities in Telkom, AdMedika, Mandiri Inhealth, Bio Farma, and Kimia Farma. The outcomes of these synergies vary from telemedicine, insurance, and e-pharmacy for Kimia Farma’s digitalization.
Second, we bring impacts to small-scale traders and the community in general. Our startups like Aruna and TaniHub provide abundant opportunities for farmers and fishermen. Digital technology has bridged between market demand and agricultural harvest and marine products.
Sustainable investment is a crucial issue for potential investors. What is your take?
We agree with the concept of impact investing as the social responsibility of corporations and philanthropists. However, it is proper corporate governance that improves competitiveness and added value to attain Sustainable Development Goals.
In many American and European countries, buyers only want to purchase products from companies that are engaged in social contract and impactful. There are added values to companies. We are currently building an impact investment fund with Telkom that will come to fruition next year. In addition, some of our companies have released ESG reports.