Indonesian Bank Mandiri’s subsidiary PT Mandiri Capital Indonesia (MCI), the corporate venture capital arm of the country’s largest financial institution, recently announced that is currently searching for promising startups in which to invest in as part of a strategic vision to establish a strong foothold in Indonesia’s fast expanding digital business space. It is understood that the venture capital firm will initially invest upwards of US$5 million for each startup that has shown promise in innovation and creativity, with a special emphasis on startups in the payments space as they could become strategic partners with Bank Mandiri, its holding company. Previously, Mandiri Capital Indonesia had invested approximately US$70 million in thirteen startups across the world’s largest island country.
Eddi Danusaputro, president director of Mandiri Capital Indonesia, said that the venture capital firm will provide between US$2 million to US$5 million for the acquisition of at least ten percent of a startup’s shares. He stressed that the company is quite experienced in running this business, seeing as that they have already invested in thirteen startups over the past four years. The president director also previously mentioned that MCI is looking to make investments in three promising startups for the year 2020.
MCI has made investments of around US$70 million in several up-and-coming local startups since its inception in 2016. Some of these noteworthy startups include Investree, Indonesia’s leading business-to-business marketplace lending platform for small and medium-sized enterprises; Amartha, a pioneering peer-to-peer lending startup that focuses on women-owned businesses; and Crowde, a fintech startup with a focus on empowering Indonesian farmers with capital and technology.
Based on the company’s experience, Eddi said that making investments in developing startups is a risky venture, even though the returns can be quite lucrative. It is risky because MCI would lose all of its investments if the startups that it had supported did not succeed since their investments are equity injections. Indeed, very few startups go on to achieve success from their initial beginnings, with most failing to achieve a sustainable business model. Therefore, the venture capital firm takes into account several factors for its risk management strategy when determining which startups to invest in.
One of these factors is the makeup of the startup’s founding team. Studies have shown that a diversified founding team can provide strong leadership and a variety of viewpoints that can enrich the startup as a whole. Each founding member also brings their own unique skill sets and experiences to the table, which can only serve to benefit the startup in the long run. Startups with just one founder running the entire business are deemed too risky because they have to overburden themselves with too many responsibilities and may not have the required skills or expertise to tackle all of the issues faced by the company. Ideally, a startup’s founding team should comprise a person capable of running a business, a tech expert, and a creative type for ingenious thinking and innovative ideas.
Besides the startup’s founding team, the other crucial factors that MCI looks into are whether the forecasted valuation can bring profitability, and whether the startup’s business model is able to sustain itself in the long run.