Fund focus: MDI leads the way in Indonesia

As the share price of Zoom makes plain, COVID-19 has been good business for communications. While most corporate venture capital programs are pulling back to ride out the downturn by focusing on their core operations, those that happen to be bankrolled by telecom players are in a decent position to buck the trend.

MDI Ventures, an arm of state-controlled Telkom Indonesia offers perhaps the most dramatic example of this effect, having assembled its largest fund yet at $500 million. It now claims to be the largest VC, corporate or otherwise, in Indonesia with assets under management topping $790 million.

Telkom is the sole LP in the fund, as was the case with MDI’s $100 million vehicle in 2015 and its $40 million follow-up in 2019, which focused on synergies with the company’s mobile carrier Telkomsel. A third vehicle known as Centauri Fund, launched in partnership with Korea’s KB Investments, raised $150 million in 2019 for growth-stage deals.

Part of the reason for the ramp-up is the straightforward idea that the success of Indonesia’s start-up ecosystem during the past few years has necessitated more firepower.

“There are now many mature companies, with proven business models and track records of healthy revenues and partnerships,” says Donald Wihardja (pictured), MDI’s recently appointed CEO. “In 2020, they simply need bigger funding rounds to reach higher levels of venture scale, and this in turn requires larger venture funds to be on the scene here in Indonesia. Being able to observe these things from the inside was a big part of why we knew we had to up the ante.”

Much of the philosophy with the new fund comes from a recognition that the pandemic has been a net positive for the local government, having forced various legacy institutions to digitize. The state-owned enterprises (SOE) that drive much of the new economy are part of this equation as well, but they still need help, especially from the entrepreneur community.  

“The vision is to have digitally-enabled, state-owned enterprises via partnerships with start-ups,” Wihardja explains. “This would not necessarily mean converting the start-ups themselves into bureaucratically-laden SOEs.”

Sector targeting will stick to MDI’s core themes, including healthcare, logistics, commerce, travel, financial technology, and food. There has been some success already in plugging healthcare investment into the SOE strategy, with MDI helping telemedicine start-up Alodokter contribute to the modernization of the national health insurance and social security system BPJS.

Meanwhile, Wihardja notes that the coronavirus-driven e-commerce boom is highlighting which retail segments work best and what kinds of start-ups can successfully ride the wave. Logistics and fintech are logically seen as piggybacking on this growth, as are new angles on the food and beverage sector. But in the case of the latter, proof-of-concept remains elusive. 

“The food industry in Indonesia needs to be further digitized and made more efficient,” Wihardja says. “So far as we can tell, no single company has fully cracked the code yet, but we are keeping an eye on it. Many start-ups are working on it, but the exact winning business model has yet to be found.”

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• Topics
• Southeast Asia
• Venture
• Technology
• Fundraising
• Indonesia
• MDI Ventures
• TMT