AC Ventures and Bain & Company have jointly released the much-anticipated report on Indonesia’s venture capital (VC) landscape titled ‘Indonesia Venture Capital Report 2023.’ This comprehensive study delves into the current trends, challenges, and the future outlook of the VC industry.
The Indonesian VC sector has undergone a notable transformation in recent years, marked by a recalibration in the last 12 months due to global macroeconomic headwinds. Despite a quick pickup in deal flow in 2021, increased macroeconomic uncertainty in the latter part of 2022 led to caution in investment momentum, resulting in a decrease in both the number and size of deals.
Projections for 2023 indicate a sobering outlook, with an expected 70% to 80% decline in deal value compared to the preceding year. The funding pace in 2023 has remained sluggish through Q3, standing at 0.3x compared to Q3 2022.
Despite the challenging year for the VC sector, the report emphasizes a positive growth outlook as the Indonesian VC landscape matures. Investors, following a surge in confidence during 2020-2021, are now adopting more measured and rational approaches. The report highlights a shift in investor priorities, focusing on startups with strong unit economics, leaner valuations, and clear paths to profitability. This shift is evident in the declining conversion rates from seed to series A/B funding rounds.
An interesting finding in the report is Indonesia’s resilience against global trends. While the global VC deal value faced a decline, Indonesia maintained a stable VC deal value in 2022 at US$3.6 billion, with a 20% YoY increase in deal volumes.
The report underscores Indonesia’s attractive macroeconomic fundamentals, positioning it as a bright spot in the region for startups. With a growing middle class, a 4.6% growth in GDP per capita in 2022, and a digital economy reaching US$77 billion, Indonesia offers a favorable climate for business. However, challenges such as ongoing US-China tensions, the 2024 elections, pressure on major tech players for profitability, and evolving regulations need navigation for sustained growth.
Deep dives into key investment themes reveal shifts from platform-based businesses to fintech, climate tech, electric vehicles, health tech, and direct-to-consumer (D2C) brands. The report predicts an upswing in Indonesia’s VC industry, with early-stage deals, particularly in electric mobility and healthcare, dominating VC activity. Late-stage startups are expected to prioritize profitability, aligning with the projection of the digital economy reaching US$360 billion by 2030.
Adrian Li, founder and managing partner of AC Ventures, said, “With multiple emerging sectors on the rise and a strong commitment to a sustainable future, Indonesia remains a promising hub for global tech investors.”
Tom Kidd, partner at Bain & Company, added, “Macro headwinds and a tougher funding environment will help shape a stronger and more resilient ecosystem, with future growth driven by emerging sectors and a maturing investor base.”
To access the full report, visit: [https://acv.vc/resources/indonesia-vc-report-2023](https://acv.vc/resources/indonesia-vc-report-2023)
