There has been a significant transformation in Indonesia’s VC industry in recent years, with a market recalibration driven by global macroeconomic headwinds, according to a new joint report by AC Ventures and Bain & Company.
Deal flow increased quickly in 2021, but increasing macroeconomic uncertainty urged caution in investing momentum, leading to a lower number of deals and a decline in deal sizes in the second half of 2022.
The Indonesia Venture Capital Report 2023 provides insights into the industry’s trends, challenges, and future outlook.
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Projections for 2023 anticipate a 70-80 per cent decline in deal value compared to the preceding year. The funding pace in 2023 remained slow through Q3, standing at 0.3x compared to Q3 2022.
Despite the challenges faced by the VC sector this year, the overall growth outlook is positive as the Indonesian VC landscape matures. Investors are now more measured and rational in their approaches, focusing on startups with strong unit economics, leaner valuations, and clear paths to profitability.
One standout insight from the report is Indonesia’s resilience against global trends, with a stable VC deal value in 2022 and an increase in deal volumes year-over-year. The country’s macroeconomic fundamentals, growing middle class, and digital economy all suggest a favorable climate for startups.
However, Indonesia must navigate macro headwinds such as geopolitical tensions, elections, and regulatory changes to stay on its growth trajectory.
The report also highlights emerging investment themes for 2023 and beyond, pointing toward an increased focus on ESG, climate tech, electric vehicles, health tech, and D2C brands.
Also Read: Indonesia needs more female investors willing to back female founders: Helen Wong of AC Ventures
On the exit outlook, there is a rising trend in initial public offerings (IPOs) alongside an imminent upswing in Indonesia’s VC industry. Early-stage deals, especially in burgeoning sectors like electric mobility and healthcare, are expected to dominate VC activity soon.
Global investors are optimistic about Indonesia, with the digital economy projected to reach US$360 billion by 2030, signaling the country’s commitment to a net-zero future.
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