Bain – Indonesia Venture Capital Report, 2023

The Indonesian venture capital industry has undergone a reset in response to market uncertainty.

After a strong period of growth in 2021 and the first half of 2022, capital deployment slowed down in the second half of 2022 due to global macroeconomic factors and investors redirecting resources to portfolio support. This trend has continued into 2023, with data indicating a significant decline in deal value compared to the previous year. Investors have adjusted their investment criteria to prioritize lower valuation multiples, stronger unit economics, and companies' ability to achieve profitability. As a result, start-ups are under pressure to shift their focus from rapid growth to capital efficiency and profitability. Despite these challenges, Indonesia remains a promising market in the regional venture capital landscape. The country's attractive market fundamentals have helped maintain reasonable deal value in comparison to other global markets. Deal volumes have also increased, particularly in early-stage opportunities.

Overall, the venture capital investment in Indonesia has transitioned to a more sustainable pace compared to the unusual period of 2020-2021. Start-ups are now expected to meet or exceed milestones before being considered for subsequent fund raisings, leading to a healthier startup ecosystem that prioritizes customer demand, durable business models, and efficient execution.