Wednesday (9/8), the Alumni Family of the Faculty of Economics and Business, Universitas Gadjah Mada (KAFEGAMA), together with PT Pupuk Kaltim, held a seminar which was one of a series of events from Pupuk Kaltim – Gadjah Mada Business Case Competition (PKT-GAMA BCC). This event was held through a Zoom Meeting with the theme “Venture Capital Investors Still Interested in Investing in Start-Ups”. On this occasion, the guest speaker who attended was Eddiwan Danusaputro, Main Director of PT BNI Modal Ventura.
Eddi opened his presentation by explaining the difference between private equity and venture capital. Private equity tends to target established companies. The percentage of shares is also higher, reaching more than 50%. Meanwhile, venture capital invests in start-up companies and generally has a small percentage of shares, namely only 5-20%. Venture capital looks at several specific metrics at each funding stage: founding team, market potential, business concept, market competition, attractiveness, and strategic fit. In the early stage, the founding team is essential to consider. While in the growth stage, attractiveness is an essential thing to consider.
To find financing, it is challenging for start-ups to borrow capital from banks. To get a loan from a bank, a start-up must provide collateral. Start-ups are also considered unable to generate maximum profit, so banks will likely reject loan applications. As a solution, start-ups can issue new shares. Even though it will reduce the share ownership of the start-up founder, this step allows for an increase in the company’s valuation. “That is what venture capital does: not providing credit, but buying their (start-up) shares,” said Eddi.
Indonesia is ranked sixth with the highest number of start-ups globally. Despite the decline, investors still demand Indonesia because it is considered a growing market. Global start-up funding has experienced a downward trend in interest rates in light of uncertain global economic conditions. Until Q2 2022, the funding trend is still increasing and will start to decline in Q3 until the end of 2022. This condition proves that the global economy has significantly impacted the start-up industry worldwide, including in Indonesia. The good news is that investors see that the industry is still doing quite well and with a tightening appetite.
The first stage of investment in start-ups is angel investors. At this stage, 3F (friends, family, and fools) is a financing method for obtaining loans from family members, friends or acquaintances. After the start-up experiences development, such as indications of traction and increasing income, the levels become series A, B and C, the target of which is venture capital. The highest stage is IPO and acquisition, targeting private equity and conglomerates. Then, Eddi emphasized that a suitable business model can be one of the critical factors for the success of a start-up.
The first step in initiating a start-up is defining the problem. The next step is to provide a solution to the problem. The third stage is to determine the team and the composition of each role. A start-up needs to find the right investors to run their business. Another critical thing to do is to look at the market and business competitors to identify the right strategy. In developing start-ups, establishing relationships and networking with fellow business partners is vital to continue.
Today, start-ups face real problems. The challenge of competition is one problem that is often encountered. New companies with exciting innovations allow old companies to become unstable. Eddiwan gave an example of how Gojek disrupted the transportation service business in Indonesia. In addition, technology also plays an important role. Its presence can trigger changes in consumer behaviour and threaten privacy security. “Start-ups experience natural selection; whoever is strong will survive,” said Eddiwan while concluding the discussion.
Reportage: Adella Wahyu Pradita
Watch the full video https://www.youtube.com/watch?v=-_O5XvfpvIk
