Indonesian tech startups drop deal plans with US Spac in favor of local approach

The successful nationwide listing of Indonesian e-commerce group Bukalapak has prompted other start-ups in the country to abandon plans for overseas equity offerings in favor of a local one, signaling a payday for their foreign donors.

The interest of international investors in the Indonesian tech sector has grown, groups such as Facebook, Microsoft, Tencent, Alibaba, Google and private equity firms KKR and Warburg Pincus have mushroomed into local start-ups.

The largest economy in Southeast Asia, Indonesia has the region’s largest harvest of unicorns, or private start-ups, valued at over $ 1 billion.

However, until Bukalapak’s IPO for $ 1.5 billion in August, none had managed to get listed on the stock exchange, a crucial stage in a startup’s lifecycle for investors. global.

Today, other Indonesian tech groups are seeing the Indonesian Stock Exchange (IDX) as a credible alternative to international IPOs. The MNC Group conglomerate, founded by billionaire Hary Tanoesoedibjo, scrapped plans to list its video streaming service in the United States thanks to a merger with a blank check vehicle this month.

“When you have a date like this [Bukalapak], it attracts the attention of late stage funds, ”said William Bao Bean, general partner of global venture capital fund SOSV. “Not only was it successful and he fired the starting shot, [but] we should [also] see an influx of funding into the market from international investors. ”

The IDX has sought to attract more tech names through the introduction of regulations to adapt to the industry, such as dual class stocks that would give founders and existing shareholders more control over their businesses.

Bukalapak, an online marketplace backed by Microsoft, Chinese billionaire Jack Ma Ant Group fintech and Singaporean sovereign wealth fund GIC, has increased its IPO from an initial target of $ 300 million to $ 1.5 billion. dollars, which made it the largest stock exchange in the country.

The early days boosted prospects for other tech companies slated to go public in Indonesia. GoTo, a “super app” that offers e-commerce, rideshare, delivery and payment services, is planning a dual listing in Indonesia and the United States aimed at a market valuation of over $ 40 billion.

GoTo backers include Tencent, Google, SoftBank, Alibaba, Visa, and Warburg Pincus.

Raghav Maliah, global vice president of investment banking at Goldman Sachs, said Indonesia has the “largest addressable market” and is at the forefront of global investor demand.

Barrett Comiskey, chief executive of Migo, a start-up that allows consumers to download movies and TV shows to their cellphones through a machine installed in convenience stores, said a shore listing made “a lot of sense. “following Bukalapak’s IPO. .

“Our leading investors have always encouraged us to go to the market where the investor base understands best,” he said. Migo’s investors include Singaporean public investment fund Temasek and YouTube co-founder Steve Chen.

MNC Group this month ended an agreement to merge its subsidiary Asia Vision Network, the holding company of local streaming platform Vision +, with the Nasdaq-listed special-purpose acquisition company, Malacca Straits. Acquisition Company. MNC cited “the growing enthusiasm of IDX investors” for digital businesses.

Willson Cuaca, co-founder of the heavily Indonesian-focused venture capital firm East Ventures, said a number of companies in his portfolio are considering selling shares in the country.

“It’s about scarcity value; there aren’t many public technology companies listed in Indonesia, ”he said.

However, Indonesia still has a long way to go to catch up with the United States or other markets in demand for tech start-ups.

The IDX ranks 23rd globally in terms of market capitalization of its companies listed at around $ 500 billion, behind Singapore and Thailand in the region, according to World Bank data. Trade also remains predominantly retail focused, making stock prices volatile.

“There is still a lack of institutional investors providing stability, although that could change if we get a series of successful IPOs,” said Hwee Ang, founder of financial advisory group Anagram Advisors.

Political risks are another problem, she added. “There is always a question of the longevity of government in Southeast Asian countries, and how policies might change.”

And while Bukalapak rose sharply during its trading debut, its stock has since fallen back to near its IPO price.

Last month, the parent company of Kredivo, Indonesia’s “Buy Now, Pay Later” app, agreed to go public through a $ 2.5 billion merger with a Nasdaq-listed Spac company.

While Kredivo had no plans to pursue an IPO in the United States, founder Akshay Garg said: “We believe that it is always better, as a strategy, to do a capital market quote. most [the] WE.”

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