Your Guide to Setting up a Venture Capital Business in Indonesia

Your Guide to Setting up a Venture Capital Business in Indonesia

  • InCorp Editorial Team
  • 18 June 2024
  • 4 reading time

A venture capital business obtains financing through many sources, such as financial schemes and capital participation. The company then uses the fund to develop a venture capital partner or debtor business. Venture capital is often seen as private equity. However, there are some principal differences among the two entities.

In Indonesia, the venture capital business is a direct investment instrument that has thrived over the years due to the country’s attractive investment outlook, emerging markets, diverse demographics, and unique geographical conditions.

This guide will help you understand where the venture capital trend is headed in Indonesia and how you can set one up.

Reasons Behind the Growth of Venture Capital Companies in Indonesia

The growth of capital ventures in Indonesia has been explosive during the past several years, and the number of investments has increased more than 60-fold. In 2017, a total of US$3 billion was collected in venture capital, twice the amount compared to 2016 in startup funding.

Indonesia’s government is undoubtedly thrilled with the influx of venture capital money, which has contributed to the flourishing of local businesses, increasing spending, and growing job opportunities. These are all good indicators of a healthy economy in the country.

President Joko Widodo has also driven policies like tax credits and subsidy programs to encourage more venture capital in Southeast Asia. Money from venture capital not only bridges the gaps that cannot be done by existing businesses in Indonesia, but it also has fewer limitations when compared to conventional financing methods.

Other reasons that boost venture capital growth in Indonesia include the following:

  • Wealthy groups and individuals exist in Indonesia
  • Increasing demand for data mining and management, especially in fintech
  • The surging number of startups

Some of Indonesia’s most well-known venture companies are MDI Ventures, Convergence Ventures, BRI Ventures, East Venture, and Ideosource. Besides that, you can also find names like Sequoia, Y Combinator, AC Ventures, and PT Prasetia Dwidharma, among others, that are active in Indonesia regarding startup funding.

Read more: 6 (Small) Business Opportunities to  Venture into to Indonesia

Requirements for Starting a Venture Capital Business in Indonesia

Setting up a Venture Capital Business in Indonesia

Venture capital companies in Jakarta and all over Indonesia can conduct business activities, including venture funds management and fee-based service activities, with approval from the Indonesian Financial Services Authority. Permitted types of legal entities for starting a venture capital business are limited liability companies, cooperatives, and limited partnerships.

Other requirements are detailed below:

  • IDR 50 billion paid-up capital for a limited liability company
  • IDR 25 billion paid-up capital for a cooperative
  • IDR 25 billion paid-up capital for a limited partnership company
  • All paid-up capital must be paid in cash
  • A venture capital company of foreign investment can only be set up in the form of a limited liability company with a maximum foreign ownership of 85%

Establishment Procedure for Venture Capital Business in Indonesia

A venture capital business license must be obtained from the OJK before a venture capital firm can conduct venture capital business activities regarding startup funding. Here’s a brief explanation of the process:

  1. The Board of Directors applies for the business license at OJK by submitting the required documents.
  2. OJK approves or rejects the application within 30 business days of receipt.
  3. Once the application is approved, the firm will receive the business license and can proceed with the business activities no later than 6 months after receiving the license.

Read more: How to Prepare a Joint Venture Agreement in Indonesia

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How InCorp Indonesia Can Assist

InCorp Indonesia offers you and your business a new beginning in Indonesia with our best experience and knowledge.

We help you start your business nationwide with cutting-edge services that minimize your overall venture capital business setup in Indonesia.

We are decade-old professional business consultants who work closely with our clients to ensure efficient communications and outcomes for company registration, licensing, business outsourcing, legal advice, and other business services.

We’ll guide you in setting up your venture capital company in Indonesia based on your budget and requirements, complying with all legal procedures.

Fill out the form below to send us your inquiry.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

It should take between 30 to 45 days.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.