Indonesian tech start-ups are foregoing plans to sign a US Spac pact in favour of staying in the country

Indonesian ecommerce business Bukalapak's spectacular domestic IPO has led other start-ups in the country to forego plans for overseas share issues in favour of going local, signalling a payoff for their foreign investors.

International investors have flocked to Indonesia's tech sector, with companies such as Facebook, Microsoft, Tencent, Alibaba, Google, and private equity firms KKR and Warburg Pincus investing in local start-ups.

Indonesia, the largest economy in Southeast Asia, contains the region's highest crop of unicorns, or privately held start-ups worth more than $1 billion.

Until Bukalapak's $1.5 billion IPO in August, no company had ever successfully listed on a stock exchange, a vital milestone in the start-up lifecycle for international investors.

Other Indonesian tech companies are now looking at the Indonesia Stock Exchange (IDX) as a viable alternative to overseas IPOs.
This month, MNC Group, the conglomerate established by billionaire Hary Tanoesoedibjo, abandoned plans to list its video-streaming business in the United States through a merger with a blank-cheque vehicle.

“When you have an exit like that [Bukalapak], it attracts later-stage funds,” said William Bao Bean, general partner at global venture capital firm SOSV.
“Not only was it a success and it fired the starting gun, but we should also witness a financial boom from international investors,” says the author.

The IDX has attempted to recruit more tech names by enacting policies that cater to the industry, such as dual-class shares, which would allow founders and existing shareholders more authority over their companies.

Bukalapak, a Singapore-based online marketplace backed by Microsoft, Chinese billionaire Jack Ma's fintech company Ant Group, and Singapore's sovereign fund GIC, increased its initial public offering from $300 million to $1.5 billion, making it the country's largest-ever stock market listing.

The success of the initial public offering boosted the prospects of other tech companies planning to go public in Indonesia.
GoTo, a "super app" that provides ecommerce, ride-hailing, delivery, and payment services, is proposing a dual IPO in Indonesia and the United States, with a market cap of more than $40 billion.

Tencent, Google, SoftBank, Alibaba, Visa, and Warburg Pincus are among GoTo's backers.

Indonesia, according to Raghav Maliah, global vice-chair of investment banking at Goldman Sachs, has the "biggest addressable market" and is at the forefront of global investor demand.

In the wake of Bukalapak's IPO, Barrett Comiskey, CEO of Migo, a start-up that lets people to download movies and television shows to their mobile phones via a machine put in convenience stores, said an onshore offering made "a lot of sense."

“Our blue-chip investors have always urged us to go where the investment base is most knowledgeable,” he said.
Temasek, the Singaporean state investment fund, and Steve Chen, the co-founder of YouTube, are among Migo's investors.

MNC Group has cancelled a merger agreement with Malacca Straits Acquisition Company, a Nasdaq-listed special purpose acquisition company, to merge its subsidiary Asia Vision Network, the holding company for local streaming platform Vision+.
MNC noted “increasing investor appetite in the IDX” for digital businesses.

Willson Cuaca, co-founder of East Ventures, a venture capital firm with a strong focus on Indonesia, said a number of his portfolio businesses were considering stock offerings in the nation.

He explained, "It's about scarcity value; there aren't many public technology companies listed in Indonesia."

Indonesia, on the other hand, still has a long way to go to catch up to the United States or other countries in terms of demand for tech start-ups.