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Investments in Indonesian startups sustain through Q1 with mixed outlook

In the first quarter of 2020, Indonesian startups in all stages of growth still managed to notch investment.

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The ongoing COVID-19 pandemic has hit the economy across various sectors. According to a report by research and advisory organization Startup Genome, venture deals in China, the pandemic’s ground zero, have contracted by approximately 57% in the first two months of the year.

If a similar decline is to be found globally, the report projected that USD 28 billion in startup investments will be wiped out in 2020. Asia might see the biggest drop, considering the importance of Chinese capital in the region’s startup ecosystem.

However, the Indonesian startup industry has not quite felt the impact yet. According to research conducted by Daily Social, funding numbers in the first quarter of 2020 were relatively normal. The report referenced 20 investments during the first three months of the year, covering the spectrum of early-stage firms to more mature businesses. The sum is close to last year’s count in the same period, when there were 27 investments made public.

The report indicates that most of the investments are in their early stages, including seed and Series A rounds. On the other end of the range was Gojek’s USD 1.2 billion notch that was part of their ongoing Series F round, which has an overall USD 3 billion target. This may suggest that despite the current situation, investors still have confidence in startups, especially those that have made it into the major leagues.

However, the reason why Indonesian startups have yet to feel the impact of COVID-19 is that most deals that were finalized in the past three months were actually agreed upon in 2019. In general, startups need at least six months before reaching an agreement with investors.

East Ventures co-founder and managing partner Willson Cuaca said that his firm will do business as usual, even though there might a slowdown in signing new deals, as reported in local media outlet Bisnis.com“Good time, bad time. Venture capitals will continue to invest. When it rains, invest in umbrellas. When it’s hot, invest in hats,” he said, describing the flexibility of VC firms.

Mandiri Capital’s CEO, Eddi Danusaputro, offered a different view. He noticed that many startups are delaying their fundraising rounds. Since the government now restricts social interactions and public activities, it’s hard for VCs and startups to conduct due diligence. “Consequently, startups have to be more efficient in managing their cash,” he said to local media outlet Kontan.

Nonetheless, the steady first quarter may just be the calm before the storm. CB Insights predicted that Asia will see a dramatic drop-off in deal volume, which will fall by 40%. Silicon Valley’s Sequoia Capital has warned of a negative business impact on startups that will last throughout the year, possibly even longer, until the economy recovers.