BRI Ventures to Manage New Venture Fund "Sembrani Nusantara"

BRI Ventures launches a new managed fund named "Dana Ventura Sembrani Nusantara". The fund acts as a new vehicle for BRI Ventures to invest in early stage startups and the non-fintech segments, such as education, agro-maritime, retail, transportation, and health.

As a non-CVC fund, Sembrani Nusantara's concept is similar to the Centauri Fund managed by the MDI Ventures and KB Financial Group in South Korea, despite some fundamental differences.

The name Sembrani Nusantara is to represent a symbol of the future startup philosophy. Sembrani, Batara Wisnu's horse in the wayang story, is a representation of a unicorn with local wisdom.

In today's event (6/24), BRI Ventures is said to raise IDR300 billion. BRI, as a General Partner, also plants money into the fund and has received some commitments from institutional investors as Limited Partners.

In terms of managing venture funds, BRI Ventures has obtained OJK approval after submitting it last year. The venture fund is an investment contract scheme between PMV and the custodian bank, made by OJK for the venture capital industry willing to enter the equity participation.

To date, most of local PMVs play in profit-sharing financing, which is not much different from the ones performed by financial companies.

BRI Ventures' CEO, Nicko Widjaja explained, Sembrani Nusantara is inspired by the will to prepare a broader investment climate, however, in compliance with rules under OJK's surveillance radar.

"BRI Ventures intends to build an ecosystem which lately controlled by foreign PMVs and we are yet to prepare. Now is the time for us to start, which is likely to change the ecosystem in ASEAN," he said.

The issue of high taxation, which behind many local PMVs to run away and flee to neighboring countries, can actually be overcome with some adjustments. He said BRI Ventures reduced management costs and other costs.

"Instead of waiting for the rules to change, why don't we change the mindset. We have talked to the [BRI] group, we changed the carry profit and management fees, [because] we are aware that we cannot instantly ask the government to change. With Sembrani Nusantara, we are trying to redefine the VC industry in Indonesia. We adjust [two things] to make the industry more competitive. It's like an early startup with a subsidy."

Of the total Rp300 billion managed funds, BRI Ventures is to invest in 10-15 non-fintech early-stage startups for the deployment period between the next two to three years.

Widjaja said Sembrani will continue to review its progress, considering this is BRI Ventures' first time to create funds and managed external funds. Until recently, BRI Ventures always invested in startups as a single LP.

"The challenge in managing venture funds is we have to communicate more for there are various investors and most importantly to perform education which very lacks these days."

First mover

Sembrani Nusantara is to bring fresh air for the local startup ecosystem which continues to be dominated by foreign investors. The license from OJK can be considered as the first movers because they agree to comply with domestic rules.

For the record, many venture capital players, even with an office in Indonesia, are having legality in Singapore due to tax-friendly. The provision of paid-up capital limits is considered not in accordance with the pattern of VC players which mostly run in tech startups and raise funds from external investors.

In addition, the large income tax (PPh) is still a challenge for local investors to compete with foreign investors. According to PMK No.48 of 2018 regarding the Tax Treatment of Equity Participation of Venture Capital Companies in Micro, Small and Medium Enterprises is considered not friendly to accommodate the capital gain tax rules.

The capital gains tax for PMV reaches 25% of the increase in equity value, while for individual investors 30%. This large number has made foreign investors prefer to channel their capital through PMA, rather than collaboration with local PMVs. Meanwhile, the capital gains tax in Singapore is only 5%.

Most of the local PMVs investing in digital startups and have been registered with the OJK are part of the bank's subsidiary, such as Central Capital Ventures (CCV), BRI Ventures, and Mandiri Capital Indonesia. The majority of them focus on investing fintech startups to support their parent business in accordance with the regulator's mandate.

According to OJK's data as of March 2020, there are 61 PMVs obtained permits, consisting of 57 conventional PMVs and four of which were Sharia-based. As of April 2020, the performance of most PMVs came from profit-sharing financing of 77%, 19% equity participation, and 4.1% convertible bonds. This number changed from last year's position. Profit-sharing financing portion reaches 99%.

"We are encouraging BRI to become a digital [investing digital startup] PMV. In addition, Sembrani Nusantara is well received by investors, therefore, it can support the PMV industry which is very limited [for investing shares in startups," the Head of OJK's 2B IKNB Supervision Department Bambang W. Budiawan explained on the same occasion.

–Original article is in Indonesian, translated by Kristin Siagian