Comment from Sandhy Widyasthana, chief operating officer, MDI Ventures

For years, state-owned enterprises (SOEs) around the world have undeservedly been branded as inefficient, with a variety of loss-making business units hampering core revenue drivers. But as the SOE landscape in China has shown, this has not been the case in recent years – not only have profits and revenues increased across the board, but China’s largest SOEs have become key dealmakers in the global acquisitions space. In Southeast Asia, the outsized influence of SOEs has had varying effects on the aggregate productivity of the region’s 10 economies. A 2019 paper found that while Singapore and Thailand’s SOEs are largely profitable and contribute to state revenues, SOEs in Indonesia, Myanmar and Malaysia serve more nationalistic, non-commercial agendas and play prominent roles in key industries like finance, energy and telecommunications. With the influx of both private local wealth and foreign VC into ASEAN’s startup communities, the region’s SOEs have taken notice of this growth sector. In Singapore and Thailand, corporate venture capital (CVC) arms of SOEs like Singtel, Siam Cement Group and Singapore Press Holdings have become major, active players in early and growth-stage funding rounds of local startups. Bolstered by their market-leading positions and easy access to capital, state-owned CVCs like Singapore’s Singtel Innov8 (founded in 2011 with 82 investees) and SPH Ventures (founded in 2014 with 40 investees) have served as alternative exit routes in the startup landscape. The success of both Innov8 and SPH Ventures when not only establishing early relationships with potential acquisition targets, but also leveraging portfolio companies to improve internal efficiencies for their parent companies (Singapore Telecommunications and Singapore Press Holdings) has encouraged SOE peers in other countries like Thailand, the Philippines, Malaysia and Indonesia to follow suit. In 2019, Indonesia’s Ministry of State-Owned Enterprises directed the country’s three SOE CVCs – MDI Ventures (Telkom Indonesia), BRI Ventures (Bank Rakyat Indonesia) and Mandiri Capital (Bank Mandiri) –  to invest in and leverage the capabilities of startups that can help Indonesian SOEs undergo digital transformation. An alternative exit route MDI Ventures, which has invested in almost 50 companies since 2015, sees this push as a key part of normalising acquisitions by SOEs as an exit route for Indonesia’s startups. Currently, Indonesia’s exit landscape is being dominated by acquisitions by unicorns like Grab and Go-Jek, both of which are still operating at negative cashflow. This is reducing liquidity options for both investors and startups in the digital ecosystem. Building a more sustainable local exit environment is now…

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