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Indonesian startups to get $200M in seed money

Posted: 21 Aug 2014 ?? ?Print Version ?Bookmark and Share

Keywords:start-up? Telkom? Metra Digital?

Indonesia's largest telecommunications company, Telekomunikasi Indonesia (Telkom), is pushing for nationwide innovation by investing millions of dollars in seed money to tech start-ups.

Telkom is set to allocate some $200 million dollars to local start-up companies, Jakarta Globe reported. The state-controlled company hopes to spur a nationwide creative industry, which it expects to contribute to the country's economic growth.

In order to speed innovation and develop new projects, Telkom has created Metra Digital Investama, which will be operating under Multimedia Nusantra (TelkomMetra), the company's information and digital media arm.

Apart from initiating innovation and other technological projects, Telkom expects Metra Digital to become an additional source of revenue for the firm.

Presently, Telkom is searching for start-up companies that it could invest in. It has also not disclosed yet the exact amount of money to be invested in each start-up.

One potential company that Telkom could invest in is Kaskus, an internet forum site which claims to be the largest online community in Indonesia. So far, though, Telkom has not revealed any start-up that will receive a chunk of the $200 million seed money.

Start-ups normally seek financing for their businesses to grow, but bank loans are quite difficult for them to obtain because these companies are often viewed as high-risk investments. This situation makes liquid investments, such as that of Telkom's, a much-needed help for these local tech companies.

Lack of government support

Research and development endeavours in Indonesia often rely on private funding due to the lack of government support. This year alone, the allotted budget by the government for R&D amounted to $684 million only, a measly 0.5 per cent of the state's national budget.

Telkom currently has several start-ups in its incubation centres in Bandung Digital Valley and Jogja Digital Valley, with 20 and 10 start-ups each. They will get free use of facilities such as co-working space, services, market access, and financing. The seed money per company is $19,530 and an additional $156,250 for the most promising start-up.

The company is planning to put up another incubator centre in Jakarta.

Helping Metra Digital in its operations is Fenox Venture Capital, a Silicon Valley-based venture capital firm, which Telkom has a standing partnership, making the Bandung-based company the first Indonesian company to expand to Silicon Valley.

Fenox was established in 2011 and had already invested in almost 40 start-ups around the world. Some of these companies include Sidecar, a free ridesharing services firm; TechInAsia, a technology news site; and, a Singapore-based end-to-end property search website.

It has also invested in Indonesian start-ups, such as online marketplace Bukalapak,com and online real estate market forum Apart from giving private funds, Fenox also plans to send in experts from Silicon Valley to train local entrepreneurs in growing and developing their tech businesses.

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