Merah Putih Fund Hunting for Potential Startups


Minister of State-Owned Enterprises (BUMN) Erick Thohir said the Merah Putih Fund – comprised of funding institutions from several state-owned companies – had obtained a license from the Financial Services Authority (OJK). He also opened up opportunities for the private sector to be involved in the funding. According to him, Merah Putih Fund’s initial capital reached US$300 million. “Merah Putih Fund is very open,” he said on Tuesday.

Erick mentioned several conditions for startups that can be financed by the Merah Putih Fund, including requirements to have an Indonesian-national founder and running its operation in Indonesia, “And if [startup] plans to go public, it must be in Indonesia,” he said. Meanwhile, the Chairperson of the Merah Putih Fund’s Project Management Officer Eddi Danusaputro said that after obtaining OJK permission, the official name of this institution is Dana Ventura Merah Putih Fund.

Our View

The Merah Putih Fund, first launched by President Joko Widodo on December 17, 2021, aims to fund “Soonicorn” startups or those with the potential to become unicorns. This scheme is intended to balance the heavy injection of foreign investors’ funds into national startups with great potential. The government sees this as a problem in the future because the talent in technology may move to other countries or be exploited by foreign entities. Therefore, Jokowi assigned Erick Thohir to establish the Merah Putih Fund, which raised initial funding from several state-owned enterprises.

In the first phase, Merah Putih Fund will raise US$300 million from PT Telkom Indonesia Tbk and its subsidiary PT Telekomunikasi Seluler (Telkomsel), PT Bank Mandiri Tbk, PT Bank Rakyat Indonesia Tbk, and PT Bank Negara Indonesia (Persero) Tbk. In the second phase, the Merah Putih Fund will invite other SOEs and private companies to participate, including the sovereign wealth fund Indonesia Investment Authority (INA).

After operating, the Merah Putih Fund will be led by venture capital representatives under five founding SOEs: Mandiri Capital Indonesia, MDI Ventures, Telkomsel Mitra Innovation, BRI Ventures, and BNI Venture. The five companies will send representatives as Co-Fund Managers.

The Merah Putih Fund does not only require local aspects for startups. Based on information obtained by D-Insights, the venture capital will only provide advanced funding for startups with a valuation above US$200 million. This value is a benchmark because Merah Putih Fund has ambitions to create new unicorns – startups valuing more than US$1 billion. In his state address on August 16, Jokowi claimed to have scored two decacorns (startups valuing more than US$10 billion) and nine unicorns. Through the Merah Putih Fund, the number of unicorns will double in 2022-2024.

With such criteria, the Merah Putih Fund is considered very selective, or in other words, it is difficult for startups to obtain funds injection. This is because, on average, startups with a valuation above US$200 million have received funding from foreign venture capital (which will affect plans to go public in Indonesia), were founded by foreign entities, or have a foreign founder. The most possible startup to get this funding are those “guided” by SOEs venture capitals or startups affiliated with SOEs.

Merah Putih Fund team will use two methods for the startup selection process: actively looking for potential startups and holding pitching for founders who meet the criteria. Until July 2022, around 150 centaur startups (valuing above US$100 million) have the potential to obtain funding from the Fund. However, Merah Putih Fund must race for opportunities because other venture capitalists, including foreign capitalists, are also targetting such startups.