The fast-rising trend of entrepreneurship among tech-savvy millennials has encouraged the contribution of angel investors. The growth of angel investor Indonesia community is so fast that there are local online platforms that encourage the contribution of angel investors. These investors not only help small startup owners to launch their businesses, but also push the trend of youth entrepreneurship.
Definition of Angel Investor
Angel investor was a term originally coined in 1978 by William Wetzel, the founder of Center of Venture Research at the University of New Hampshire. He took examples from wealthy people who used their personal money to support theatre performances on Broadway, and early industrial-era investors who provided seed capitals and boosted American industry.
“Angel investor” is a more preferable term than “lenders”, since the investors do not apply high interests and prefer to support small or new businesses. These investors often consist of affluent individuals, although in the modern business term, angel investors may consist of friends and families of the business owner who contribute for his or her first capital seed.
Angel investors used to contribute money as individuals, usually, because they wanted to keep abreast of recent developments, support potential new entrepreneurs, or create networks. During the 70’s and 80’s economic boom in industrial countries, many angel investors started to merge into various groups and invested more substantial capitals.
With the coming of the internet and online business, anyone can share status as angel investors. Online crowdfunding platforms such as Kickstarter and Patreon allow people to contribute for various projects, from startup development to independent art projects. However, the more affluent individuals may choose more sophisticated and organized ways to support new businesses.
Differences between Angel Investors and Venture Capitals
Angel investors are different in many ways with venture capitals. Here are the main differences you should know between them:
The numbers of investors
Angel investors may form networks or communities, but they consist of individuals. You can invest your money individually to one or several startups at once. Meanwhile, venture capitals are usually companies or corporations.
Angel investors may support small or new startups, and an individual investor can provide seed capital for more than one “bootstrap” startups. Meanwhile, venture capitals usually only invest in established growing businesses (even with small businesses, venture capitals typically choose those that already have stable revenues). Some exceptions may apply, such as if the startups are backed/created by already-successful founders.
Amounts of investments
Angel investors can start the investments for as little as USD25,000, or even less depending on the startup type. Meanwhile, venture capitals often start from hefty numbers, such as USD1 million.
Types of contacts
Since angel investors often consist of individuals, the numbers of contacts they have are usually limited. Even a successful investor may not have extensive networks of important contacts related to the investment type. Meanwhile, venture capitals not only have extensive contacts, but they also can provide new, useful contacts for the supported businesses to grow.
Types of involvement
An individual angel investor needs to be in constant communication with startup owners, but he or she can have “on-off” investment style. Aside from the money, the investor can contribute in other forms, such as mentoring. Meanwhile, venture capitals require seats in the board in return for their financial investments.
Since angel investors can work with newly-hatched startups, they become ideal supporting forces for the growing numbers of new entrepreneurs and startup owners, especially in a developing country like Indonesia.
Angel Investor and Indonesian Online Startups
In January 2015, Fortune named Indonesia as one of the fastest-growing emerging online markets and an ideal place to invest. Since many homegrown online businesses are started with really small capitals, venture capitalists are often not the ideal options for financial support. Luckily, many affluent individuals have set their eyes to small businesses, and they took initiatives in forming angel investor network.
There are several notable angel investors in Indonesia, and they have contributed to the developments of various businesses, including unicorn startups. They are:
Internet business pioneer and entrepreneur Shinta Bubu was among the earliest angel investors in Indonesia. She has supported various startups local startups, such as DreadOut horror game, Catfiz messaging app, and country-based social app DewaNation. Some of the startups she endorsed have ceased to grow, but it does not stop her from supporting new, potential businesses.
Shinta Bubu also developed Indonesian angel investor network called Angel-eQ Network. Its initial members consisted of 15 successful business owners and executives from various corporations, ranging from TV station to privately-owned bank and airline company. The members are committed to supporting potential startups using their own money.
Victor Fungkong is the CEO of PT Indonusa Dwitama, an IT and energy company. Victor was famous for becoming an early supporter of Tokopedia, one of Indonesia’s unicorn startups. He gave financial supports to Tokopedia’s founders, William Tanuwijaya and Leontinus Alpha Edision, during the startup’s early development period (2009-2010). Now, Victor owns about 80 percent of shares in Tokopedia.
Sugiono Miyono is the CEO of PT Trikomsel, which is famous among new entrepreneurs and startup owners. Sugiono was also the early supporter of KapanLagi.com, a local online news network. Sugiono later founded a local capital venture corporation called Ideosource, which helped with the development of FemaleDaily (women-focused online media), Saqina (e-commerce network), and 8wood (online fashion store).
Danny Oei Wirianto
Danny Oei Wirianto is the Chief Marketing Officer at GDP Venture and has become an angel investor for several successful startups in Indonesia, Singapore, and the US. He financially supported the development of KasKus, Indonesia’s most famous online forum network. Danny also has experiences in creating startups, such as SemutApi Colony and Mindtalk.com.
Elisa Lumbantoruan is a former director of Garuda Indonesia, the biggest airline company in Indonesia. She has become an angel investor for several local startups, although she does not specify the names. She also helps new entrepreneurs in the form of professional advice and mentoring.
Amir Sambodo is a former CEO of Berau Coal, and he has contributed to the development of famous startups such as Nuesto (software house for the online queue), Good News from Indonesia media network, and BitRead Digital Publishing.
These investors are only a fraction of angel investors in Indonesia, but they have managed to help small startups grow into large-scale businesses with substantial profits and exposure. In fact, becoming an angel investor for Indonesian entrepreneur markets offers a wide range of possibilities.
Why Becoming Angel Investor in Indonesia?
There are several good reasons why Indonesia is ideal for angel investors. Here are some of them:
Increased exposure to Indonesia’s potentials
Indonesia is one of the Asia Pacific countries that slowly receives international attention due to its growing potentials. The country’s populations adapt quickly to technology and information trends and consist of rich demography that creates a potential customer base. The new generations also have higher possibilities to become entrepreneurs, especially in businesses related to internet and digital technology.
Investors may only need to spend small
Indonesia may be booming in the economy and business trend, but it is still possible to invest at a small startup with minimum seed capitals. Many internet businesses in Indonesia are homegrown or started with small capitals. At this stage, investors are able to find startups that only need USD200,000 to USD500,000 as seed capitals. This is perfect for angel investors who are not particularly affluent.
However, prospective investors may see the rise of valuations in several years, especially with large investments given to Indonesia’s prominent e-commerce players, such as MatahariMall, Go-Jek, and Tokopedia.
Investors may find unique startups
Many small (“bootstrapper”) startups in Indonesia were created to tackle real problems. The most successful example is probably Go-Jek, which focuses on ride (and later, delivery) services with motorcycles to tackle Indonesian cities’ traffic problems. Now, investors are faced with some interesting, low-cost startups that have great potentials to be successful in Indonesia.
Some of the newest potential startups include Zenius (education video source), HandyMantis (motorcycle courier service), and Mimopay (e-payment aggregator service). Investors can expect other creative and potential startups to come so that they can invest their money in various low-capital businesses.
Opportunity to practice their knowledge in business trend
Many investors find satisfaction not only from possible profits but also the ability to put their knowledge into practice. Indonesia may offer great opportunities to become angel investors, but there are also risks related to business and market trends. These are great challenges for investors to tackle, using proper strategies and knowledge to gain profits even from a small amount of seed capitals.
Giant firms aim to support more e-commerce businesses
International firms and affluent investors around the world have started giving their financial support to Indonesian e-commerce businesses, with Tokopedia and Go-Jek as the most successful recent examples. This means that any angel investors who contributed to the development of such startups will also gain extra profits.
Indonesian e-commerce businesses are growing fast, and angel investors can still find various startups that address unique but real problems. If you decide to become an angel investor in Indonesia, make sure to tap the startup market early, especially if you also dream of getting future profits.
Tips to Become Angel Investor in Indonesia
Thinking of becoming an angel investor? Here are some useful tips to apply before shelling out your money:
Prepare your psychology
Becoming an angel investor nowadays is more than just spending money and see where the startup goes. Unlike liquid investments such as real estate or stocks, investing in new startups can mean that you do not see any money until the business actually profits. Depending on the growth speed, a new startup may need around five to seven years to make substantial profits. This means that you will not see your money for those many years.
Don’t get excited too fast
A good pitch can make the difference between substantial investment decision and empty hand. Therefore, make sure you do not get excited too easily when facing a seemingly potential pitch. If you think of supporting one type of business, such as e-payment platform startup, make sure to review a handful of similar emerging startups.
Consider joining a network or community
Unless you are a super-affluent individual with your own financial advisor and unlimited funding, you must consider joining an angel investor community or network. In Indonesia, networks such as ANGIN helps investors creating the best strategy, getting the newest information, and screening the new, potential startups that deserve the funding. This is useful if you plan to fund more than one startups.
Invest in a small group
Related to the previous point, a first-time angel investor may consider investing in a small group (“syndicate”). This strategy provides you with the benefits of group assessment, risk management, and funding. You can also get benefits from the group’s accumulated knowledge, networks, and experiences.
Prepare good money management
Angel investors face more significant risks in their investments compared to more traditional options. Diversifying the investment choices is recommended, which is why the abovementioned Indonesian angel investors chose to fund multiple startups. To become an angel investor, you must have at least USD200,000 to USD500,000 that you can spend on several startups, such as USD10,000 to USD25,000 for each. Make sure this money does not come from your savings.
Add experience to your investments
Having a business and industrial experiences is vital to make good decisions in investments. This is why many angel investors have professional backgrounds or business experiences. If your experiences have something in common with the startups you want to support, they can help in navigating difficult decisions in investments.
Having an expert source to consult your decision is a good idea. PT Sempurna Nilai Sukses is a business consulting and company registration company in Indonesia that provides professional services for investors. You can inquire about investments, business registrations, corporate accounting, and other business-related activities. Visit Company-registration.co.id to get solutions about becoming angel investor Indonesia. This way, you can make the best financial decision with your hard-earned money.