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Indonesia Entrepreneurs Ecosystem Mapping 2021: Report by ANGIN and Blue Impacts

Posted on | by Aisha Nadira | Leave a Comment on Indonesia Entrepreneurs Ecosystem Mapping 2021: Report by ANGIN and Blue Impacts

This new report is brought to you by ANGIN and Blue Impacts, Impact X

DOWNLOAD THE REPORT HERE

Introduction

As the largest economy in Southeast Asia, Indonesia has charted impressive economic growth and is home to a massive population that is excited to embrace emerging technologies. With the advent of some of Indonesia’s largest tech unicorns going public, the island country is gathering significant importance and influence as a hub for startups and talents.

Over the past decade, Indonesia has seen more deals and impact capital deployed by the Development Finance Institutions (DFI) than any other country in the region. With this encouraging trend in mind, a rising number of different players in the startup ecosystem are contributing to nurturing the impact startups – startups with a social and environmental focus while generating promising financial returns.

Moving forward from the pandemic, there is an urgent need to recover our economy and learn from the exposed social and environmental vulnerabilities. The Indonesian Government, an increasing number of companies, youth-led climate actions, and young entrepreneurs, are committed to addressing the United Nations Sustainable Development Goals, to include environmental and social problems on their agenda and work towards a more resilient economy. These entities identify innovative ideas and technologies from startups and entrepreneurs to challenge the business-as-usual trajectory.

This is the emerging trend of Impact Technology, where business ideas are backed by science, technology and innovation to benefit people and the environment. Given the complexity to measure and track social and environmental impacts, we hope to introduce a new perspective and mechanism to ignite, re-align and join forces with existing efforts in the startup ecosystem to build the community that tailors to nurturing these young and mission-led innovators and entrepreneurs so that their impacts can scale and eventually lead our nations towards a sustainable era.

Report Overview

Screen Shot 2022-07-18 at 11.21.04

This report zooms in on some of the key players supporting the startup ecosystem in Indonesia that also contribute in paving the way for impact technology startups to grow. Highlighting the work from investors to service providers, these key players in the ecosystem are building the foundation for startups to make a positive impact through tech-enabled solutions.

This report use the term “impact” in a broader scope. Not only social enterprises deliver “impact” (i.e. achieve positive social and environmental impact through the business). “Impact” can be a vague concept and while social enterprises intentionally state that they are pursuing “impact” and have the duty to measure it. Some of these players that may be working in Impact Areas also contribute to achieving “impact” without stating it openly or with a capacity to measure it.

Recognition

About Impact X, Blue Impacts

Blue Impacts seeks to discover, support and scale impact technologies solving environmental and development related challenges. Focus areas include food systems, energy and carbon, inclusive finance, urban resilience, improved health and circular economy. Blue Impacts has offices in Singapore, Australia, and China.

A startup innovation challenge, called SHIFT!, is a discovery platform established by Blue Impacts with partners in 8 cities across the Asia Pacific. Designed to discover impact technologies at their earliest stage, Shift! takes a deeper approach to developing startup ecosystems at the local level.

The company brings innovators together with investors, buyers, and experts at the Impact X Summit, to match and help scale. In 2021 and 2022, Impact X Summits will take place in Australia, China, and the Netherlands.

Disclaimer: The report prepared by a team from ANGIN and Blue Impacts. The organisations featured in the report are based on ANGIN’s interaction and observation with Indonesia’s Startup Ecosystem. Any reproduction in full or in part must mention the title of the report and credit the above-mentioned publisher as the copyright owner. 

This report aims to highlight and identify the possibility of aligning existing efforts in Indonesia’s startup ecosystem to nurture, invest, and scale startups and entrepreneurs with a focus on climate and sustainable development goals. This report is also the follow up of ANGIN’s report, the 2019 edition of ecosystem mapping report. So here is the 2021 edition of the key players who are highly contributing to the development of entrepreneurship and paving the way for impact technology to grow in Indonesia. 

These are the organizations you should definitely meet if you are exploring the Indonesian impact technology startups market. We have updated our 2019 list to reflect the changes in the ecosystem as new players are coming, some organizations are not active anymore, less active or changed their focus. 

DOWNLOAD THE REPORT HERE

Previous Report by ANGIN

66 People and Organizations Moving Social Entrepreneurship and Impact Investment in Indonesia (2nd Edition)

This report is the follow up of 2018 ecosystem mapping report ANGIN released in 2019.

52 Figures and Organizations Moving Social Entrepreneurship and Impact Investment in Indonesia (1st Edition)

This report is the first edition of ANGIN ecosystem mapping report released in 2018.

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Investing in Impact: Opportunities, Implementation, and Measurement

Posted on | by Aisha Nadira | Leave a Comment on Investing in Impact: Opportunities, Implementation, and Measurement

This article is written based on the discussion note on Tinc Investor Networking.

Visit Tinc Investor Networking Main Page here.

Demystifying impact investing myths around low financial return: The future of impact investing and the opportunities

The terms impact investment and social entrepreneurship were coined to define organizations that could reconcile the desire to create an impact while also having a commercial or financial intention. Beyond the intention, these organizations commit to measuring, evaluating, and reporting their impact to drive better decisions and strategies to achieve their social mission. This impact investment generation emerged in Indonesia in the early 2010′s [1]. Since its emergence, there was an underlying perception that impact investing was similar to philanthropy whereas impact investors yield lower financial return compared to commercial investors.

However, most studies report that Socially Responsible Investments (SRI) do not have lower returns than traditional investments. In fact, there is evidence of the opposite; most conclusions point to SRI having higher returns, especially when social impact is taken into account. A comprehensive review by the Royal Bank of Canada looked into over 40 major studies and found that there was no evidence that socially responsible investing resulted in lower investment returns [2]. This sentiment was echoed by the GIIN’s (Global Impact Investing Network) 2017 Annual Impact Investor Survey [3], which found that the majority of respondents achieved market-rate returns, with 91% claiming their returns met or exceeded their professional expectations.

A survey by Morgan Stanely released in 2018 [4] mentioned that 76% investors believe that a perception remains among some investors that sustainable investing requires a financial tradeoff, However, they claim the opposite, where 87% of respondents believe it is possible to achieve financial returns alongside a social or environmental impact. And 62% go even further, agreeing that it is possible to maximize returns while investing sustainably.

This perception was echoed by investors that participated in the Tinc Investor Networking Day:

Profit and purpose are not separate but complementary. Although we do not identify ourselves as an impact investor, Investible is exploring the idea of implementing a sustainability lens for our forthcoming fund.
Reena Sharma
Investible

Reena Sharma, Vice President of Investor Relations at Investible shared that Investible’s investment decisions are made based on financial performance for the company, while impact is used as an additional filter after an investment passes the desired financial profile. 

Beenext’s Partner, Faiz Rahman also added that there is an opportunity to maximise profit while implementing an impact lens. 

Beenext believes that scale has to come first and a good business is a business that directly tackles real problems in the society, thus creating impact. If the market is big enough for the business to scale and gain financial return, that means the impact created is also bigger.
Faiz Rahman
Beenext

Rexi Chritopher from init-6 fund shares the same value that Impact investing is a mindset: any startup that is challenging the status quo is working on creating impact.

Nowadays, most people are more aware of impact, for example with SDGs. In an optimistic lens, this is a great momentum for impact investors, especially because the new generation of founder is more aware of the importance of impact, hence apply it into their business.
Rexi Christopher
Init-6

Emphasizing on the context of “invest” in impact investment, it is necessary to distinguish impact investment from non-profit practices, such as donations or grants. The investor attendees on Tinc Investor Networking agree that financial returns and performance are still  key considerations behind impact investment decisions. This means that there is a fundamental distinction between for-profit, non profit, and for-profit with social mission, in which impact investment falls for the latter.

Measurement of Impact and ESG

Impact investments, as defined by GIIN’s (Global Impact Investing Network), are “investments made with the intention to generate positive, measurable social and environmental impact, alongside a financial return” [5]. The word ‘measure’ plays an interesting role in this ecosystem. As an investment is repayable finance, investors will want to see the evidence of financial return and revenue from the business. 

Yet in impact investment, the responsibility doubles up; both social and financial return are to be expected. This is what differentiates impact investors from mainstream investors or traditional funds. Impact investors want to know how investing into a business will enable them to create a positive impact on society, and in order to know, one has to measure.

"Impact investors share several core characteristics, including the use of evidence and impact data in investment design, the commitment to measure and manage impact, and the intention to pursue impact alongside a financial return."
GIIN, State of Impact Measurement and Management Practice (2020)

Measuring impact is indeed a complicated process, especially for early-stage business or startups. However, Kejora-SBI Orbit stated the importance of having at least one dedicated ESG officer that can measure impact within the scope of Environment, Social, and Governance (ESG). This statement is echoed in The S&P 500 ESG Index: Defining the Sustainable Core [6] as a signal of evolution in sustainable investing, built to underlie strategic, long-term mainstream investment products.

As Kejora looks into this index, they found out: impact investment actually follows where the money is.

Having a good impact is actually a good business. Meaning, companies that are more ESG compliant tend not to cut corners and therefore in the long run have possibilities to perform better. These companies are also more socially responsible and well-managed; these are the companies that investors want to invest in.
Kejora-SBI Orbit
Representative

ESG is an increasingly popular tool of measurement when it comes to sustainability efforts, and also to giving companies a space for improvement. Yet in practice, no matter how sophisticated the tool is, measurement is much easier at capturing quantifiable inputs, than complex and intangible outcomes, such as impacts [7]. For this reason, Kejora believes that in order to comprehend the outcomes and impacts, investors also need to go the extra mile to fully grasp the internal process. This starts with the due diligence process, and continues by using a method and metrics to measure impact within the portfolio, because it is necessary to capture the input-outcome-impacts, without assuming causality.

Since there are no uniformly accepted metrics, Beenext also sees that measuring impact requires doing more than just ESG measurement. In particular, Beenext emphasizes that impact investors have to be able to have skin in the game, put themselves on the field, and improvise with more grassroots practices.

We have to talk to startups directly and try to understand their business, mission, values, drive, and goals. Impact investors need to understand where the business is coming from and the core problem that they are trying to solve or disrupt.
Faiz Rahman
Beenext

Demands for ways to measure impact continue to grow and mature alongside the impact investing industry. According to the GIIN report on Impact Measurement and Management Practice (2020), over the past 2 years, the impact investment industry has greatly expanded its suite of approaches to measure impact; from data collection, aggregation, comparison, impact valuation, and benchmarking of impact results. Besides ESG, many tools and frameworks have been developed to help impact investors measure their impact, as seen on the figure below:

Most investors can use more than one framework, the common average is three. This development represents significant steps toward enabling investors to transparently and reliably measure and manage their impact [8].

Role of incubator and accelerators in the investing in impact scene

As one of the first “open door,” incubators and accelerators plays a critical role in developing a startup founder’s mentality regarding impact and business. As stated by Jockie Heruseon, VP Business Development of Telkomsel, incubators and accelerators also have the power as a gatekeeper; to set impact and social contribution as standard in the business ecosystem.

Accelerators and incubators have an important role to provide support, especially for very early stage (often pre-revenue) startups. Heruseon from Telkomsel shared his insight from years of experiences in the startup ecosystem;

Many startups from the early stage have trouble increasing the size of their operations to expand their impact. As they attempt to scale, they often struggle to reach more customers, attract talented human capital, and lock the right types of funding. At the same time, impact investors are interested in supporting these startups, but often have trouble finding investment-ready impact startups.
Jockie Heruseon
VP Business Development of Telkomsel

Telkomsel, the parent company of TINC has taken up the space on supporting the startups and companies to integrate in impact by creating NextDev platform. NextDev is an early stage digital startup search and development platform in Indonesia that is oriented towards social impact. The program ranges from competitions to incubator programs like the NextDev Academy as well as  the NextDev Summit.

Through similar programs, that are also encouraged by Tinc, founders can be introduced to open their mindset and integrate impact and sustainability lens as well as understand the benefit and importance of good governance that is advocated by the ESG. This will also allow startups to identify like minded investors to actually support and amplify their impact.

Resonated by The Rockefeller Foundation’s report on Impact Enterprise Acceleration, this is where accelerators and incubators like TINC are able to contribute as sort of a “matchmaker,” ensuring downstream impact VCs funds or other investors have access to a good deal-flow of investment-ready opportunities [9].

Looking to the Future

The impact business and impact investment extended its wings to emerge as a new conception of “Investing in impact,” where this impact becomes an arbitrage, an opportunity, a “new normal”– the smart investment to do on top of the right business and investment strategy [10]. 

Each player in the startup ecosystem has its own role, and therefore its own power. Investors provide the capital and the fuel, while incubators and accelerators play key roles in educating and building the mentality of the founders. All roles are equally crucial in the development of the whole impact ecosystem. 

In the future, we hope to see more incubators and accelerators occupying the impact space to create a supportive environment for impact driven startups and impact investment practice can grow.

We see that with the current trend, we will see a shift of mindset where impact is no longer a type of investment; but impact is investment.
Akhil Adler
Moderator

End of article.

Participating investors in the discussion:

Reena Sharma
VP Investor Relations
Investible

Faiz Rahman
Partner
Beenext

Rexi Christopher Investment Associate
Init-6

Jockie Heruseon
Vice President
Business Development

Kejora-SBI Orbit
by Kejora Capital & SBI Holdings

This article is brought to you by:

Writer

Writer

Moderator

Aisha Nadira
Partnership Engagement Lead, ANGIN

Yohana Parida
Partnership Engagement Associate, ANGIN

Akhil Adler
Ex-Investment Analyst
Teja Ventures