The current pandemic has resulted in a significant drop in corporate venture capital (CVC) activities due to their susceptibility to budget cuts and divestments, according to Aldi Adrian Hartanto of telecommunications firm Telkom’s corporate venturing unit, MDI Ventures.
Corporate venturing commitments are usually on a capital-call basis, so units may face hurdles if their parent companies go into survival mode, Hartanto told Global Corporate Venturing. He was named vice-president of investments for Indonesia-based MDI Ventures in February this year.
“This new development will drive many CVCs to reposition themselves from cost-centre units to revenue-centre units to maintain relevance within the group, especially in the current situation,” he added.
“It made us more confident in our direction to transform [MDI Ventures] into a multi-stage VC firm through multiple initiatives that started to gain traction, such as the launch of multiple external funds and booking a sizable NPAT (net profit after tax) for the first time as a company through exits.”
MDI Ventures fully deployed its $100m debut fund last year and achieved five profitable exits – one initial public offering and four mergers and acquisitions – with no write offs.
Those exits included three companies situated outside Indonesia, taking place over the course of about six weeks in mid-2019. Australia-based messaging software producer Whispir went public while Singapore-headquartered online payment technology developer Red Dot Payment and cloud communication platform Wavecell were acquired.
Telkom has consequently been appreciative of the MDI Ventures team’s efforts, and the unit has gained a bigger role within the group, according to Hartanto, who said: “They show their continued support through multiple synergy initiatives that are being accelerated or developed with our portfolio to navigate the new normal.
“They also proved the vote of confidence in us by accelerating the approval of a second fund that will be much larger and more relevant with the necessity of the group, and the startup industry in the long run.”
MDI Ventures is in the process of raising a new vehicle set to be sized between $300m and $500m, and managing partner Kenneth Li having said earlier this year the unit was preparing to set up separate funds for seed and late-stage investments.
“We are currently showered by significant dry powder, as we are going to close multiple new funds which will allow us to continuously invest,” Hartanto confirmed.
The unit is closing in on several deals having disclosed an investment in e-commerce management system developer Anchanto in February.
Despite the coronavirus threat, Hartanto said the MDI Ventures team is bullish on the startup industry in the long run, because every crisis has an end, and suggested the light at the end of this tunnel will be in sight sooner rather than later.
As part of the Covid-19 support mechanism, the unit joined multiple corporates to back Meet Your Match Malaysia, an investor-matching initiative for entrepreneurs struggling with the effects of the pandemic, earlier this month.
MDI Ventures also decided to double down on a ‘backward investment thesis strategy’ that initially applied only to its seed investments.
Hartanto explained: “Now we use [this strategy] for the overall funds…we are crafting a handful of playbooks for each of the deal thesis that we believe will have enormous long-term upside potentials even post Covid-19. After that, we will proactively approach those companies that fit with our playbooks.
“This allows us to maintain or even accelerate our pace of investments while still remaining prudent and disciplined when we make the final call, especially when analysing the founders’ quality and conducting reference checking, since we cannot have in-person meetings like before.”
Photo courtesy of Aldi Adrian Hartanto.
