New Venture Capital Investment in Indonesia – Venture Capital is an investment in the form of financing in the form of capital participation into a private company as a form of investee company conducted for a certain period. Generally, this investment is done in the form of capital surrender in cash to be exchanged with a number of shares in the company’s business partner or investee company. Venture capital investment has a high risk, but also can provide high yield benefits.
In this venture capital system there is a term known as venture capitalist “VC”. This is an understanding of an investor who invests in a venture capital company. Managing investment funds from third parties that aim to invest in companies that have high risk. Thus, this condition does not meet the standard requirements as an open company or to obtain loan capital from banks. Venture capital investment also includes the provision of managerial and technical assistance. Therefore, many emerging new venture capital investment in Indonesia
Purpose of Venture Capital Company
Most venture funds come from a group of investors who have good and healthy financial condition. An investment bank and a financial institution can make a fundraising or partnership for investment purposes. Equity investments made by venture capital are often made on newly established firms so that they do not have an operational history that can be a record for obtaining loans.
As a form of entrepreneurship, venture capital owners usually have voting rights as a determinant of the direction of company policy in accordance with the number of shares owned. Referring to the Decree of the Minister of Finance of the Republic of Indonesia number 1251/1988 which contains the venture capital company can assist capital or technical assistance required by prospective employers and businesses that have been running. It has the following objectives:
- To develop new discoveries.
- To develop the company, which at the beginning of its business experienced funding difficulties.
- For the development of engineering and research projects.
- Developing a variety of new technology uses and studying the growing technology in domestic and abroad.
- Petrified company ownership transfer.
- To help companies that are in the development stage.
- To help companies that are in a state of slump.
- For specific project development. As an example of a research project that is not only for profit, but also aimed at the development of science.
- To take ownership of a company to gain maximum profit.
- To develop new technology or new products. This type of business financing will benefit in the long term.
- Building partnerships in the form of helping weak entrepreneurs who are under-capitalized, but have no guarantee of obtaining loans. Thus, with the participation of capital from venture capital will be able to help the company to face financial difficulties.
- Change the use of older technologies to be newer that aims to increase the capacity and quality of production of a company.
- Assisting the establishment of a new company, but has a very high risk of loss.
- To help companies that are lacking liquidity.
The Legal Foundation in Venture Capital
In this new venture capital investment in Indonesia has various legal foundations. Here are some brief explanations of the legal basis:
- Government Regulation number 4/1995 which contains the Income Tax for Venture Capital Companies.
- Decree of the Minister of Finance No. 227/1994 contains the Company’s business sector for a Business Partner or a Venture Capital Company.
- Government Regulation No. 62/1992 which describes the business sector of a “Coupon” Business Partner Company or a Venture Capital Company.
- Decree of the Minister of Finance No. 469/1995 describes the establishment and establishment of a Venture Capital Company.
- Decree of the Minister of Finance No. 1251/1998 contains the Terms and Conditions for the Implementation of Financing Institutions.
- Presidential Decree number 61/1998 contains the Financing Institution.
How to Financing Venture Capital in Indonesia
- There are several ways of financing by New venture capital investment in Indonesia, namely:
- Buying convertible bonds in accordance with the agreed time and can be converted into shares or also referred to as capital equity in the Company.
- Use profit sharing with a certain percentage of profit every month. This benefit will be given to the venture capital company by the business partner company. The profit-sharing patterns that can be done are as follows:
- Profit sharing based on revenue sharing (revenue sharing).
- Revenue based on agreement.
- Profit sharing based on net profit sharing.
- Investments in shares directly to companies that become business partners.
Types of Financing of Venture Capital Companies
Type of financing of venture capital companies is as follows:
- For the results, this type of financing is a financing to a small business that does not yet have a legal entity form Limited Liability Company (PT), but it is not possible with the legal entity PT, if both parties want each other.
- Financing by buying convertible bonds issued by the Couple Company or also called Semi equity financial.
- Direct financing or equity financing, a direct investment in a Business Partner Company by taking part of a number of shares owned by the Couple Company.
- The Business Partner company together with the venture capital company set up a new venture.
Advantages and Disadvantages of Venture Capital Companies
a) The advantages of venture capital companies are as follows:
- Is a short and medium term funds are relatively cheap and flexible enough.
- Promote a partnership company, tangible management assistance provided by the company Venture Capital to the company’s spouse.
- Sources of funds for new companies that are not yet eligible for funding from other sources of financing.
- With the addition of new capital can improve the ability of companies to obtain capital loans in other forms.
- Increased reputation of the business partner company, this thing because Venture Capital Company usually have a good reputation.
b) The disadvantages of venture capital firms are as follows:
- Financing assistance through venture capital can only be provided to certain companies effectively.
- Financing through venture capital can be very expensive because of the profit sharing system it implements.
- The founders of a business partner company financed by a venture capital company may lose control and ownership of the company, due to management and shares held by a venture capital company. Therefore, a new venture capital investment in Indonesia has advantages and also shortcomings.