MDI Ventures

Q&A with Nicko Widjaja, Chief Executive Officer, MDI Ventures

In order to compete with new Web and OTT players that are asset-light and enjoy greater operational flexibility, telecom operators have started their own innovation programmes to drive new waves of innovation and launched partnerships with startups to develop their own innovative services. One such telco is Indonesian giant Telkom Indonesia, which launched MDI Ventures in 2015 .

We caught up with its CEO, Nicko Widjaja to find out more about the company’s plans and opportunities for telcos in Indonesia’s startup market.

Q: Hello Nicko, tell us a bit more about yourselfNickoWidjaja

A: I lived in the US for about 12 years. After graduating from universities in Oregon, I moved to San Francisco in 1999 to experience working in a “dot-com” (before we called them “startups”). Most of my peers worked either in investment banking or engineering firms, here I was, moving from one dot-com to another and I worked as any for just a brief period of time: as intern for Dimaonds.com, data entry with Embark.com, content writer for Palo Alto Software. Anything to get me to understand its culture and pace. To me, the “dot-com” revolution in the US would replicate itself in the SEA region sooner or later.

I moved back to Jakarta in 2003, only to find the SEA region was not up for this kind of industry yet. Internet connection was poor and usage was low. So, I ended joining (then) the largest publicly traded company at that time, Indofood, I was Associate Director of Corporate Development, while waiting for some digital revolution to happen in Indonesia or SEA. I left Indofood in 2007 to start my own business. I started with a couple of agencies, one focusing on branding design and another focused on digital marketing.

From 2007-2009, I found myself doing every bit of thing from managing two companies, raising money for projects, and started investing in early stage startups (in 2009, I saw small entrepreneurial communities forming in Indonesia, and it was a good thing), and lecturing in one local university UPH Business School of various business subjects: strategic management, entrepreneurship, marketing strategy, finance, and corporate strategy (until 2013)

In 2010, I established one of the first few small VC funds in Indonesia called Systec Group Ventures with an initial fund of $5M. During the period of 2010 – 2014, we’ve invested in 22 startups during 2010 – 2014. We made a few small exits, we made mistakes and lost some money. It was too early for us to get more out of the game. I believe only 1 VC survived from 5 early funds that were existed with Systec.

In 2014, I briefly joined Fenox VC as Venture Partner. I left after just a few months because I felt like repeating the same old model as Systec: buy cheap, sell high. I don’t think this is the case for investing in the SEA/Indonesia, where investors just need to be a little bit more patient and provide strategic value to boost portfolio growth.

We need another thesis: a corporate perspective. Unlike the US and China, SEA doesn’t have much large Series B+ independent VCs, but we do have plenty corporate/strategic investors, so companies with strategic value for large corporates will have a competitive edge in attracting large funding rounds.

I was hired as a consultant for Telkom for its corporate venture project (including the incubator program Indigo). In 2015, I officially joined MDI Ventures, Telkom Indonesia’s corporate venture arm, as its CEO, with initial fund of $100M.

Throughout my career of investing (2009 – 2016), I must have invested and incubated almost 100 startups from all around the world either through personal, Systec Group, Indigo Incubators, and MDI Ventures.

Q: What does MDI Ventures do, and where do you see its role relative to the development of Indonesia’s ICT ecosystem?

A: Our thesis is straightforward – synergy with Telkom Indonesia’s resources. Basically, Telkom has massive (i) infrastructure, (ii) end user and enterprise customer base, and (iii) data. We would want to invest in tech companies that could partner with us to utilize the resources mentioned above. In terms of industry verticals, we are looking at three classifications: (i) Now, (ii) New, (iii) Next

We invest in Series A and above, with geographical focuses on Indonesia, ASEAN, and Silicon Valley. We go to Silicon Valley due to the maturity of the ecosystem, Telkom has to think global. We currently only invest in companies with proven business models and healthy unit economics, these traits alone already de-risk a potential investment.

Other possible justifications: technology (can be spin off to other products and services), market potential (e.g. Uber tackling the logistic market instead of the perceived taxi market), frontier (space, mobility, energy), team (industry veterans or serial entrepreneurs).

Though we’ve invested only in growth stage companies (Series A valuation and above — $20M and above valuation), our work in Indonesia is rather focusing on building the ecosystem.We co-operate two of the largest incubator/accelerator program in the country: Telkom’s Indigo Creative Nation and Bank Mandiri’s Digital Business Incubator. Both of these programs take up to 80+ startups per year, with the highest rate of follow-on funding of 40%-50% each batch compare to any other programs in the country today with less than 10% follow-on rate. Some of these startups are worth $5M-$10M, which is almost unheard of for startups that come out of SEA incubator programs.

Q: What can we expect from MDI Ventures in 2017?

 A: MDI Ventures will continue to invest in high-target and reputable digital companies to strengthen these verticals: enterprise solutions, cybersecurity, mobile internet, and IoT.

Innovation is exploding from every corner of the globe and transforming our world into one connected place, our task has always been to identify those trends and collaborate with them to bring better experience into our services.

We will back more graduates from Indigo next year as we are seeing stronger batch last year. This year 2 of the Indigo companies have joined MDI Ventures, next year five or six companies will follow. The Indigo program is still the best accelerator program in the country today to get the best of Indonesia’s startups.

Aside from building a strong portfolio, we are in the process of closing our second fund next year. We are currently building vertical focused funds: fin-tech, logis-tech, and more.

Q: In one sentence, how would describe the role of telcos today vs before?

A: Telcos will evolve from a utility provider into tech conglomerates with bigger role in supporting everyone who sits within the proximity of their pipes. Alternative – Telcos will be much more diverse and expansive, providing and supporting a broad array of value added services surrounding their smart pipes.

 Q: What do you think is one fundamental change that telcos today need to undergo in order to remain competitive and be more than a “dumb pipe”?

A: Telcos must realize that partnership with fast growing tech companies are essential, they cannot do everything by themselves. Most telcos came from government imposed monopolistic environment where success is almost guaranteed to any player who has capability to build. Strong competition from fast-growing, innovative companies were virtually nonexistent. Telcos did not have the luxury of time to build all necessary capabilities and organizational structure to compete in the information age.

Q: What can other telcos who’ve set up their own VC/accelerator programmes learn from MDI Ventures and its success?

A: I believe that one of the key factors contributing to MDI’s success in generating value for our telco parent is our hands-on role in building businesses. We do not only invest and make introductions, but we also take a pro-active role in executing strategic projects, involving various business units and our portfolio companies.

 

Catch Nicko on Day One (21 March) of Telecoms World Asia 2017 as he shares more about MDI Ventures’ plans in “Innovation Lab Progress Card” alongside speakers from Axiata Digital and TRUE InCube!

Get involved!

Keen to be involved? Get in touch with the team:

To sponsor: Hazel Chen | +65 6322 2730
To speak: Regina Koh | +65 6322 2308

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