After three funds focused on early-stage deals, Indonesia-focused Intudo has embarked on a strategic expansion in its fourth vintage. In addition to a new venture capital vehicle – with a corpus of USD 75m – the firm has raised a USD 50m fund to invest in downstream natural resources and renewable energy.

“Energy transition is very important, not just in Indonesia, but worldwide. [Newly elected Indonesian] President Prabowo and his cabinet have made it one of the pillars for growth. We have an opportunity to play a part in that and contribute to the downstreaming of certain minerals and the battery supply chain for electric cars,” said Patrick Yip, a founding partner at the firm.

In contrast to the minority equity strategy Intudo has pursued to date, the new fund will take majority or full ownership of projects positioned to generate long-term cashflows. Often, these will be co-investments with LPs. The firm may also form joint ventures with overseas partners to leverage different combinations of experience and market access.

Yip and his fellow founding partner Eddy Chan will lead the strategy. Existing team members at Intudo are expected to upgrade their skillsets to participate as well.

The LP base comprises a mixture of family offices and corporate affiliates, many of which have interests in upstream energy. Most are Indonesia-based. Yip observed that the differences in risk-return profile between this and the VC strategy naturally attract a different kind of investor.

On the VC side, the Intudo team is the single biggest LP in Fund IV with a 10%-plus commitment. The external investor base, meanwhile, has become more diversified, according to Chan. LPs that have disclosed their participation include Orient Growth Ventures, a fund-of-funds from the Netherlands, and Black Kite Capital, a Singapore family office.

Beyond those, Intudo claims support from over 20 global VC funds or the managing partners of said funds, investment entities or affiliate businesses of 15 overseas billionaires, and more than 30 Indonesian family groups, either directly or through the conglomerates they control.

In previous funds, the foreign-domestic split was 70-30. The overseas portion came from North America and Indonesia ex-Asia in equal parts. The domestic share is larger in Fund IV, in part due to international investors scaling back their commitments. At the same time, Europe and the Middle East are now represented in the LP base alongside North America.

“The key surprise was that Europe ramped up a bit,” said Chan. “We’ve also seen more interest from that pocket of North Asia that wants to lessen reliance on China.”

Early-stage learnings

Intudo previously scaled its venture capital offering from USD 20m to USD 50m to USD 115m, with Fund III subsequently upsizing to USD 144m following the final close in September 2021. However, that vintage was split approximately 55-45 between early-stage and growth-stage deals.

For Fund IV, the firm has substantially cut back the growth allocation to USD 5m-USD 10m, leaving up to USD 70m for early-stage investments. Chan described this as a deliberate decision to match capital pool and opportunity set.

“[Investors] appreciate that we have what we consider to be the right fund size for the market, based on our assessment of Southeast Asia. In our view, the optimal fund size is between USD 60m and USD 90m,” he explained.

Elaborating on this thesis, Chan estimated that the appropriate fund size for a US-based VC fund manager operating in a USD 23trn economy might be around USD 900m. The addressable market in Southeast Asia is one-tenth that of the US, he added, using ride-hailing for guidance. While Uber [NYSE:UBER] has a market capitalisation of USD 152bn, Grab [NASDAQ:GRAB] trades at approximately USD 16bn.

Meanwhile, Intudo’s early-stage strategy is unchanged. Fund IV will back 14-18 Indonesian companies – a much more concentrated portfolio than most VCs active in the country – and pursue larger ownership stakes. The goal is to be the lead investor in each debut round, putting USD 1m-USD 2m into a pre-Series A for a 25%-35% interest or USD 3m-USD 5m into a Series A for 20%-30%.

The firm will also participate selectively in Series B and C rounds – typically for existing portfolio companies – for which commitments could be as large as USD 10m.

Moreover, Intudo is deploying into a market starved of funding. VC investment in Southeast Asia hit USD 8.5bn in 2021, then fell to USD 6.8bn in 2022, and USD 3.1bn in 2023. There has been a mini-revival this year, with USD 3.7bn put to work so far, but Chan observed that valuations for Series A and B rounds are down 45% from 2021 levels. Flat rounds and down rounds are relatively common.

Global growth capital has also dried up, limiting expansion options for start-ups and exit opportunities for early-stage investors. On the other hand, it has forced start-ups to focus on capital efficiency and unit economics. “Ultimately, if you build a really good business, the money will come,” said Chan.

Global access

Intudo distils its core mandate into three key dimensions: bringing global technologies to Indonesia, enabling international expansion by Indonesian start-ups, and investing in the domestic consumer. The latter is predicated on Indonesia’s young and increasingly upwardly mobile population of 700m, whose consumption activities account for 56% of GDP.

Under a pure Indonesia for Indonesia model, founders must identify a total addressable market (TAM) that facilitates scale and financial sustainability. Some have achieved this – Chan pointed to Jago, an Intudo-backed coffee brand that has turned profitable by cracking the high-end market – but many others are falling short.

“Indonesia opportunities may have inadequate TAM; it’s possible even Southeast Asia TAM will be inadequate,” he added. “So, we need to bring the world to Indonesia and bring Indonesia the world.”

Bringing the world to Indonesia primarily involves supporting the transfer of technology in areas such as electric vehicles, batteries, carbon capture, and solar power. Indonesia to the world, meanwhile, is likely to focus on aquaculture and horticulture. The portfolio already features CarbonEthics, a provider of carbon consulting services and an operator of nature-based carbon projects.

In this context, Intudo believes being the only Indonesian VC firm with a founding partner – Chan – based in Silicon Valley represents a competitive advantage. It can help local companies establish operations and address regulatory issues in the US, as well as make introductions to potential clients. CarbonEthics, for example, is building a roster of oil and gas multinationals.

“Many of these multinationals are our LPs. When they want access to blue carbon, they will at least consider CarbonEthics,” Chan said. “The biggest issue in Southeast Asia is building a customer base with the willingness to pay. We can assist with this because we are global.”