This document discusses MDI, a corporate venture initiative of Telkom Indonesia that invests in growth stage companies globally. MDI combines venture capital investment with operational support. It focuses on high growth verticals that enhance digital experience. MDI co-manages the Indigo Accelerator program that has incubated over 20 startups. It forges strategic alliances with major corporates to pursue collaborative investments. MDI's investments are aimed at strategic areas uncovered by its incubation activities, with the goal of creating value through access to Telkom's resources and infrastructure.

1. Demystifying VC Business
Joshua Agusta - Head of Indigo Accelerator

2. ABOUT MDI
• Established in 2015, as a corporate venture initiative of Telkom
Indonesia, with mandate to invest in growth stage companies
globally.
• MDI combines a VC model with services in providing companies with
access to operational and go-to-market assistance after making a
financial investment.
• Focus investment: high growth verticals to enhance the digital
experience and provide excellent services that ultimately lead to the
more demanding customer expectation.
• Co-manage and oversee the Indigo Incubator Program since 2015
and had incubated more than 20+ startups with Indigo Incubator.

3. MDI IS FORGING STRATEGIC ALLIANCES WITH MAJOR CORPORATES
Investment
Management
Incubation &
Acceleration
Objectives Initiatives Partners
Strategic
Advisory
Key Activities
Build startup ecosystem
by supporting early stage
companies
Indigo Incubator
Mandiri Inkubator
Bisnis
- Corporate venturing
- Corporate innovation
seminars/workshops
- Ad-hoc advisory
Venture
capital
fund
Collaborative
investment
activities
• Perform strategic
investments in line with
corporate innovation
agenda
• Maximize financial
returns for corporate
principal
Leverage MDI’s unique
resources to create value
in areas uncovered by
investment and incubation
activities

4. SILICON VALLEY - SOUTHEAST ASIA

5. 60+ INCUBATED IN 3 INDONESIA CITIES
• Started in 2013, operating in 3
cities in Indonesia.
• Maintains at least 40% Follow on
Funding in every batch of
graduates since 2015.
• Assist launched 20+ startups go to
market.
• Dual track immersion program to
Silicon Valley in partnership with
Plug & Play.
• Formed the largest angel network
in Indonesia (150+ angel investors
attending Indigo Demo Day in the
past 2 years).

6. COMPANIES
Singapore & Indonesia
Series A
Indonesia & Philippines
Series A
Indonesia & India
Series B
Thailand, Malaysia, Philippines, Indonesia
Series B
Singapore & Indonesia
Series B
Japan
Pre IPO
Singapore & Indonesia
Series B
Philippines & Indonesia
Series B

7. BATCH 2015 & 2016
45%FOLLOW ON
FUNDING
MM
4.5X
WEIGHTED
AVERAGE
Total of 35 startups
incubated, chosen from
2,000+ entries

8. Now New Next
Revenue Enhancement &
Cost Savings
New Growth and Revenue
Opportunity
New Technologies beyond
Telco sector
Investment Thesis
- Future-shaping technologies
relevant to Telkom ecosystem
(A.I., robotics, space
technology, 3D printing,
Internet of Things)
- Technologies ready for early
adoption in
the Indonesian market
(Blockchain, big data, cyber
security, healthcare)
- Technologies ready for use to
solve current problems
(Logistics, e-commerce
enablers, advertising, cloud
computing, payment
solution, SaaS, education)

9. • Access to large established customer base
• Network of partner companies and advisors
• Access to later round financing/exit opportunity
• Access to ICT infrastructure
• Insights into new markets and technology
• Next gen products and services
• Domain expertise
• New business models for the future
• Cost savings
Access to Telkom’s Infrastructure

10. VC: 2-Sided Business
DemandSupply

11. VC: 2-Sided Business
Demand
1. Things you need to know
before VC pitch
2. How VC Valuations Work
3. Some Investment Trends

12. VC: 2-Sided Business
Demand
1. Things you need to know
before VC pitch
2. How VC Valuations Work
3. Some Investment Trends

13. 3 Things to Find Out Before VC Pitch
1. VC’s Investment Thesis
2. Preferred Ticket Size
3. Preferred Investment Stage

14. Different VCs Have Different Investment Thesis

15. Now New Next
Revenue Enhancement &
Cost Savings
New Growth and Revenue
Opportunity
New Technologies beyond
Telco sector
Investment Thesis
- Future-shaping technologies
relevant to Telkom ecosystem
(A.I., robotics, space
technology, 3D printing,
Internet of Things)
- Technologies ready for early
adoption in
the Indonesian market
(Blockchain, big data, cyber
security, healthcare)
- Technologies ready for use to
solve current problems
(Logistics, e-commerce
enablers, advertising, cloud
computing, payment
solution, SaaS, education)

16. Telkom Synergy Value
Business Process
Outsourcing
IT Managed Service
E-Payment
Third Party Administrator Digital Entertainment Mobile Subscription
User Base Support (Corporate & Consumer)
Media Services
We Need Our “Users” to Justify Our Investments

17. Each VC’s Ticket Size is Also Different
Source: mapofthemoney.com

18. Revenue
TimeValley Of The Death
Break Even
Seed Capital
A
B
C & above
Venture Capitals, Strategic Alliances,
Mergers & Acquisitions
Early Stage Later Stage
Angel Investors, Seed VCs
IPO
As Well As Investment Stages Preference

19. Revenue
TimeValley Of The Death
Seed Capital
Venture Capitals, Strategic Alliances,
Mergers & Acquisitions
Early Stage Later Stage
Angel Investors, Seed VCs
IPO
As Well As Investment Stages Preference
A
B
C & above

20. VC: 2-Sided Business
Demand
1. Things you need to know
before VC pitch
2. How VC Valuations Work
3. Some Investment Trends

21. Startup Financing Stage
Pre-Seed / Bootstrap Seed Series A, B, Etc.STAGES
PURPOSE
AMOUNT*
Hypothesis Validation
$10-50K
INVESTORS FFF, Angel Investors
Figuring out the
product and Getting
to user/Product Fit
$100-500K
Angel Investors,
Micro VC, Seed VC
Scaling the product and
getting to a true product
market fit. The rest of the
funding series is about
scaling
VC, Institutions, PE
$1-5 Mio
These are the 3 common rounds of financing. Sometimes it requires a bridge round between these stages
(Pre-Series A, or a Bridge Loan)

22. Basic Truth for Early Stage Fund Raising
In short, startup investors would see these 3 Ps before investing :
PEOPLE (50%)
track record and sectoral experience is important, if the team is weak, idea is
irrelevant
POTENTIAL MARKET (25%)
funding for a $10 million market and $100 million market will be different. (for VCs, if
it’s not at least a $100 million market, why bother starting?)
PRODUCT (25%)
pivoting in early stage is common, but a sound product and solid business model
should be designed.

23. – Aswath Damodaran
“VCs Price Businesses, Not Value Them”

24. HOW DO WE WORK - STARTUP VALUATION
Startupinvestment
opportunities
Angel
investors/VCs
(Deals) experience and
points of referencefor
valuation
Industry knowledge
Angel network
Supply Demand
Startup Valuation, especially for early stage companies, is more like an art. Supply and Demand
drives the valuation (willingness of each parties determines).

25. BASELINE STANDARD - PUBLIC REVENUE MULTIPLES
Formula:
Price = Forward Multiple x ARR - Private
Discount Rate
E.g:
SaaS Company A is growing at 80% YoY
rate
Current ARR = $2 Mio
Implied EV = 7.6 x $2 Mio = $15.2 Mio
Price = $15.2 Mio - 20% = ~$12 Mio
Source: https://goo.gl/XE5e6T

26. – Reid Hoffman
“VCs are ‘Creatures of Herd’”

27. INVESTOR HERD IN RIDE-SHARING STARTUPS
Source: theinformation.com
Tips: Find multiple investors to invest in 1 investment round

28. VC: 2-Sided Business
Demand
1. Things you need to know
before VC pitch
2. How VC Valuations Work
3. Some Investment Trends

29. Conglomerate Family
Backed VC
Foreign VC
Local & JV VC
Corporate Backed VC
(Foreign & Local )
VCs OPERATING IN SEA (ACTIVE)
+/- US$ 4.5 Bn of capital is ready to be deployed
Source: mapofthemoney.com

30. Source: CB Insights & KPMG 2015 Report - Global Analysis of Venture Funding
Center of Gravity is Shifting Towards Asia
0
35
70
105
140
2011 2012 2013 2014 2015
North America
Europe
Asia
Asia % of Total
Investments in VC-backed Companies
13% 11% 13% 24% 31%

31. Asian Deals are Getting Bigger
2011 2012 2013 2014 2015
# of deals Investments ($B)
$39.70$20.60$6.40$4.70$6.20
445
566
826
1,143
1,446

32. Quarterly Tech Exit Volume: Asia
0
40
80
120
160
Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
4
34
6
11
90
8383
101
135
M&A IPO
ASIAN EXITS IN H1 2016
Asian exits increased slightly in Q2’16 with 90 acquisitions and 4 IPOs. Activity is still down from
Q2’15 highs, but is on an upward trend over the last two quarters.
Source: CB Insights - Tech Exits Report H1 2016

33. ● SEA tech funding still growing in Q2
2016, albeit slower pace
● SEA has not seen many Series B
investors to go for companies invested in
the recent seed boom
● Anticipating Series B readiness, SEA
startups are shifting towards business
model with clear path to profitability
• B2B business models
• Vertical integration trend for e-
commerce companies
● Large series B investors are gearing up
to invest in the market
• Alibaba gets aggressive in SE Asia,
plans to both invest and acquire,
other Chinese companies follow
Source: Techinasia, e27
SEA Tech Funding Q1 2015 - Q2 2016

34. 0
15
30
45
60
Seed Series A & Above
43
53
3
19
2014 2015
Source: Tech in Asia (https://www.techinasia.com/breakthrough-year-indonesias-startup-landscape-2015-infographic)
VC Investments in 2015 shows a significant rate of growth compared to 2014
Indonesia Startup Funding 2014 & 2015

36. “How VCs Make Money Out of Their
Business?”

37. VC: 2-Sided Business
Supply
1. VC’s Business Model
2. Investment Returns in VCs

38. VC: 2-Sided Business
Supply
1. VC’s Business Model
2. Investment Returns in VCs

39. VC Fund Structure
• Most VCs are fund managers - they’re doing their investment activities
using money they raised from their LPs for a certain investment period
• LPs are usually expecting their VC funds to have 3x-5x return rate

40. So Far, VCs Have Yielded Better Returns
VCs have shown better returns to investors, particularly after 2011
Source: Cambridge Associates
12.90%
21.20%
16.20%
10.90%
4.20%
5.90%
13.30% 13.00%
11.20% 10.90%
1.40%
15.10%
12.60%
7.30%
5.00%
2015 2013-2015 2011-2015 2006-2015 2001-2015
Annualized Returns on US VC, PE, and Public Market Investments
VC Funds PE Funds S&P 500

41. VC’s Business Model
1. Management Fee
2. Carried Interest

42. Management Fee
“A fee charged by VCs to their LPs as a compensation to
manage their fund - usually the fee is utilized to cover
operational expenses, taking 2%-3% out of the total fund
size”
E.g:
• VC Firm A raised a $300 Mio, 5-year fund
• Management fee = 3%
• Total management fee = 3% x $300 Mio = $9 Mio
• Annual opex = $9 Mio / 5 = $1.8 Mio

43. Carried Interest
“A fee charged by VCs to their LPs from the earned capital
gains out of their investments - usually the fee is taking
20%-30% out of the capital gains received”
E.g:
• VC Firm A invested $10 Mio to startup X with $50 Mio
post-money valuation —> Ownership = 20%
• 5 years later, the company is acquired for $200 Mio
• Ownership value at exit = 20% x $200 Mio = $40 Mio
• Capital gain = $40 Mio - $10 Mio = $30 Mio
• Carried interest = 20% —> 20% x $30 Mio = $6 Mio

44. VC: 2-Sided Business
Supply
1. VC’s Business Model
2. Investment Returns in VCs

45. This is THE Real Sh*t
• VC Firm A raised $200 Mio fund - invested $1 Mio for 20% of
Startup X with $5 Mio post-money valuation
• Startup X is acquired for $1 Bn (Unicorn!!)
• Ownership at exit +/- 15% (dilution) —> $150 Mio
• LP’s return expectation of funds = 3x —> 3 x $200 Mio = $600
Mio
• $150 Mio / $600 Mio = 25%??
Conclusion: The fund needs 3 more unicorns

46. It’s a Tough Market for Venture Returns
Source: Mattermark
Most startups experienced really tough time in raising their follow-on investment round

47. Power Law
6% of deals produce 60% of returns
Source: Horsley Bridge

48. Returns are Incredibly Skewed
Source: Horsley Bridge
“Babe Ruth Effect”: Hit big or miss big
The home runs for good funds are around 20x, but the home runs for great
funds are almost 70x.

49. Most Investments Lose Money
Source: Horsley Bridge
Venture capital is a risky business
Surprisingly, great funds lose money more often than good funds do

50. TVPI = Total Value Paid-In Ratio
VC’s Return Metric
This ratio usually reflects the minimum level of return that investors would expect
from their investments in a fund.

51. TVPI =
VC’s Return Metric
CFR
+ NAVT
CFP
CFR = Total Cash Flow received (capital gains from
previous investments)
NAVT = Net Asset Value at the time of calculation
CFP = Total Cash Flow paid in to the fund (incl.
management fee & carry interest)

52. Conclusions
1. Find out about VC’s Investment Thesis, Preferred
Ticket Size, and Preferred Investment Stage before
meeting them.
2. VCs price businesses, not value them
3. VCs are “Creatures of Herd”
4. VC is a super competitive business - power law
distribution is imminent.
5. VC is a game of outliers - finding the “grand slam” is
the key

53. Recommended Readings
Mastering the VC Game
Jeffrey Bussgang (2010)
Venture Deals
Feld & Mendelson (2011)

54. Q&A

55. Thank You