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Venture Capital’s Investments in Startup as a Bank Strategy

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Venture Capital’s Investments in Startup as a Bank Strategy

Through venture capital, banks can channel various financing schemes to startup, expand to digital services, and reach people who do not yet have access to banks. Several banks in Indonesia are currently expanding their business lines by forming venture capital companies.

Bank Mandiri has operated Mandiri Capital Indonesia since January 2016. The company has invested more than nine hundred billion rupiahs in 12 companies including Moka, PrivyID, and KoinWorks.

Venture Capital’s Investments in Startup as a Bank Strategy

BRI Ventures Bank Rakyat Indonesia currently injects one trillion rupiahs into LinkAja and other high-tech companies. The formation of venture capital was also carried out by Bank Negara Indonesia (BNI) and also the State Savings Bank (BTN).

Having venture capital and collaborating with high-tech companies can be a good idea too. In this way, banks can penetrate digital financing platforms without creating them themselves. That is why recently banks on average consider fin-tech, not as a competitor.

Some Reasons Banks Use Venture Capital

There are several reasons why banks finally decide to have venture capital. One reason is to channel various financing schemes in addition to providing credit to the public. Another reason is to expand its business to digital services.

Apart from the reasons mentioned earlier, several other reasons are also available. One good reason to have venture capital and invest in high-tech companies is to reach people who don’t have access to banks. Most fin technology companies have this capability, so they can be a good investment.

Venture Capital’s Investments in Startup as a Bank Strategy

Besides, banks have venture capital to increase banking penetration. Meanwhile, the survey results from the consulting agency McKinsey & Co. states that half of the world’s banks are already in a weak position before even facing an economic slowdown that may occur sooner or later.

In this case, the bank must begin to develop technology, improve operations, and increase mergers first. This is because we are in the final cycle of the economy and banks must be brave to take steps because they are not in good condition too.

Not Opponent, Banks and Fin-Tech Companies Are Friends

In investing in Indonesian technology companies, of course, there are still considerations made by investors. Some considerations made are:

1. Target market

Business owners must map and have a clear and attractive target market to follow the product. If you want to become a successful business owner, you must be able to set targets for your own company.

2. Scalability

Mapping the right scalability strategy to ensure business owners can profit by business and be cost-efficient. For example, in the F&B sector, one of the biggest challenges is determining the right location to target the product market target.

Venture Capital’s Investments in Startup as a Bank Strategy

3. Productive company team

Investment return ratio (ROI) Things that need to be done by business people are efficiency in various lines without hampering business development, for example reducing production costs, or employee salaries. In other words, a production company team is needed.

4. Able to face competition

Competition is one thing that you will always face in this digital economy era. As a business owner, you must be able to survive and face endless competition.

5. Adapt to developing trends

Trends are another thing that will come and go. It changes all the time. To make your business grow, you must always check trends and improve your company’s strategy to attract investors.

Financial technology companies (fintech) were initially predicted to erode the banking business. However, the average national bank does not consider this company as a competitor. They have prepared a special strategy to face this competition and survive in the financial sector.

With digital server-based payment system technology offered by fin technology, users can trade directly with their business partners. In Indonesia, banks on the average state that they do not consider fin-tech startup as a business threat.

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