Zombie VCs may arise globally and in Indonesia, too

Investors are more careful today due to economic uncertainty but still very interested in Indonesia’s “big untapped potential,” East Ventures' Willson said. — Bloomberg

Jakarta: Faced with macroeconomic headwinds, global venture capital (VC) fundraising has tumbled by a double-digit percentage in 2022, and some insiders see the next few years as the night of the living dead, where zombie VC firms would arise.

The term has been used to describe VC firms that fail to prosper and are only there to manage their existing portfolios.

Incapable of raising more funds, they might languish in the tech space for years or even decades, given the long-term nature of VC investment.

“That number could be as high as 50% of VCs in the next few years,” said Maelle Gavet, chief executive officer of global entrepreneur network Techstars, as reported by CNBC.

Indonesia, despite its relatively strong macroeconomic standing, is not deemed immune to this phenomenon, as it has become harder to raise funds in the country.

One of Indonesia’s biggest VC firms, East Ventures, makes no secret of the tougher fundraising environment, despite raising US$550mil (RM2.5bil) for early stage and growth stage deals in the first half of 2022.

“Overall, we would say the fundraising was challenging, but that doesn’t mean that fundraising cannot be done,” East Ventures co-founder and managing partner Willson Cuaca told The Jakarta Post.

Investors were more careful today due to economic uncertainty but still very interested in Indonesia’s “big untapped potential,” Willson said.

DealStreetAsia reported on Monday that South-East Asia-based VC firms had closed a total of 31 funds throughout 2022.

This amounted to a total of US$4.14bil (RM18.6bil) investment being raised, which was higher than the pre-pandemic level.

However, a report released by Pitchbook on Feb 22 revealed that global VC fundraising dropped by 11.4% to US$252.6bil (RM1.1 trillion) in 2022.

Only 1,381 funds were launched in 2022, far less than the prior year’s 2,495, according to Pitchbook’s annual “Global Private Market Fundraising Report”.

“The 2022 fundraising activity was buoyed by the first half of the year, which accounted for 66.1% of total fundraising value,” wrote Pitchbook venture capital analyst Max Navas in the report. — The Jakarta Post/ANN