1. What is the current legal landscape for venture capital in your jurisdiction?

The venture capital industry landscape in Indonesia over the past year has remained in a cooling phase, following the global venture capital slowdown. Several reports indicate that total startup funding in Indonesia has declined significantly from its peak years. Various experts note that this slowdown is widely understood as part of a broader market reset, where investors have become more cautious and selective in deploying their capital, and certain aspects have become non-negotiable, such as sustainability and governance. As a consequence, Indonesian tech startups that typically raise funds from venture capitals have found it increasingly difficult to secure funding. Compounding this is the exposure of financial misconduct at eFishery, one of the country’s unicorn-status agritech startups.

As a result of the funding squeeze briefly elaborated above, we have observed that Indonesian tech startups with sufficient runway have opted to avoid equity fundraising given the unfavourable valuation environment and have instead explored alternative financing options, including venture debt or conventional bank loans. On the other hand, this environment has forced startups to prioritize a clear path to profitability. Those unable to meet investor’s criteria or attract the attention of lenders have been left with little choice but to conduct layoffs, or in more severe cases, pursue liquidation.

Several startups have felt the impact and been forced to conduct layoffs. Aquatech startup, Aruna cut approximately 40% of its workforce in early 2025. E-commerce giant Tokopedia also underwent a significant workforce reduction following its merger with TikTok. Mekari, a cloud-based business automation SaaS platform, announced layoffs affecting its financial services team and internal tooling division. Adding to this wave is the growing adoption of artificial intelligence across companies, which has made workforce downsizing increasingly difficult to avoid.

Drawing from our experience advising venture capital transactions over the past year, we have observed several notable shifts. In terms of investment appetite, venture capitals have begun gravitating toward sectors they can see, touch, and feel such as FMCG and retail. This shift reflects a growing preference for businesses with tangible products, predictable consumer demand, and proven revenue streams, as opposed to the asset-light, high-burn digital plays that dominated the previous investment cycle. In an environment where investor confidence has been shaken, the appeal of businesses grounded in physical goods and established market behaviour is understandable as these sectors offer a clearer line of sight to profitability and are generally less susceptible to the kind of governance irregularities that have plagued some tech startups.

Furthermore, the focus in due diligence has expanded beyond revenue figures to encompass how that revenue is generated, with the aim of identifying and preventing potential irregularities. This shift has been largely influenced by the eFishery case, in which the agritech unicorn has been under investigation for fraud involving inflated assets and revenues which also served as a wake-up call for the entire investment community in Indonesia. Investors are no longer satisfied with top-line numbers alone and they are now digging deeper into the underlying mechanics of revenue generation, scrutinizing customer acquisition practices, transaction authenticity, and the integrity of financial reporting. Background checks on founders and key management have also become more thorough, for example to check whether there is any affiliated transaction between the company and its founders or key management. As a natural consequence of this heightened scrutiny, investment committee processes have become considerably longer, with more layers of verification and a lower tolerance for ambiguity before capital is committed.

Also, as previously noted, venture capitals are placing heightened scrutiny on how their investees plan to maintain long-term sustainability. Gone are the days when a compelling growth story and a large addressable market were sufficient to secure a term sheet. Investors today want to see a credible and well-articulated plan for how a business intends to sustain itself beyond the next funding round, one that is grounded in realistic assumptions, disciplined cost management, and a defensible competitive position. This scrutiny extends to how startups plan to weather periods of limited access to external capital, as the current environment has made it abundantly clear that funding cycles can tighten without warning. In this context, pure-play tech startups without a clear monetization story continue to face an uphill battle in fundraising, as investors have little appetite for businesses that cannot demonstrate a concrete and near-term path to generating sustainable revenue.

The shifts in Indonesia’s venture capital landscape, as briefly elaborated above, have had a direct and tangible impact on the supporting legal scene. The heightened scrutiny on revenue integrity and governance practices has made legal due diligence significantly more intensive as lawyers are now expected to go beyond reviewing corporate documents and contracts, and are increasingly asked to trace transaction flows, verify the authenticity of material agreements and flag any structural arrangements that could potentially mask financial irregularities, including checking the ultimate beneficial owner of any parties outside the target company to ensure an arms-length relationship. As investment committee processes have grown longer, so too have overall transaction timelines, requiring lawyers to manage extended negotiation periods and keep deal documents current through prolonged closing processes. The rise of venture debt and conventional bank loans as alternatives to equity fundraising has also created growing demand for lawyers skilled in debt financing, loan documentation, and security arrangement, skillsets that were comparatively less in demand during the equity boom years.

Beyond transactional work, the current environment has opened new advisory opportunities for corporate lawyers. With good governance becoming a non-negotiable expectation rather than a best practice, startups are increasingly seeking legal counsel for governance structuring, covering areas such as board composition, shareholder agreements, internal policies, and regulatory compliance frameworks. At the same time, the wave of layoffs and startup closures has generated a notable uptick in restructuring, insolvency, and liquidation mandates, while the surge in employment layoffs has brought employment law to the forefront, with companies requiring guidance on severance obligations and the legal risks associated with large-scale layoffs under Indonesia’s labour laws and regulations.

2. What three essential pieces of advice would you give to clients involved in venture capital matters?

Given that this venture capital industry serves 2 types of clients, investors and investees, we distinguish the advice as follows:

Investors

1. Place greater value on stable businesses. The pursuit of exponential returns may lead many investors to overlook fundamental business weaknesses in favour of aggressive growth narratives. A stable business may not generate exponential returns, but its risks are considerably more predictable and manageable, and in a market where capital is scarce and exit options are limited, predictability has become a virtue in its own right. Businesses with steady cash flows, loyal customer bases, and proven unit economics may lack the excitement of a hypergrowth story, but they offer something arguably more valuable in today’s climate, which is resilience. Investors who recalibrate their return expectations and broaden their definition of a “good investment” to include stable, cash-generative businesses are likely to find themselves better positioned to weather the current cycle and deliver consistent returns to their limited partners.

From a legal standpoint, stable businesses also tend to have cleaner corporate structures, more organized documentation, and a longer track record of regulatory compliance, all of which significantly reduce legal risk and simplify the due diligence process.

From operational standpoint, investors should consider dedicating more resources to supporting existing portfolio companies through operational guidance, network introductions, and help with alternative financing, rather than focusing solely on deploying into new deals. Protecting existing investments is just as important as making new ones. At the end of the day, the best investors are not just capital providers, they are active partners.

2. Exit Options. In the tech boom years, exit planning was often an afterthought as investors were confident that a buoyant IPO market or an eager pool of strategic acquirers would eventually provide a way out. That confidence is no longer warranted. Given that exit options today are considerably more limited than before, available exit pathways must be carefully thought through from the very outset of any investment, rather than being addressed as an afterthought once the business has matured. Before committing capital, investors should have a clear and realistic view of how and when they intend to exit whether through a trade sale, secondary transaction, management buyout, or an eventual public listing and should stress-test each of those scenarios against current market conditions. Contractual protections such as drag-along rights, put options, and redemption rights should also be negotiated and embedded in transaction documents from day one, serving as safeguards in the event that a preferred exit route becomes unavailable. Ultimately, the cost of not thinking about exits early is the very real risk of capital being locked in indefinitely, an outcome that is increasingly common in today’s more cautious and illiquid market.

Additionally, given the higher risk environment, going alone on deals is increasingly inadvisable. Investors should actively seek co-investment partners to share risk, bring complementary expertise, and provide additional validation of investment theses. Syndicated deals also tend to attract more rigorous collective due diligence, which benefits all parties involved.

3. Scrutiny in Due Diligence. Data presented by prospective investees during the due diligence process must be verified with careful scrutiny, particularly with respect to financial figures and this verification should go well beyond a surface-level review of audited financial statements. The question investors must now ask is no longer simply “how much,” but “how.” How was this revenue generated? How were these margins achieved? How were these customer numbers counted? Investors should consider engaging independent third parties to validate key financial and operational data, cross-referencing figures across multiple sources rather than relying solely on information furnished by the investee. Red flags such as unusually high growth rates, revenue heavily concentrated in a small number of customers, or discrepancies between reported figures and observable business activity should be treated as triggers for deeper investigation rather than dismissed as anomalies. In an environment where governance failures have proven capable of wiping out unicorn-level valuations overnight (e-Fishery example), the cost of thorough due diligence is modest compared to the cost of getting it wrong.

Background checks on founders and key management should also form a standard part of the due diligence process, as governance failures rarely happen in the absence of human agency. Additionally, investors may also establish clear post-investment governance mechanisms including board representation, regular financial reporting obligations, and audit rights to maintain ongoing visibility into how their capital is being deployed long after the deal has closed.

Investees

1. The End of Cash Burning Era. The era of cash burning without a clear path to profitability (“growth at all costs” mindset) is all but over. At least for the last decade, startups were rewarded with ever-increasing valuations for capturing market share aggressively, even when doing so required burning through capital at an unsustainable rate. Investors were willing to fund the next round before the previous one had produced any meaningful return, confident that the market would continue to reward growth over profitability. That era is much different now. Business ventures requiring external capital must now prioritize fundamentals over valuation, demonstrating real revenue quality, disciplined cost structures, and a credible and near-term path to profitability rather than chasing inflated paper valuations that are increasingly difficult to defend in today’s market. This shift in mindset has practical implications that extend beyond financial management. Startups that have historically structured themselves around rapid expansion, with bloated headcounts, aggressive marketing spend, and heavy reliance on subsidized pricing, will need to undertake a serious and honest reassessment of their operating models.

From a legal standpoint, this reassessment often surfaces contractual obligations that were entered into during more optimistic times such as long-term lease commitments, vendor contracts, and employee arrangements that may now need to be renegotiated, restructured, or carefully unwound. Founders would be well-advised to conduct a thorough legal audit of their existing obligations early, identifying potential liabilities before they become crises, and engaging legal counsel to explore the most viable and legally sound pathways to a leaner, more sustainable operating structure.

2. Good Governance. Good governance might be the most frequently overlooked in the early stages of a startup’s life. Good governance must be embedded from day one, not as a box-ticking exercise, but as a genuine organizational commitment, because it is ultimately what saves a company when problems arise. The eFishery case is once again instructive here, what began as governance lapses that may have seemed manageable in the early stages ultimately snowballed into a full-blown scandal that wiped out years of value creation and shook investor confidence across the entire ecosystem. It is a clear indication that such scandal was the product of bad habits that go unchallenged for too long.

In practical terms, good governance encompasses several interconnected pillars. Robust financial recordkeeping ensures that the company’s financial position is accurately and consistently documented, making it far harder for irregularities to go undetected. Clear internal controls establish the checks and balances that prevent the misuse of company’s resources and ensure that financial decisions are made through proper channels. Transparent reporting to investors and stakeholders that is delivered regularly, honestly, and without embellishment builds the kind of trust that proves invaluable when a company needs support during difficult times. Proper documentation of board and shareholder decisions, including minutes, resolutions, and approvals, creates an auditable trail that protects both the company and its founders in the event of disputes or regulatory scrutiny. And disciplined use of capital which ensures that funds are deployed strictly in accordance with the purposes for which they were raised is not only a matter of financial prudence but also a legal obligation that founders often underestimate.

More importantly, good governance is not merely best practice. A company with well-maintained corporate records, properly constituted boards, and clearly documented decision-making processes is significantly better positioned to defend itself against investor claims, regulatory investigations, or litigation. Founders should engage legal counsel early to ensure that their corporate structure, shareholder agreements, and internal policies are fit for purpose and should revisit these arrangements regularly as the company grows and its investor base evolves. In today’s environment, where investors are conducting deeper and more prolonged due diligence, a company that can demonstrate a genuine culture of good governance from its earliest days will not only find it easier to raise capital, but will also command greater investor confidence and, ultimately, better terms.

3. Sustainable Business Model. Business model must be thought through with deliberation and oriented toward long-term sustainability, built to be both resilient in the face of adversity and adaptable to changing market conditions. The tech boom might have produced a generation of startups that seemed built primarily to raise the next round of funding rather than to serve a genuine and enduring market need. Business models were designed to impress investors on paper such as impressive gross merchandise values, inflated user numbers, and aggressive growth trajectories while the underlying economics remained fundamentally broken. That approach is no longer viable, and startups that have not yet confronted this reality will find themselves increasingly isolated from the capital markets.

A truly sustainable business model must be built to be both resilient in the face of adversity and adaptable to changing market conditions. Resilience means that the business can continue to operate and service its customers even during periods of limited access to external capital, economic downturns, or industry disruptions. Adaptability, on the other hand, means that the business is structured in a way that allows it to pivot, evolve, and respond to shifts in consumer behaviour, regulatory changes, or competitive dynamics without losing its fundamental identity or value proposition. In today’s rapidly evolving landscape, where artificial intelligence is reshaping entire industries and regulatory frameworks are being rewritten, the ability to adapt is no longer a competitive advantage, but it is a survival requirement.

Moreover, building a sustainable business model requires founders to think carefully about the legal architecture that underpins their operations. This includes ensuring that key revenue streams are protected through appropriate intellectual property registrations, that material commercial relationships are governed by well-drafted contracts that provide sufficient flexibility to accommodate changing circumstances, and that the company’s corporate structure is designed to support long-term growth rather than short-term fundraising optics. Founders should also pay close attention to the regulatory environment in which they operate, as businesses that are built on legally sound foundations are far better positioned to withstand regulatory scrutiny and adapt to new compliance requirements as they emerge. Ultimately, a business model that is built to last is not just a commercial imperative in today’s market, but it is the single most compelling story a founder can tell a prospective investor who has grown weary of promises that never materialize.

3. What are the greatest threats and opportunities in venture capital in the next 12 months?

Threats:

1. Interest Rate. One of the most persistent headwinds facing the venture capital industry globally is the interest rate environment. Elevated interest rates have a compounding effect on venture capital activity: they increase the cost of capital, compress valuations, and make alternative asset classes such as bonds and fixed income instruments comparatively more attractive to limited partners who might otherwise allocate capital to venture funds. For startups specifically, higher interest rates translate into more expensive debt financing, making the venture debt alternative that many have turned to in lieu of equity fundraising a less straightforward solution than it may appear. Until interest rates normalize to levels that make risk capital genuinely competitive again, the venture capital industry should brace for continued LP caution and a slower pace of fund deployment.

2. Investment Climate and Geopolitical Uncertainty. Indonesia’s investment climate, while fundamentally promising, may be susceptible to both domestic and global forces that are increasingly difficult to predict. Globally, geopolitical tensions including war, trade disputes, supply chain realignments, and shifting foreign investment policies have made international limited partners more selective about where they deploy capital across emerging markets.

3. Investor Confidence. The scandal within the tech ecosystem (such as eFishery) was not an isolated incident as it might be seemed as deeper governance gaps that exist across majority of the startup landscape. Each high-profile failure that involves financial misconduct or misrepresentation chips away at the trust that is the lifeblood of any functioning investment ecosystem. If left unaddressed, this erosion of confidence risks becoming self-reinforcing as fewer investors may commit capital and fewer startups may receive funding. Rebuilding that confidence will require a collective and sustained effort from founders, investors, regulators, and advisors alike.

Opportunities:

1. Attractive Business Sectors. Despite the broader slowdown, there are business sectors that continue to attract genuine and sustained investor interest and for founders operating in these spaces, the current environment may actually present a relative advantage as competition for capital thins out. Sectors tied to Indonesia’s fundamental economic priorities including agritech and food security, renewable energy and the green transition, digital financial inclusion, healthcare technology, and B2B infrastructure remain well-positioned to attract both private venture capital and state-backed investment. The government’s strategic focus on the downstreaming of natural resources and the build-out of digital infrastructure, including data centres and connectivity, has created a clear and investable roadmap that aligns private and public capital around common objectives. Startups that can credibly position themselves within these priority sectors and demonstrate a clear connection between their business model and Indonesia’s broader economic development agenda will find a more receptive audience among investors than those operating in sectors without a clear strategic rationale.

2. Growing Culture of Good Governance. One of the more encouraging developments to emerge from the current period of difficulty is a growing and genuine appreciation for good governance across the startup ecosystem. What was once dismissed by many founders as a bureaucratic burden imposed by overly cautious investors is increasingly being recognized as a genuine competitive advantage. Startups that have invested early in building robust governance frameworks such as clean corporate structures, properly constituted boards, disciplined financial reporting, and transparent investor communications are finding that these qualities meaningfully differentiate them in a market where investor trust is scarce. This cultural shift, while still in its early stages, represents a meaningful opportunity for the ecosystem to mature and build the kind of institutional credibility that attracts larger and more sophisticated pools of capital over time. Eventually, this trend also creates growing demand for governance advisory services, as founders increasingly seek proactive legal guidance rather than reactive crisis management.

3. Acquisition Opportunities. The current downturn, while painful for many, is also creating opportunities for well-capitalized players to consolidate the market through strategic acquisitions. Distressed startups with valuable technology, talent, or customer bases but insufficient runway represent attractive acquisition targets for larger companies looking to expand their capabilities or market reach at a fraction of what such assets would have cost during the peak years. For venture capital investors with dry powder and a long investment horizon, this environment offers the opportunity to deploy capital into high-quality assets at significantly more reasonable valuations than were available during the boom.

4. Artificial Intelligence. While artificial intelligence has contributed to workforce reductions across the industry, it also represents one of the most significant opportunity vectors for the next generation of Indonesian startups. AI has the potential to dramatically reduce the cost of building and scaling technology products, enabling leaner founding teams to build more capital-efficient businesses which is precisely the kind of profile that resonates with today’s investors. Startups that can harness AI to solve Indonesia’s most persistent structural challenges are likely to find themselves at the intersection of technological relevance and investor appetite. The opportunity is real, but so is the need for a sound legal framework around AI adoption, including data privacy compliance, intellectual property protection, and algorithmic accountability.

4. How do you ensure high client satisfaction levels are maintained by your practice?

We believe that having deep understanding of what clients actually need is a must. We cannot limit ourselves to the role of document producers and transaction executors. We believe that the clients who remain loyal and who generate the most meaningful mandates are those who feel that their lawyer truly understands their business, their pressures, and their goals, not merely their legal problems. For investor clients, this means understanding not just the deal at hand but the broader fund strategy such as knowing which sectors they are targeting, what governance standards they hold, and what exit scenarios they are working toward. For investee clients, it means understanding the stage of the business, the founder’s vision, and the operational realities that shape what is and is not commercially feasible.

Moreover, tailored solutions are the natural output of this depth of understanding. In practice, we are required to craft legal structures, contractual protections, and advisory recommendations that are genuinely fit for the specific client, deal, and market context. It also means being proactive by anticipating legal risks and commercial issues before they surface, rather than waiting to be asked. The goal is to transform the perspective of a legal practitioner from a service provider into a trusted advisor.

5. What technological advancements are reshaping venture capital and how can clients benefit from them?

Artificial intelligence is perhaps the most transformative force currently at work. On the investor side, AI-powered tools are increasingly being used to screen deal flow, analyse market data, assess founder backgrounds, and even predict startup success probabilities based on a combination of financial, operational, and behavioural signals. This allows investors to process a significantly larger universe of opportunities with greater speed and consistency than traditional manual methods would permit. For investees, AI is enabling leaner and more capital-efficient business models which may reduce the cost of building technology products, automate back-office functions, and generate the kind of data-driven operational insights that today’s investors expect to see.

Data analytics and digital due diligence tools are also fundamentally changing the verification and validation process of information provided by prospective investees. Some tools are available to analyse documents and information at a scale and speed that was previously impossible, making due diligence process, which was once heavily reliant on document review and management interviews, considerably more manageable. Also to mention contract management platforms, automated document generation tools, and AI-assisted legal research which are enabling legal practitioners to deliver faster, more consistent, and more cost-effective services to their clients.