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Contrasting startup governance in Indonesia to that in Singapore

Published on February 6, 2023


A working group set up by the Singapore Venture Capital Association and the Singapore Academy of Law has published a new update to a model form stipulating market standard agreements for VC investments.

But how do protections for VCs and other classes of investors in Indonesia compare to what’s happening in Singapore? 

Just as Indonesia’s tech sector is less mature and refined than in some other parts of the world, so too are investor protections. This was mutually agreed on by Pandu Sjahrir and Joel Shen during a recent MindShare episode of Indonesia Digital Deconstructed, hosted by Leighton Cosseboom, Head of PR and Communications at AC Ventures (ACV).

“Indonesia’s digital ecosystem is a little bit behind the curve compared to these more advanced markets,” said Joel, a venture lawyer operating in both Singapore and Indonesia. He is a member of the working group in Singapore and heads up the Withersworld tech practice in Asia.

Joel added, “The past eight years have been transformational for tech in Indonesia. But there’s still far less of an established market practice in Indonesia as to what constitutes good governance.”

Pandu, Founding Partner at ACV, added color to Joel’s point, mentioning that he has heard whispers about bad behavior by some tech founders in the market.

“I cringe every time I hear about founders in our industry that might be doing things they’re not supposed to do. In some cases, I suppose people think they can get away with it, as long as it isn’t big enough,” said Pandu. “But you know, it takes two to tango. You can’t just blame founders. That’s why scrutiny by investors is so important.”

Improved governance is on the way, but it’s still a work in progress

Governance is improving in Indonesia, though, said Joel. “The law is still largely the same in Indonesia as elsewhere. It imposes the same sort of fiduciary duties and obligations on directors and other officers of the company. But outside of the black letter of the law, there’s been far less of an established market practice around good governance.”

He went on, “But we’re seeing a change in this respect. This has happened as a result of many years of deal-making. We’re seeing VCs and institutional investors ask for more sorts of safeguards built into the investment agreements. We’re seeing VCs ask for certain reporting obligations to be built into the board construct and for certain checks and balances to be built into the decision-making process.”

“And as the market evolves and matures, and as VCs themselves take on institutional capital, we’ll see a convergence toward best practices. It’s still a work in progress.”

As for activities of the working group in Singapore, the original model form agreement was published in 2018, and the update was added at the end of 2022. Both include a subscription agreement and a shareholders agreement, with long- and short-form term sheets.

The update, however, adds a new side letter, entered into between a company and its investors, around ESG reporting obligations and how to manage and mitigate ESG risks. 

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