MDI Ventures to launch an impact fund with Alvin Evander at the helm

MDI Ventures, the corporate VC arm of Telkom Indonesia, is launching a new impact investment fund.

Alvin Evander, Vice President (Business Development) at MDI Ventures, will head the new fund, which will focus on local startups and, opportunistically, regional startups targetting the Indonesian market.

“I can confirm that MDI Ventures will launch a fund for impact investing. However, I can’t share all the granular information about the fund yet, such as the size and the average ticket size. This information is still under wraps and will be made public when the time is right,” Evander said in an interview with e27. However, a DealStreetAsia report said the VC firm is exploring a US$100 million impact fund.

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The MDI impact fund will explore sectors with tremendous opportunities in the archipelago, such as agriculture, education, healthcare, SMEs, energy, and waste management.

In his view, agriculture is an ever-expanding sector. It has a growing transition rate from refined foods and artificial substances to more organic ingredients of 18 per cent from 2020 to 2021, thanks to technological advancements in agriculture and aquacultural spaces.

As for education, Southeast Asia — with around 680 million people — accounts for 8 per cent of the global population. It grew 1 per cent in 2021, with 60 per cent entering their productive years. However, 41 million still live in poverty due to unemployment.

He added that investment in education will improve the overall quality of Indonesia’s workforce, thus increasing productivity and resulting in a better standard of living. With better living standards comes the demand for better healthcare, and it is impossible to have a modern and digitalised healthcare ecosystem without proper energy/waste management.

The impact fund also sees great initiatives in renewable energy and electric vehicles. Some startups in these sectors have raised large rounds, such as Form Energy (which raised US$240 million in Series D in August 2021). “Specifically in Indonesia, with the recent developments with Tesla, there are opportunities that Indonesia could become the largest battery manufacturer with our important nickel supply,” Evander noted.

In addition to making new investment deals, MDI will likely invest further in its existing portfolio across agriculture, healthcare, financial inclusion, and education, especially if they have a provable and tangible social impact that fits its criteria.

MDI Ventures will help its startups to connect with various business units within Telkom and other state-owned enterprises to form strategic alliances. “For example, if a startup we invest in operates in the healthcare space, we would seek to get them plugged into the leading pharmaceutical and hospital chain company to find product-market fit and see their product implemented nationwide quickly,” he explained.

As the head of the impact fund, Evander’s first move will be to explore implementing an ESG (environmental, social, and governance) framework and start measuring ‘impact’ based on the UN sustainable development goals for its portfolio companies. “We’ll partner with a global firm with experience in impact assessment and try to work together to implement a world-class ESG framework in MDI.”

In his view, impact-oriented funds generally have a stigma of lower returns than conventional funds, which is untrue. Their research indicates that impact funds generate competitive returns compared to other traditional venture capital investments. It will be a matter of time until more investors understand the potential and move toward impact investing.

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Globally, impact ventures, in general, are still far smaller in size compared to conventional ventures. This condition is not limited only to Southeast Asia and Indonesia but to the general investment landscape, he remarked.

“However, there has been a recent surge of interest in ESG-conscious investments in the last few years. As the global investment climate moves toward impact ventures, we strongly believe that venture capital in Indonesia and Southeast Asia will follow suit in the years to come,” he concluded.

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