From scandals to standards: Why governance is now critical for Indonesian startups

At a time when trust is becoming increasingly vital in Indonesia’s tech ecosystem, industry experts and regulators stressed that founders and investors can no longer treat governance, risk, and compliance (GRC) as a luxury—it is now the ticket to win investor and public confidence.

“Governance is no longer an added value—but a minimum requirement to be able to grow and be trusted,” Yuliana Sudjonno, a partner at accounting firm PwC, said in a recent panel discussion titled “The Importance of Implementing GRC in Early Stage Companies”.

The discussion, which was part of the GovernUp event hosted by local corporate venture capital (CVC) firm Mandiri Capital Indonesia, came at a crucial time, as Southeast Asia’s tech slowdown and recent scandals involving fraud, money laundering, and corruption have further shaken investor confidence and dampened deal activity.

According to DealStreetAsia DATA VANTAGE’s SE Asia Deal Review: Q1 2025 report, deal count for venture-backed companies in the first quarter fell 43%, while capital raised declined 46% compared to the same period last year.

Meanwhile, on the VC fundraising front, only eight VC firms managed to reach fundraising milestones and collectively raised a mere $384 million in the first half of 2025. This represents a sharp decline from $1.14 billion in the previous semester and $1.51 billion a year earlier.

While there may be many factors contributing to the drastic investment downfall, governance-related failures are understood to be a notable factor, given investors’ renewed emphasis on governance.

Sudjonno cited PWC’s 2024 Global Investor Survey report, which found that investors see corporate governance matters, including risk management, controls, and ethics, as the most important aspect when evaluating companies for investments—more important than factors like innovation, management competence, and human capital management.

This sentiment was echoed by an OJK representative who urged founders to see governance framework as more than just a mere formality, as it can really steady their ship in the midst of a storm.

“It strengthens the quality of decision-making and resource management, especially when the market is under pressure and uncertainty,” says Andi Tito, an assistant director at OJK’s regulation and development department.

“Start early, start small”

Investors’ growing focus on governance is evident: earlier this year, five major private capital associations in Southeast Asia came together to launch a joint blueprint aimed at raising governance standards across the startup ecosystem.

The blueprint, called the “Maturation Map”, includes recommendations tailored to different stages of company maturity, from pre-revenue startups to later-stage firms.

While the initiative helps build a shared understanding and standard of governance among investors, founders and operators may still need more convincing—and support—before they are willing to take on the “hassle” of putting governance measures into practice.

Abimata Putra, Partner at law firm Hiswara Bunjamin & Tandjung, said founders need to understand that aligning GRC with business strategy will not only help maintain operational continuity but also drive accelerated growth.

“Imagine you are in outer space—there’s no one else but you and the decisions you make. That’s when you realize that what keeps you safe isn’t luck, but it’s the system you build. That’s what GRC is,” says Putra, whose firm is renowned for its expertise in assisting both investor and startups in fundraising activities.

One of the startups that has imbibed this philosophy is fintech company Amartha, adding three European development finance institutions to its long list of backers in June.

The Jakarta-based company, which provides microfinancing to women-led businesses, has formed a risk management committee within its ranks that, according to Mandiri Capital, resembles that of an established bank. Amartha also has, for a number of years, adopted an “IPO-ready mentality”, which means that, administratively, the company is all set for an IPO at any given time.

The company’s legal and compliance head, Angel Brigitta, shares that the key for Amartha in its GRC endeavors has been its “internal education and consistent values”.

While Amartha is a company that is reaping the rewards of good governance practices, plenty of its peers have not enjoyed the same success because treat GRC as a mere formality, says Deni R. Tama, managing director of financial and risk advisory firm Kroll Indonesia.

“When GRC becomes a checklist, it checks boxes but not risks. Effective GRC shows up in controls and culture, not columns and ticks,” Deni said.

According to Mandiri Capital Indonesia CFO Wisnu Setiadi, it is essential for founders to have a good governance mindset early on and start small to avoid becoming overwhelmed by GRC, especially given the “heavy-duty” perception commonly attached to it.

“Start early. You don’t need to subscribe to tools that cost billions of rupiahs a year,” he says. “If you’re a company of eight people rather than eight regional branches, governance can be as simple as having another person checking on a transaction you did.”

Setting standards

For Mandiri Capital, which operates as the venture capital arm of Indonesian state-owned lender Bank Mandiri, the call for better governance is not mere lip service. It is something the firm has internalized and implemented before it started calling on partners and peers to do the same.

In 2023, the Mandiri group put in place experienced leaders from its banking group to take the helm at the VC firm, replacing former externally-hired professionals who led Mandiri Capital for almost a decade.

This marked a more deliberate dive into governance, risk management, and compliance. Mandiri Capital Indonesia CEO Ronald Simorangkir says the new leadership put in place SOPs and organizational policies, as well as risk assessment principles to enhance decision-making, strengthen resilience, and improve efficiency.

For the firm’s portfolio startups, Simorangkir says Mandiri Capital extends support in the form of education and hands-on assistance.

“We help them go through their (accounting) books and analyze their expenses and help them set up KPIs and so on. But at the end of the day, it’s up to them to want to improve,” he says.

While Mandiri Capital has set a notable GRC standard for itself and its portfolio companies, it is hopeful that others would follow suit.

In fact, as part of its fresh investment strategy, the firm now looks to inject capital only in growth-stage companies that already have some levels of GRC measures in place, such as a separate bank account for operations, a CFO, reliable accounting system, sound decision-making mechanism, and even an independent commissioner.

The firm argues that such a requirement is reasonable for a growth-stage company. In fact, Simorangkir adds that raising the bar on GRC expectations will benefit the ecosystem over the long term.

“Yes, starting last quarter of 2024, the new MCI management team has strengthened the investment process, including putting GRC criteria in our early pipeline screening. We also improved our decision process to avoid conflict of interest and uphold integrity in every investment decision. We are fully aware that by doing this, the pool of companies available might not be as large as it was earlier, and the process might take relatively longer, but when it comes to sustainable investment, we prefer quality over quantity,” he said.