Scandal after scandal has rocked Indonesia’s tech ecosystem: eFishery’s founders were suspended and investigated for financial fraud; fintech lending company KoinWorks was implicated in a fraudulent lending scheme; founder of another fintech lender, Investree, fled the country amid regulator investigations; logistics startup Sicepat’s CEO allegedly diverted company funds for stock speculation; even Gojek’s founder last month faced questioning over corruption linked to a major school procurement project.
Last week, it also emerged that three prominent individuals in the ecosystem were arrested on suspicion of involvement in a ‘corruption and money laundering’ case: Donald Wihardja, CEO of MDI Ventures, the VC arm of state-owned Telkom Indonesia; Ivan Arie Sustiawan, former CEO of TaniHub; and Edison Tobing, former Finance VP of TaniHub. The case concerns a US$25 million investment made by MDI and another state-owned investment firm under Bank Rakyat Indonesia (BRI) in TaniHub between 2019 and 2023.
TaniHub was founded in 2016 as an “agri-tech” company focused on connecting farmers with restaurants and retailers. After the US$65.5 million Series B round in 2021 led by MDI ventures, TaniHub shifted its focus to B2B operations and aggressively expanded its lending arm, TaniFund.
Then reportedly, TaniFund used venture capital funds to cover looming loan defaults, all the way to the point where even the venture capital funds could not fill it, ultimately triggering a chain of collapses and leading to the company’s forced liquidation by Indonesia’s financial regulator in 2024.
You can find details about the case in local business outlets as well as regional tech media. However, hardly anyone in the ecosystem is surprised, after so many stories involving Indonesia’s tech ecosystem over the last 12 months.
Some thoughts:
- While entrusting 10s of millions of dollars to young, inexperienced founders sometimes lead to issues, the widespread misappropriation of funds in the Indonesian ecosystem is still mind boggling. Every case from eFishery to KoinWorks, to Sicepat and now TaniHub, MDI ventures, is seriously denting the confidence in Southeast Asia’s startup and venture capital ecosystem;
The founder of eFishery gave an interview to Bloomberg after the whole thing had blown up, alleging he was advised to manipulate financial results because it was common practice. Many investors in the MW community were stunned by how casually he described this and why he could still be at large. News came in yesterday from Dealstreetasia that he has been detained by the police, alongside a few others implicated in the case;
What makes the TaniHub scandal particularly significant is that it marks the first time high-profile tech executives have been arrested on camera – sending an even stronger signal to the market and global investor community;Alongside fintech lending companies (which naturally touch a lot of money), B2B startups are particularly problematic. Aside from the imploded ones, Ula effectively became defunct and GudangAda recently bought back investor shares – both B2B platforms had collectively raised over US$250 million, with Peak IV (formerly Sequoia India) as an anchor investor;We noticed a long time ago that B2B startups in Indonesia had essentially turned into supply chain financing companies. A B2C grocery founder told us in 2021 that he and his fellow founders in the sector often sourced from TaniHub ONLY because TaniHub offered longer credit terms – “twice as that offered by a normal grocery supplier”;
Commenting on MW’s Chinese post about the TaniHub case, Allen Zhu, the outspoken managing partner at GSR Ventures, put it: “B2B platforms have essentially always been either financing intermediaries or self-operated trading companies. Understanding the basics of business is absolutely crucial.” ie. they should not be treated as scalable tech startups; VCs and startup founders are not the only parties who should do some serious soul searching – the service ecosystem: auditors, consultants and lawyers, did you do your job adequately? Remember when the economy first opened up in China, there was no trust in companies, therefore auditors and short sellers went to great lengths to verify inventory and uncover the truth? So why shouldn’t we be expecting the same level of rigor – or whistleblowing – in this part of the world?A more fundamental question is: is Indonesia simply a bad market for tech – or did we, as an ecosystem, screw it up? We believe it is the latter. Fundamentally Indonesia, with its 270 million population, has a lot of issues that tech can resolve, creating value. Monee, Shopee’s digital financial services affiliate, does exceptionally well in consumer credit in Indonesia; in H1 2025 Indonesia also overtook the U.S. as the largest market for TikTok Shop – to name a few;Building tech in Indonesia, however, can be much harder compared to in China. Tech in China grew rapidly not only because of the increasing middle class, but also the infrastructure created by the government, as well as multiple factors that were growing rapidly at the same time (urbanisation, middle class, payment infrastructure, expressways etc.). In Indonesia, lack of infrastructure and natural tailwind means more friction in building successful tech companies. Subsequently, whoever seizes the opportunity might need to operate at even greater levels of efficiency compared to their Chinese counterparts;Donald Wihardja took over as CEO of MDI in 2020, succeeding Nicko Widjaja, who moved to BRI (another SoE) in an effort to replicate MDI’s initial success. Two years ago, Widjaja famously wrote a LinkedIn post after attending a glamorous VC-tech conference in Bali: “Some near death startups (with less than 2-3 months run rate) are lining up at the NXC, took selfies and partied with investors, officials, and what have yous. How these guys can still afford to go instead of working their problems at home is beyond my understanding.”
Was he prophetic or just telling the truth (not that there is often a difference between the two)?
The post Our thoughts on the scandals in Indonesia’s VC-startup ecosystem first appeared on The Low Down - Momentum Works.
