The Corporate Fundraising Cycle: From Informal Business to Post-IPO
Every company has a different fundraising journey. A business may start with the owner’s personal capital, grow into an MSME, transform into a large-scale company, or—if it has a highly scalable business model—take the startup and venture capital route until it eventually goes public.
Nevertheless, one common thread runs through this journey: companies need capital to grow. As a business develops, what changes is not only the amount of funding required, but also the sources, instruments, costs, and requirements of that funding.
In Indonesia, this journey can be mapped from informal businesses, MSMEs, startups, pre-IPO, IPO, to public companies that use financial instruments such as bonds as a source of funding.
The Starting Point: Informal and Individual Businesses
Before formally becoming an MSME, many businesses in Indonesia start as informal businesses. They take various forms, ranging from grocery stores, street vendors, home-based businesses, online resellers, to freelancers.
At this stage, businesses generally do not yet have complete legal and business administrative structures. Business owners may not yet have an NIB (Business Identification Number) and may not yet be connected to various formal government financing programs. As a result, sources of capital are usually still very simple, coming from personal savings, family, friends, or informal loans. Limited access to formal financial institutions may also force some business owners to use high-cost sources of financing or even illegal loans.
One important point in the process of formalizing a business is registration through the OSS (Online Single Submission) system and obtaining an NIB. Such legal status can then provide broader access to the formal financing ecosystem and various government programs.
The MSME Fundraising: Building the Foundation and Working Capital
Micro, Small, and Medium Enterprises (MSMEs) are types of companies in Indonesia owned by individuals or business entities that meet the criteria stipulated under Law No. 20 of 2008, which was subsequently updated through Government Regulation No. 7 of 2021 as an implementing regulation of the Job Creation Law.
In Indonesia, MSMEs are the backbone of the national economy, contributing approximately 60% to Gross Domestic Product (GDP) and absorbing up to 97% of the workforce. Based on data from the Ministry of Micro, Small, and Medium Enterprises’ SIDT-UMKM, the number of non-agricultural MSMEs in Indonesia has reached more than 30 million business units.
Based on Government Regulation No. 7 of 2021, MSMEs are classified based on business capital and annual sales:
Classification | Business Capital* | Annual Sales |
Micro Enterprise | Up to IDR 1 billion | Up to IDR 2 billion |
Small Enterprise | > IDR 1-5 billion | > IDR 2-15 billion |
Medium Enterprise | > IDR 5-10 billion | > IDR 15-50 billion |
*Excluding land and buildings used as business premises.
At this stage, funding needs focus on working capital, asset purchases, inventory, and business expansion. MSMEs have access to various financing instruments and programs, including:
Personal capital and bootstrapping, namely using personal savings or funds from family and friends.
Kredit Usaha Rakyat (KUR), a government-subsidized financing program distributed through financial institutions or participating banks, with a low interest rate of approximately 6% effective per year or an equivalent flat interest rate.
Business Credit Cards, short-term financing instruments in the form of credit cards issued by banks specifically for business transactions and corporate/MSME operational needs. They are generally used for short-term working capital needs.
Government grants and assistance programs, including various assistance and financing programs whose policies may change over time. These forms of assistance are provided free of charge (grants) and do not need to be repaid, with the aim of stimulating competitiveness, innovation, or economic recovery in certain sectors. Examples include BPUM (Productive Assistance for Micro Enterprises) and Ultra Micro Financing (UMi).
Securities Crowdfunding (SCF), an alternative fundraising mechanism from retail investors through licensed digital platforms, such as Santara, Bizhare, or ICX. SCF can be accessed by MSMEs established as business entities (Ltd. or CV), with financial statements or clear business projections, and that meet the fundraising threshold of IDR 10 billion in accordance with the applicable OJK (Financial Services Authority) Regulation No. 17 of 2025.
The Startup Route: From Bootstrapping to Venture Capital (VC)
Not all companies grow through the MSME route in a linear manner. The startup route can develop in parallel, characterized by a business model designed from the outset to grow rapidly (scalable) and reach a broad market (achieving Product-Market Fit / PMF), even though revenue may still be relatively small in the early stages. According to Silicon Valley Bank, startup fundraising typically develops through several stages:
Stage | Business Activity Focus | Funding Sources |
Pre-seed | Refining the idea, developing the concept and pitch deck, initiating partnerships, and managing basic legal requirements. | Personal capital (bootstrapping), family, friends, and micro VCs. |
Seed | Testing the product in the real market, running initial operations, and seeking traction or initial revenue. | Personal savings, angel investors, and early-stage venture capital. |
Series A | Conducting market research, strengthening marketing strategies, developing a business plan, and beginning to expand. | Venture capital firms (venture capitalists) and accelerator programs. |
Series B | Scaling the business, expanding market penetration, and strengthening the team and operational capacity. | Mid- to late-stage venture capital investors (late-stage VCs). |
Series C+ | Introducing new products, significantly expanding market share, or acquiring other companies. | Late-stage venture capital investors, private equity firms, and financial institutions. |
Mezzanine | Preparing for strategic corporate actions, internal restructuring, or strengthening governance ahead of a potential listing. | Private equity firms and institutional fund managers. |
Exit | Officially going public through an Initial Public Offering (IPO). | Public capital markets, retail investors, and institutions through the stock exchange. |
In Indonesia, several VCs such as Alpha JWC Ventures, East Ventures, and Indogen Capital are active in the startup ecosystem. Several companies that have gone through the startup funding route before eventually going public include Bukalapak and GoTo Group. However, funding amounts at each stage are not standardized. The amount can vary significantly depending on the sector, company valuation, market conditions, business quality, and negotiations between the company and investors.
Approaching an IPO: The Pre-IPO Fundraising Stage
When a company has reached a much larger scale, its funding needs also change. Before conducting an Initial Public Offering (IPO), a company may obtain funding through a pre-IPO round or bridge financing. The objectives vary, ranging from strengthening the balance sheet, financing expansion, preparing the company for the IPO process, to providing institutional investors with an opportunity to invest before the company becomes public.
At this stage, the investor profile also typically changes. While companies in the early stages rely heavily on founders, angel investors, and VCs, investors approaching the IPO stage may include private equity firms, sovereign wealth funds, or large financial institutions.
Pre-IPO funding can also help companies navigate the complex preparation process, including audits, due diligence, prospectus preparation, underwriting fees, and compliance with various regulatory requirements.
IPO: When a Company Enters the Public Market
An Initial Public Offering (IPO) is the process through which a company offers its shares to the public for the first time and lists those shares on a stock exchange. In Indonesia, the process is conducted through the Indonesia Stock Exchange (IDX), under the supervision and requirements of the relevant regulators.
An IPO marks a major change in a company’s lifecycle. The company is no longer accountable only to its founders and private investors, but also to public shareholders. The IPO process involves several important stages, including:
meeting listing requirements and provisions regarding shares offered to the public;
conducting due diligence;
preparing a prospectus;
working with an underwriter; and
obtaining regulatory approval and complying with IDX requirements.
However, an IPO is not the end of the fundraising journey. Instead, after becoming a public company, the company gains access to various new financing alternatives. In addition to issuing shares, the company can conduct a rights issue or issue debt instruments such as corporate bonds.
Post-IPO: Bonds, Sukuk, and Capital Structure Optimization
After a company becomes a public company, funding needs remain. However, the instruments used tend to become increasingly diverse. One of the main options is corporate bonds. Through bonds, a company borrows funds from investors and is obligated to pay coupons periodically and repay the principal at maturity. For companies with strong financial conditions and credit ratings, bonds can be an attractive source of funding because they allow the company to raise substantial amounts of capital without issuing new shares.
In addition to conventional bonds, companies can also use corporate sukuk, which use structures and contracts that comply with Sharia principles. Other instruments that can be used include:
Rights issue (Hak Memesan Efek Terlebih Dahulu / HMETD), the issuance of new shares offered to existing shareholders.
Secondary offering, which relates to the offering of shares in the secondary market.
Medium Term Notes (MTN), medium-term debt instruments that can provide financing flexibility for companies.
At this stage, the company’s question is usually no longer simply, “Where do we get capital?” The question changes to: “How do we structure the most efficient capital structure?” Companies must balance the use of debt and equity while considering the cost of capital, risk, financial flexibility, and shareholder interests.
The Larger the Company, the More Complex Its Financing
A company’s fundraising journey is essentially a journey from simple access to capital toward increasingly larger and more structured sources of capital. At the early stage, companies rely on personal and family capital. As they begin to develop into MSMEs, companies can access KUR, bank loans, government programs, and crowdfunding. Startups with high growth potential can then attract venture capital. After reaching a certain scale, companies can obtain pre-IPO funding and eventually go public. Once becoming a public company, their financing options become broader, ranging from rights issues to bonds and sukuk.
There is one important consequence of this evolution: the larger the company, the greater the demands for governance, transparency, and accountability. A small company may only need to be accountable for the use of its capital to its owners and banks. A public company, on the other hand, must be accountable for its performance to thousands or even millions of shareholders, regulators, creditors, and the market.
Therefore, corporate growth is not only about obtaining increasingly large amounts of capital. Growth also means building the legal foundation, governance, financial reporting, credibility, and capital structure capable of supporting an increasingly large business.
Ultimately, the purpose of fundraising is not simply to obtain as much money as possible, but to obtain the right type of capital, at the right stage, and at a cost and level of risk that can be managed.
Disclaimer: Konten dibuat untuk edukasi atau promosi layanan, bukan rekomendasi jual beli Efek tertentu. Setiap risiko dari keputusan investasi yang diambil berdasarkan informasi pada publikasi ini menjadi tanggung jawab masing-masing audiens. Data dilansir dari berbagai sumber. PT KAF Sekuritas Indonesia berizin dan diawasi oleh Otoritas Jasa Keuangan (OJK).
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