Jakarta – One bad apple spoils the whole barrel. As a result of the embezzlement of corporate funds that allegedly occurred at eFishery, an aquaculture startup, investor trust in startups in Indonesia is melting away. And the eFishery scandal shows that the young people managing them are highly skilled in financial manipulation.
In order to grow the company, the eFishery management is suspected of a number of irregular actions: from establishing shadow companies and arranging fictitious transactions to withdrawing company funds for personal interests. When the eFishery case came to light, investors claiming they had lost money took the company management to court. eFishery closed down and many fish farmers lost money.
And there have been similar cases in companies other than eFishery. According to the "Maturation Map: Corporate Governance in Southeast Asia Private Markets" document prepared by a number of associations of venture capital companies in Southeast Asia, four other Indonesian startups have been hit by fraud.
They are TaniHub, which failed to pay Rp14 billion, Octopus Indonesia, which produced fictitious contracts, and financial technology startups Investree and Koin P2P, which were involved in the embezzlement of hundreds of billions of rupiah. Although all these cases have not reached the stage of legal proceedings, an investigation by the association shows that Indonesian startups are prone to financial manipulation by their managers. Moreover, the owner of Investree has become an Interpol fugitive.
These alleged misdemeanors are worrying because those responsible are young people who graduated from top universities. This is because they relied on their reputation to attract funds for investors. They used their intelligence and their background to fool both investors and consumers using sophisticated methods.
And the impact of the investment from these startups could be widespread. Investors lost their money, instead of seeing it double or more as they had expected. Customers, consumers and corporate partners also lost money when the startups closed down. And the business ecosystem has become highly risky, resulting in investors thinking twice before putting money in.
The decline in the trust of the investors is illustrated in data from the Indonesian Venture Capital Association for Startups. Since 2021, capital flows for startups have been in steady decline. This year, the funds going into startups totaled US$6.8 million, but last year, before the startup scandals started emerging, the sum was US$235 million.
The collapse of trust has adversely affected startup companies that are honest and want to establish credible businesses. At present, Indonesia is ranked fourth in the number of startups. With around 3,000 startups offering a range of innovations, there should be huge capital flows, resulting in improvements to the economy and to the quality of life for the people of Indonesia.
These startup scandals could spread to other business sectors, for example, capital-intensive industries who need investors because of the sluggish economy. Irregularities in startups will affect confidence in the business ecosystem.
This is because what is damaged by startup fraud is the very essence of every business: integrity. If nobody has integrity any more, there are no longer any bonds of mutual trust. Let us hope we have not entered a dark age with poor corporate governance, corruption, and the absence of integrity in business.
– Read the complete story in Tempo English Magazine
Source: https://en.tempo.co/read/2007799/startup-business-frau