For a decade, Indonesia was not a story about Southeast Asia. It was the story. Two hundred and eighty million people, most of them young, most of them coming online for the first time with a phone in their hand. Gojek, Tokopedia, a parade of unicorns. Every global fund with a Southeast Asia slide put Jakarta in the middle of it, and everybody wanted in.

In 2021, at the peak, Indonesian startups raised about $6.9 billion. Not the region. Indonesia by itself.

Last year, the whole country raised $355.7 million across 91 deals.

That is roughly five cents on the dollar. Indonesia, the giant, the centre of the entire regional pitch, now raises less venture money in a year than Vietnam does, and less in a year than Singapore raises in a month.

The music stopped and the bubble burst. That part is not the interesting part. Bubbles burst everywhere. What is interesting is what comes next, and in Indonesia three things arrived at once. The courts came for the founders. The regulator came for the funds. And the smart money quietly started packing its bags.

That is the reckoning. Let us walk through it.

One. How the balloon got that big

Before we bury this thing, we have to be honest about how it got so big in the first place, because a bubble this size is never one person’s fault. It is a whole system agreeing not to look too closely.

I am going to be honest about my own side of the table, because that is the only way this ends up being fair.

You back a startup. Six months later, twelve months later, eighteen months later, another fund puts money in, hopefully at a higher price. And just like that, on your books, your stake is worth more. You have made money on paper. You did not sell anything. You did not return a cent to anyone. But the number on your page went up.

That paper number is the single most valuable thing you own, because it is what you carry into the room when you go and raise your next fund. A bigger fund. And a bigger fund pays you a bigger management fee, in cash, this year, whether or not a single rupiah ever comes back to an investor.

So let me say the quiet part plainly. These funds spent years marking their own books up to prices that only ever lived on paper, because that paper is what raises a bigger fund and pays a bigger fee. Every asset class on earth plays some version of this game. Private equity plays it. Hedge funds play it. Real estate plays it. Indonesian venture’s bad luck was that here the bubble actually burst, so everyone found out at once.

And when everyone marks everything up, nobody wants to be the person who checks. When eFishery was carried on everyone’s books at unicorn prices, every investor holding it got to wave that markup around and raise more. The number made everyone richer on paper. So who exactly was going to drive out to the fish farms and count the feeders? Nobody did.

That is how a balloon gets this big. Real founders, real ambition, a genuinely enormous market: all of that was true. But wrapped around it was a thick layer of paper valuation that everyone had a reason to believe and nobody had a reason to test.

Then the cheap money went away. Global rates went up, the free-flowing capital dried up, and the next round at a higher price simply stopped coming. The moment the markup stopped going up, the whole thing had to be repriced down to whatever was actually there. Sometimes that is a smaller, real business. Sometimes it turns out there was nothing there at all.

As Buffett put it, when the tide goes out you find out who has been swimming naked. In Indonesia, when the tide went out, the state did not shrug. It reached for a hammer.

Two. The hammer lands on the frauds, and it should

Start with the clearest case.

eFishery, the internet-connected fish feeder company that sold itself as the future of aquaculture, turned out to be one of the largest frauds this region has ever produced. Two sets of books. The company claimed roughly $752 million in revenue when the real number was nowhere close, and claimed a profit while it was losing tens of millions. The founder was sentenced to nine years, reduced to six on appeal. Two of his executives are going to prison alongside him. The investors who got fooled were not amateurs.

Then there is Investree, a fintech lender and at the time one of the respected pioneers, run by a genuine star of Indonesian finance. The regulator says Adrian Gunadi collected around Rp2.7 trillion, about $164 million, from the public without the licence to do it, and routed money through shell companies. When the investigation closed in, he left for Qatar. Interpol red notice, extradition, and he landed back at Soekarno-Hatta in handcuffs in September last year. He faces up to ten years.

So far this is a clean story. Frauds exposed, frauds punished. Good. If that were the whole thing I would be telling you the cleanup is working.

But the hammer did not stop at the frauds.

Three. Four venture capitalists went to prison for a startup that failed

There was a startup called TaniHub, an agritech connecting farmers to buyers. It failed the way startups fail. Two investors had put about $25 million in between 2019 and 2023: MDI Ventures and BRI Ventures.

Here is the detail that changes everything. MDI is owned by Telkom Indonesia. BRI Ventures is owned by Bank BRI. Both parents are state-owned. So in the eyes of the law, the money that went up in smoke was state money. And in Indonesia, a loss of state money can be prosecuted as corruption.

The man who ran TaniHub, Ivan Arie Sustiawan, did divert funds for himself. That was a fraud. He got nine years, plus a fine and restitution, and according to the court record that is a thief getting what a thief gets. No argument from me.

Then the court turned to the investors and convicted them too.

Donald Wihardja, former chief executive of MDI Ventures: five years. Nicko Widjaja, former chief executive of BRI Ventures: three years. Two more investment executives, Aldi Adrian Hartanto and William Gozali: two years each.

Four venture capitalists in prison for backing a startup that failed.

I want to be precise here, because this is the part that made every investor I know, inside the region and outside it, sit up. The court record noted there was no personal gain. These men did not steal. What they were convicted of was approving an investment that lost money. Their own defence was the most basic rule in the whole business: a decision made in good faith that happens to lose money is not a crime, it is the risk you were hired to take. The court did not accept it.

I told you the funds were not saints and I meant it. The markup game, the fee game, all of it. I have called parts of my own industry a grift and I stand by that. We earned plenty of the anger coming our way.

But there is an enormous gap between you pumped your paper numbers to raise a bigger fund and you belong in a prison cell because a startup failed. The hammer stopped drawing that distinction. It came down on the thieves and on the losers with roughly the same force.

Four. And it reached the very top

Then there is Nadiem Makarim, co-founder of Gojek and former Minister of Education. At the time he built it, Gojek was the most successful startup this country had ever produced.

I am going to be exact, because it matters. He was not convicted of enriching himself, and the court specifically found that he did not. The conviction, on 30 June, was for abuse of authority in how his ministry procured school laptops, and for favouring Google, which had been an early Gojek investor. The court put state losses at Rp1.57 trillion, roughly $88 million, on the basis that the Chromebooks could not be used in regions without internet access. He got ten years, a fine, and an order to pay restitution. He says the deal saved money. He is appealing.

I am not going to opine on guilt. That is what the appeal is for, and I have no interest in convicting anyone from behind a microphone. The only thing I can talk about is the picture this makes from the outside.

The founder who built the country’s proudest tech company is in a cell. Two founders who faked the numbers and one who fled the country are in cells. And four investors who simply lost money are in cells too.

Whatever you think of any single case, the message that lands on every founder and every fund in the country is identical. When the boom turns to a bust here, the bust does not end in a spreadsheet and some red ink. It can end in a courtroom. Every founder and every fund manager in Jakarta is now doing that mental maths.

Five. Then the regulator arrived, as it always does

Once the courtroom is in play, the regulator is never far behind, because the other thing a burst bubble always triggers, everywhere, is new rules. The people who missed the fraud on the way up tend to be the most desperate to look tough on the way down.

The financial regulator, OJK, brought in a new regime for venture firms. You now need Rp50 billion, about $3 million, in paid-up capital just to operate a fund. Use your licence within six months or lose it. Full disclosure of who really owns and controls you.

Some of that is a reasonable reaction. After Investree ran money through shell companies, wanting to know who actually controls a fund is fair enough, and I understand the intent.

But be honest about the $3 million floor. It does not stop the next fraud. Fraud does not care what your paid-up capital is. What it does do is price out emerging fund managers, the exact people a recovering market needs most, the ones willing to back a founder before anyone else will. You do not catch the crook. You just clear the room of the honest small players.

And it is not only the private market. Up at the level of the public exchange, MSCI, the firm whose indices steer trillions of dollars of passive money around the world, has put Indonesia under review. It flagged the market for opacity, for murky shareholding structures, for suspected coordinated trading. It has pushed the review out to November and is holding open the option of downgrading Indonesia from emerging market to frontier market.

To be clear, Indonesia has not been downgraded. It is under review. But if that downgrade comes, estimates run as high as $13 billion flowing straight back out of the country almost mechanically, as passive funds rebalance away.

So stack it up. At the startup level, investors going to prison. At the fund level, small players regulated out of existence. At the public market level, the world’s biggest index provider standing at the exit with a hand on the switch.

Every rule, every review, every sentence points the same direction. And the people who move capital for a living can read a compass.

Six. The quietest part, and the one that tells you where this goes

A few days ago the news broke that Monk’s Hill Ventures, one of the better-known names in the region, has restructured. It shut its Indonesia office, pulled its team back to Singapore, and is moving up market toward later, safer, growth-stage deals.

No scandal. No sentence. No headline number. Just a flagship fund quietly closing its door in Jakarta and walking back across the causeway to home base.

Sitting next to everything else in this piece, that is not a coincidence. It is the logical last step. The bubble burst, the hammer came down, the rules tightened, and the smart early money did the only rational thing available to it. It stopped writing early cheques there.

It will not be the last fund to make that move. It is just the most recognisable name to do it so far.

Seven. Where I actually land

I do not want this to read as doom, and I do not want it to read as a defence of my own industry.

The frauds deserve everything they get. Ivan Arie Sustiawan, who looted TaniHub, gets no sympathy from me. Throw the book. Fraud is fraud and it should be punished. And my own industry earned a hard look for the years it spent inflating paper it knew was soft. A reckoning was coming, and a lot of what has landed is fair.

But there is a difference between a reckoning that cleans a market and a reckoning that empties it. Right now Indonesia is doing both at once, and it does not seem to know the difference. It is punishing the fraud, which is right. It is frightening off the risk, which is fatal. And it is doing them in the same breath.

Here is the part worth holding onto, though, because you should not walk away thinking the country is finished. It is not.

It is still the biggest market in this region. It still has the largest population, and it is still full of people who want to build and buy and grow. And remember that something like ninety percent of the peak money was foreign to begin with. A lot of what just fled was never really rooted here. It bought into a story and some honestly fake valuations, and much of it needed to go, or at least needed to recalibrate.

The people are still there. The demand is still there.

The question is whether, when the dust settles, anyone with capital is still willing to stand in a room and take a real risk on a Jakarta founder. Right now they are heading for the door.

The market that figures out how to call them back is the one that wins the next decade.

If you are a founder in Jakarta watching your funding options walk out one by one, or an investor deciding whether to stay, I want to hear from you. My inbox is open.

The tide went out on Indonesia. Now we find out who is still willing to swim.

This piece accompanies this week’s episode of SEA of Startups. Real. Raw. Relatable. Listen on Spotify, Apple Podcasts, or YouTube, and subscribe to the newsletter at seaofstartups.substack.com.

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