Indonesia is a particularly noteworthy marketplace in Asia. As one of the most populous nations in the world, and an average age of 29 years old, Indonesia has tremendous opportunity for the development of profitable companies. At only 28% internet penetration, there are over 93 million people online. The potential is huge as can be seen from companies like Kasus, Tokopedia and Go-Jek.
The tech community in Indonesia began to make huge strides in 2010 as investments in the country grew and greater exposure of opportunities occurred through new Asian media sites like TechInAsia and e27. In addition, foreign investments, such as Yahoo’s purchase of Koprol, firmly placed Indonesia on the map as a place of tech innovation and potential.
Today, there are a number of key investors and firms in the country, including:
– East Ventures: a mix of Indonesian and Japanese investors, with successes such as Kaskus
-GDP Ventures: a branch of Djarum group with its own incubator (MerahPutih)
-Rocket Internet: which birthed Lazada and Zalora, among others
-GREE ventures: the investment arm of the Japanese gaming platform
– CyberAgent: A Japanese firm with invested in, among others, Tokopedia, Bilna and Seekmi
Indonesian Start-up benefits:
There are many benefits for startups in Indonesia, even though the community is still in development stages.
Perhaps one of the greatest advantage for local startups is just that-they are local. Many foreign investors approach the country as a nation of 240 million peoples. But in reality, it’s a country with 240 million potential users with different needs and desires. For example, there are huge gaps between those who have money to spend online and those who do not; there are cultural disparities between places like Jakarta and Bali; and of course, there are religious differences across the region. Local companies are much better armed to address these different demographics and meet the needs of each sub-group.
Another advantage for startups in Indonesia is the climbing rate of internet users. In 2015, studies show that they had over 93 million internet users and that number is set to climb to 123 million by 2018, making it one of the largest internet markets in the world. As one of the world’s most populous countries, 93 million users is still only 28% percent of the population. The potential for customers here is use and companies know that. Rather than create startups to sell, Indonesian startups are building for the future-for the 28% currently online and for the multitudes who will get online in the next few years. These companies are in the unique position of extremely high earning potential just within their own market.
Reputation matters. Given the current climate in the Indonesian startup community, investors are excited about getting involved and investing in Indonesian companies. Successes such as tokopedia, Kaskus, Go-Jek, Blinda and other startup success stories will certainly lead to greater speculation and excitement around Indonesian startup potential.
Startup Environment Challenges:
The Indonesian government is known to be bureaucratic, and sometimes corrupt, and the same rules apply for startups. While companies in places like Singapore can fill out paperwork in a few short days online, it can take companies 2-3 months to register their company in Indonesia. In addition, to encourage foreign investments, there are few regulations for outside investors which can be a challenge for local, poorly funded startups.
In addition to bureaucratic challenges, many startups face a shortage of highly qualified workers-from engineers to HR personnel. In a country with extreme poverty, those who do attend University usually prefer stable and reliable jobs rather than the risky excitement of start-up life. Of course, companies are trying to change this perception by creating pockets of ‘Silicon Valley style’ workplaces. For example, Kaskus, Indonesia’s leading online forums, has office that would be feel right at home in Mountain View. From free food, to colorful walls and chill spaces, they have worked hard to create an environment that can attract a local, high skill workforce.
Another major challenge for startups in Indonesia is the geographical and cultural mash-up that is Indonesia. Most companies address this concern by starting operations in one area (usually the greater Jakarta area) and then expanding, slowly, as they can study and understand users in other locations.
Incubating an Indonesian Startup:
There tends to be four ways in which Indonesian startups develop.
- They are funded and nurtured through large corporate investors/incubators such as Rocket Internet or GDP ventures. These corporations usually invest heavily into companies of interest, usually bring in outside management, and help their investments expands regionally.
- They participate in private and independant startup incubators such as InvestIdea and Ideosource. These incubators usually include seed funding as well as mentor and networking opportunities.
- Indonesian family conglomerates have to invest in the next generation; and what better way to do this by funding startups run by gen. 2.0. Funding the next generations’ startups are both necessary and easier for wealthy Indonesian heirs. While their parents own mines and plantations worth millions, the younger generation can invest smaller sums and stake important claims in the booming tech sector of the future. We’ve been seeing this trend increase by firms like Lippo group (Lazada and Matahari Mall) and Sinar Mas (a-commerce, HappyFresh).
- Like any other startup community, Indonesia has its fair share of bootstrapped and self-funded startups. While this reality is more challenging given the poverty rates and low-levels of education in country, there are some who have gone this route. To be fair, these companies are usually started by those who studied abroad and returned, entrepreneurs on their second startup, and foreigners.