Investors See Growth on the Horizon for Indonesia's Nascent Startup Industry

Venture capital firms are optimistic about the growth of the startup industry in Indonesia. (B1 Photo/Faisal Maliki Baskoro)

By : Faisal M Baskoro | on 4:13 PM November 02, 2017
Category : Business, Corporate News, Featured

Jakarta. Venture capital firms are optimistic about the growth of the startup industry in Indonesia.

"Indonesia right now is more interesting, a lot of things going on. We start to see more unicorns forming and more mergers and acquisitions taking place," Willson Cuaca, managing partner at East Ventures, said on Wednesday (02/11) at the Tech in Asia Conference at the Jakarta Convention Center.

More than 300 startup companies and 250 investors attended the two-day event.

"Fundraising is more efficient. But, there's a huge gap between the big startup companies and the middle tier, so I think next year there won't be any unicorns," Willson said, referring to startups that have reached a valuation of $1 billion or more.

Tokopedia, Traveloka and Go-Jek are considered unicorns. Grab and Singapore-based Garena are two other unicorns based in Southeast Asia that have a market presence in Indonesia.

"I am still bullish about the market. E-commerce only accounts for 2 percent of retail sales. We're expecting a new generation of startups. This country is so inefficient, there are lot of opportunities from that inefficiency," Willson said.

Companies like Shopback.co.id, Mokapos.com, IDNTimes and Ruangguru.com have potential to be the next startup success story, Willson said,.

"Indonesia also has the fastest internet user growth rate. Our internet users grew by 100 million over the past five years. Indonesia also has a huge population. Startups are all about problem solving and Indonesia has a lot of problems," he said.

East Ventures is preparing $30 million in funding for two startup companies for next year, though Willson declined to name which ones specifically.

Going forward, he expects local startup companies to scale up to compete in the regional market. The challenge, Willson said, is finding enough qualified talent to expand the startup ecosystem.

"Talent is key for small to big startups. Local startups are starting to look abroad for talent. Problem is there's not enough talent to go around. The big companies are taking all the talent," he said.

Pieter Kemps, principal at Sequoia Capital, is also bullish about startup companies in Indonesia but a lack of technology development is slowing growth.

"The quality of engineering and technology in India and China is on par with United States. Here in Indonesia, it's still a challenge. We're very bullish but we want to see more faster learning curve in engineering," he said.

Grace Yun Xia, principal at Jungle Ventures, said Indonesian startups are still in early stages of entrepreneurship. "Many starters are still untouched, we're looking for founders that have independent thinking and a unique view of the market."

IPO or Venture Capital Funds?

Willson said he estimated venture capital funding in Indonesia's startup industry contracted by 30-40 percent this year, compared to last year, because of a lack of original ideas.

Still, some startups are looking for funding from public offerings. Kioson Komersial Indonesia raised Rp 45 billion ($3.32 million) from its IPO in October. M Cash Integrasi raised more than Rp 300 billion during its IPO on Wednesday.

"Venture capital funding will remain the main source of funding for startups [...] because startups can keep their information private and that's an advantage in the competitive industry," Willson said.

Irzan Raditya, chief executive of Kata.ai, said that Kioson and M Cash are pioneers of listed startup companies, though his company is still not yet prepared to follow that path.

"We just received $3.5 million series A funding from Taiwan-based Trans-Pacific Technology Fund. We used the money for talent acquisition. We don't have any new plans to raise more funding," he said, adding that the company formerly known as YesBoss has raised nearly $40 million in funding from investors over the past couple of years.

Kata.ai is an artificial intelligence startup company which provides customer service chatbots to companies such as Telkomsel and Unilever.

 

 

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