Lately, Indonesia is experiencing a massive investment in its technology sector. Giants like Expedia, Alibaba, JD.com, Tencent Holdings, Sequoia Capital and Rakuten Ventures are pumping billions of dollars into Indonesia, trying to take a piece of the ever-growing pie.
Let me try to break it down for you. To understand the entire ecosystem we will be looking into Venture Capital (VC) activity, market, government initiatives, challenges and how co-working spaces fit into that picture.
Venture Capital Activity
In 2015, Indonesia received $31 million in disclosed venture capital, and the number grew to $631 million in 2016! [CB Insights]
In 2017, the investment reached $3 billion worth of deals (as of September 2017).[JakartaPost]
Tokopedia — a marketplace that empowers users to set up online shops and handles transactions got $1.1 billion in capital from China’s Alibaba in August. [JakartaPost]
Go-Jek — motorbike on demand as well as a lot more (on demand) cool features, like go massage (our favourite) — secured $1.2 billion from Chinese JD.com and Tencent Holdings in may. [CB Insights]
Kioson — became Indonesia’s first e-commerce service to go public in October. [JakartaPost]
As you can see from above, a lot is going on in Indonesia. Thus it’s not a surprise why Recently Indonesia was ranked as the first in a category called “startup frontier markets.” The study covered over 50 countries, which are defined as “hotspots of raising venture capital outside of places where mainstream VC is concentrated.”
The graph below illustrates Top Emerging Startup Hubs and Indonesia has contributed the highest percentage of the world VC deals since 2012.
On top of that, Jakarta leads the top ten frontier startup cities, ahead of Dubai, Vienna, Istanbul, Kuala Lumpur and Bangkok.
On a worldwide level, nearly 60% of all VC deals go to US-based companies, followed by the UK, China, India, Germany, and Canada respectively. [CB INSIGHTS]
However, when it comes to emerging markets Indonesia and Jakarta are taking the lead and there is no sign of why investments would decrease in the near future.
With a population of more than 250 million, a growing middle class and an increasing availability of cheap mobile devices; Indonesia attract more and more attention from international startups as well.
Additionally, internet use is growing faster in Southeast Asia than in other parts of the world, with 124,000 users coming online every day over the next five years, according to a study by Google and Temasek Holdings.
Indonesia has developed a unique mobile-first market which is expected to comprise more than half of Southeast Asia’s e-commerce market by 2025 and an estimated value of $46 billion. [JakartaPost]
Luckily the Indonesian president, Joko Widodo is a strong supporter of digital innovation and his support amplifies the rapid growth. He plans to create 1,000 local tech startups worth $10 billion by 2020!
Being an emerging market, Indonesian startups face many challenges amongst which low credit card penetration (many Indonesians do not hold a bank account yet), tricky logistics considering Indonesia’s archipelago nature, bureaucratic delays, poor internet penetration across the country and a limited pool of tech talent.
4. Coworking spaces
Co-working spaces play a crucial role in facilitating relevant events, meetings and bringing together influencers, successful entrepreneurs with upcoming startup teams.
Co-working spaces are the epicentres of tech startup activities as they bring a lot of like-minded people together. To illustrate my point, Greenhouse is often facilitating meetings between startups and VCs, organizing events like Startup Weekend, Silicon Drinkabout, IDEO Workshops, and the list could go on. If you want to get a glimpse of how developed the local tech-scene is, visit a nice co-working space for a week.
5. Conclusion — an ecosystem in the shaping
Investment in the tech sector is booming. More and more VCs are eyeing Indonesia. Consequently, there are already several massively funded startups that serve as an inspiration to wantrepreneur e.g., Treveloka, Go-Jek, Tokopedia, Lazada, Grab, etc.
Co-working spaces are coming to the rescue as well. The growth in shared offices reflects an increase in events across major cities such as Jakarta, Bandung, and Yogyakarta.
Having said that, as it is the case with any other emerging market, Indonesia faces many challenges too. However, such problems spark creativity and give rise to startups like Go-Jek that are unique on a worldwide level. I am confident that Indonesia will come out with a few more unicorns in the upcoming years.