When Will Indonesia’s Fifth Unicorn Appear?
In the span of two years between 2016 and 2017, the country welcomed its four first local unicorns. For those who are not familiar with the Indonesian start-up ecosystem, they are Go-Jek (ride-hailing, at least at that time it was their main business model before they ventured to become a fintech player then eventually a super-app), Traveloka (travel-tech), Tokopedia and Bukalapak (both horizontal marketplaces). At that time, the word Unicorn became a household term, and several events like NextICorn (next Indonesian unicorns) were held by the government. Everybody thought that the momentum will continue uninterrupted. However, by the end of 2020, it turns out that it will be 3 years in a row that no new unicorns appearˆ1.
It is not that the funding pipeline has dried up as both the number of deals and the amounts being invested have steadily gone up in the past 3 years. This has resulted in the appearance of 27 centaurs, a very healthy number, but still not a single new unicorn.
Why is that the case? This brings us to my unpopular opinion: the four unicorns were not solving very hard problems. With all due respect to the ingenuity and hard work of entrepreneurs and employees of these four companies, the sectors they were disrupting were anyway ripe for disruption, and there would be very successful start-ups in those sectors in Indonesia. It just happened that the ones with the best execution capabilities (and most amount of funding) were Traveloka, Tokopedia, Go-Jek, and Bukalapak, so kudos to them! However, there will be harder challenges with larger obstacles that lie ahead, to be solved by either the incumbent unicorns, or the centaurs, or probably new startups that we have not heard yet.
Let’s briefly look at sectors occupied by today’s centaurs. There is no definitive list of Indonesian centaurs, but we will stick to this one published by DailySocial. In this list, two of the three near-unicorns (larger centaurs) are in the fintech sector, while another one is an e-commerce player. Fintech in Indonesia is a notoriously hard sector as it is typically regulated to the teeth and require a very robust tech and operational infrastructure. It is perfectly understandable that it would take some time before any startups in this sector to scale up and reach the unicorn status.
The smaller centaurs’ segment is again dominated by fintech players, but there are at least four players operating in very challenging sectors apart from Fintech: HaloDoc in healthcare, Ruangguru in education, and WarungPintar/Ralali in B2B commerce. Consumer adoption in these sectors would be much slower compared to what have been resolved five years earlier by the unicorns, although they would also benefit from a longer “market education” period and much improved internet infrastructure. Healthcare, for example, is sometimes a matter of life and death that you can’t really compare with buying gadgets online through e-commerce or hailing a ride to the office. Education, healthcare, and SME contexts in Indonesia is also very different than the context of Silicon Valley startups, hence their playbooks have to be heavily modified through a lengthy period of experimentation and learning to suit the local circumstances that are fundamentally different than those at the Valley’s.
Less than 5% of the Indonesian economy has been digitalized, so the tech ecosystem is barely scratching the surface here. There has been quite a lengthy lull in the past three years, but as long as the start-up ecosystem continue to evolve and the investors community can be a little bit more patient, the unicorn drought will end. When it rains unicorns again, it will pour. My guess, well, it’s everyone’s guess anyway, would be that most of them are going to be the Fintech players. The key question that remains today is, will the year be 2021, or will we still have to wait for another year?
[1] I am not counting JD.ID, which is not homegrown, or OVO, which was seeded by a conglomerate
