With what TechCrunch calls a “burgeoning startup economy” and the tacking of a handful of unicorns to its name, the startup landscape of Indonesia has been the subject of a similarly growing number of conversations. I had the privilege of talking to a number of players in the industry and compiled my conversations, knowledge, and research of Indonesia into one informative deep-dive into the ecosystem!
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Staying true to its roots as the largest and fastest-growing Internet economy in Southeast Asia, Indonesia’s internet economy is set to reach a massive US$40 billion this year, according to research done by Google, Bain and Company, and Temasek. This growth is propelled due to its young population. With a median age of 29 and 60% of the country being under 40, technology adoption in Indonesia is at an all-time high. This trend has created what Eddy Chan, Founding Partner at Intudo Ventures, likes to describe as the “leapfrog movement.” Running parallels with the US and China, who’ve taken decade-long routes towards normalizing digital payments, for example, the Indonesian population instantly took it up after cash. “Over time, the US went from cash to traveler’s checks to credit and debit cards … whereas Indonesia, although still preliminary, went straight from cash to mobile,” Chan says.
This phenomenon of adoption has led to 95% of Indonesia’s current Internet users to consume their content on mobile. Whether it be video, music, social, or game-related content, consumers in Indonesia enjoy—and prefer relative to other platforms—the convenience mobile brings. Helmy Rianda, Founder and COO at DOOgether, a mobile app that allows users to book classes for anything in Jakarta from Zumba to pickup indoor soccer sessions, cites this as a large factor for DOOgether’s success, stating that “80% of users book sports classes because it’s [on] mobile.” This trend is also evident in the region-wide adoption of Shanghai Moontoon Technology’s Mobile Legends: Bang Bang, a popular mobile MOBA reminiscent of Riot Games’ League of Legends. Mobile Legends has clung to the top 1% of apps on the Indonesian iOS and Play Stores—fluctuating between positions over time, but remaining constant at #2 or #3 in terms of downloads and overall rank according to App Annie.
The convenience mobile brings in has made fintech extremely popular in Indonesia. Whether it be in the form of P2P solutions, POS, personal finance management, or lending services, Indonesia probably already has some version of it—last year, Fintech Singapore identified 167 fintech companies operating in Indonesia. However, it is to be noted that this figure probably does not account for “what was essentially predatory loan sharking under the guise of ‘banking the underbanked’,” Tommy Sullivan, the CTO of an Indonesian video-streaming platform, describes. Indonesia’s regulatory body on investments, the Otoritas Jasa Keungan (OJK), recently reported that they had found and took action on a total of 1,477 illegal fintech corporations as of October as part of their initiative to regulate businesses operating without licenses that would or already have “[caused harm] to the community.”
Although disappointingly large, this number is not truly surprising, given Indonesia’s deeply-rooted problem with education. According to a report done by the World Education News + Reviews earlier this year, “the percentage of Indonesians over the age of 25 that had attained at least a bachelor’s degree in 2016 was just under 9 percent.” This accompanies an equally disappointing 36.3% tertiary gross enrollment ratio (GER). The lack of education and technological illiteracy in the older population of Indonesia makes it difficult to not be scammed with fraudulent apps/software. The aforementioned financial fraud induced “intimidation and sexual harassment during debt collections, as well as breaches of data privacy … resulting in swelling interest charges,” according to a 2018 piece done by the Nikkei Asian Review.
Another problem that plagues Indonesia currently is what Rianda calls the “access gap”—the accessibility of the Internet and other resources for rural areas outside of just Jakarta, Indonesia’s capital city. Karissa Prayogo, a current senior at Georgetown University and a recent Product Management Intern at the Angel Investment Network of Indonesia (ANGIN), describes this problem of “being stuck in the ivory tower of Jakarta” as one that is still rife within the community. “All the current capital, resources, and community is [being funneled] into South Jakarta,” Prayogo reminisced. In addition to a larger disparity between the technology center of Jakarta and its more rural outskirts, this leads to “founders in Semarang or Medan (two other Indonesian cities), for example, not having the same access to capital or role models and mentors,” essentially cutting out the people who would be the most inclined to solve the problem: the people experiencing them from day-to-day.
These problems can be mitigated by reigning back and truly solving what Sullivan calls “an Indonesian problem.” Addressed by almost everyone I had the privilege of talking to, startups that currently—and will continue to—succeed today in the Indonesian ecosystem touch back to problems that genuinely plague Indonesia. Sullivan explained that the ability to launch a company in Indonesia mainly “because it was a startup in the US” has led to large-scale pivots despite their abilities to “raise money quick [and snap] up tech talent at inflated salaries.” This is because problems in Indonesia are very geography-unique, often leading the founders of these companies to scramble to uncover problems instead of vice versa. What potential founders have to realize is that despite its rapid adoption for technology, solving a truly painful problem in Indonesia most often involves “very lightweight” opportunities that “solve the coordination/logistics issue,” Chan says. Things like “deep tech adoption” and “complicated products that would be hard to understand by the majority … for example, blockchain integration in banking,” are things that would find adoption difficult, adds Kartini Andri Wardhani, an Associate at Venturra Discovery.
Companies today solving this logistical problem for potential founders to look into include TaniHub, a company that helps connect small farmers to markets to sell their crops, and Kargo, a company seeking to rid the pen-and-paper-heavy planning that’s the norm in logistics. With missions to address the ‘middlemen’ plaguing the average labor worker in Indonesia, these companies directly contribute to the impactful development of Indonesia. Additionally, HaloDoc, a company that aggregates and connects patients with doctors, labs, and pharmacies and RuangGuru, a host for online video lectures, study notes, and quizzes both serve needs that plague Indonesia as a whole—access to medicine and education. Additionally, as the push for health and fitness also becomes more normalized, companies like Burgreens (plant-based eats), Lemonilo (a healthy alternative to Indomie—Indonesian instant noodles that play a large role in food and pop culture), and RIDE (music-fueled group cycling) are carving out spaces for themselves to blossom. There is also something to be said about companies that do the above as well as tie back to being unapologetically local. Kopi Kenangan is a good example of one—not only do they bridge the gap between street vendor and cafe coffee, their most popular drink is ‘Es Kopi Kenangan Mantan,’ a cup of coffee that, in slang, should taste like the memories of your ex—a popular topic in Indonesian humor.
What I believe discourages founders as well as investors from encouraging this more is the idea of far-future returns. The idea of success coming from solving a huge Indonesian problem is not novel, but the acceptance of not getting returns in the immediate nor short-term future seems to be. “Motivating individuals to make sacrifices for returns that are delayed much longer than the lifespans of their own children [is] very difficult.”
However, as more SEA turtles ‘come home’ to Indonesia from their times abroad and Indonesia’s tech unicorns poise for momentous IPOs, producing ‘ex-company’ founders, I believe the near future looks bright for product-Indonesia fit. The success of companies like Gojek and Tokopedia make blatant this notion of trimming the logistics fat Indonesian is rife with (prior to Gojek’s rides-on-demand, one would have to call a taxi operator’s landline to specify, in words, their precise location and type of taxi they’d need), acting as good role models for future Indonesian founders to look up to. Doubling-down on this mantra of solving painful, Indonesian problems is what will continue the momentum Indonesia’s technology scene has kickstarted and “leapfrog” growth as it catches up to global counterparts.
Thank you for reading all the way to the bottom! As usual, I’d love any feedback you might have—say hi: firstname.lastname@example.org
This is a project that I’ve been spearheading for a while at Failory. Since a lot of our current startup content is very company-specific, I thought it would be interesting to explore the literal and metaphorical ground these high-octane companies are built on. This article is the pilot to a potential series of deep dives into these geographies, featuring insights about consumer and industry trends, the landscape, and possible opportunities I’ve gathered through conversations with key players in the space.
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