Indonesia’s technology and digital sector is experiencing a major spike in venture

capital activities. there is no better time to run startups in Indonesia than now.
With more than 260 million of the population, Indonesia’s middle class is growing rapidly.
Coupled with the affordable access mobile devices, these factors are now shaping
Indonesia into a fintech ecosystem, allowing many Indonesian startups to venture
primarily into e-commerce and ride-hailing markets.

While to access updated and important information is limited, business startups in Indonesia
still have to face challenging issues and come up with effective solutions.

THE GOOD OF RUNNING STARTUPS IN INDONESIA

Investments

Indonesia has been known as the largest Southeast Asia’s online market. Since 2012,
the country has successfully received the most venture capital deals from the emerging
markets worldwide.  

International giants such as Alibaba, Expedia, Alibaba, Tencent Holdings and Rakuten
Ventures, JD.id are pouring enormous investments into Indonesia, hoping to reap the most
profits by grabbing a piece of this ever-growing pie.

In 2016, Indonesia has gained US$631 million disclosed venture capital, a massive growth
as compared to the US$31 million in the previous year. The growth was even
more shocking as the investment achieved US$3 billion deals in September 2017.

According to a study done in 50 countries by CB Insights, Indonesia has gained the first
place in the category of “startup frontier markets”. This category is defined as the “hotspots
of raising venture capital (VC) outside of places where mainstream VC is concentrated.”

Capital city of Jakarta

In addition to that, Jakarta tops the rank of the top ten frontier startup cities, followed by
Dubai, Vienna, Istanbul, Kuala Lumpur and Bangkok.
On a larger global scale, approximately 60% of all VC deals is directed into US-based
companies. The rest of the investments are primarily invested into the UK, China, India,
Germany, and Canada.

Market

Indonesia gains more attention than ever. This emerging market is attracting international
startups mainly.

Statistics have shown that in Southeast Asia, the internet use is growing much faster as
compared to other parts of the world. A study from Google also indicates that over the next
five years, there will be whopping 124,000 users go online almost every day.

By 2025, Indonesia is anticipated to have an ecosystem that comprises of more

than 50 percent of all e-commerce market in Southeast Asia with an estimated value of
US$46 billion – thanks to the unique advancing mobile-first market. 

Government

As an avid supporter of technology and digital innovation, the influence of Indonesian

President Joko Widodo does help to heighten this particular market. One of his plans in this
burgeoning market includes the creation of 1,000 domestic tech startups by 2020, with a
total value of US$10 billion.

THE BAD AND THE UGLY

Low Penetration of Credit Card

This might be shocking to other countries, but Indonesia is considered a highly

unbanked nation with only a small percentage of its population owning a credit card.

 
Skills and Talent

With the increasing globalisation, revolutionary technology and evolving work patterns,
Indonesia is now encountering huge challenges in terms of skills needs and talents to
keep up with workforce requirements, the International Labour Organization reported.

According to The World Bank, one of the factors that lead to skill and talent gaps is poor
education. Inadequate education also causes people to be lack of critical thinking skill is
particularly crucial in order to run a startup in Indonesia.

Bureaucracy

Indonesia is ranked 72nd by the World Bank for the ease of doing a business (EDOB).
Additionally, Indonesia is claimed by AFP as one of the countries in the world having a bad
reputation for its startup bureaucracy.

This is because on average, in countries like the United States, it takes five procedures and
five days to set up a company; and in Denmark, it merely takes 5 minutes with an online
application. Meanwhile, in Indonesia, nine procedures with 47 days are considered
standards for entrepreneurs to set up a company in Indonesia.

Transports and Logistics

Indonesia’s poorly developed transportation infrastructure creates a lot of opportunities for

startups but poor roads and unclear addresses make the process cumbersome.

Consumer Behaviour

TechInAsia indicates that Indonesians, as “late adopters”, prefer to purchase products and

services that have gained popularity in other markets, as well as products and services they
have already heard of.

As a result, this behaviour makes adopting new and innovative ideas more challenging in
the emerging markets in Indonesia.
 

Lacking Co-working Spaces

Major cities like Jakarta and Bali have the most of co-working spaces in Indonesia whereas
this type of facility is scarce or almost non-existing in other regions of Indonesia. Thus it
could be challenging for startup in Indonesia if the company is not located in one of the
major cities.