Is it possible to call Indonesia the next Silicon Valley?
Currently, Indonesia is a promising centre for technological advancement in Asia as it has a growing market. With the aid of gigantic scopes, quick expansion and tech-savvy clientele, investors are showing interest to pour their money. For the investors, entrepreneurs and business advisers, this place is turning into subsequent Silicon Valley as the start-up cost, cost of running the business is somewhat low in Indonesia, and that makes it bull’s eye for the investors. The government is also put their hands together to make it a hometown for interested investors to raise capitals for new start-ups. Thus it helps overseas companies to make investments on small and local IT companies.
The President of the country took the initiative
Back in 2016, the president stole endeavour to promote 1000 start-ups by the end of the year 2020 and the program named as ‘1000 Startups Movement’ with a hope of raising $10 million capital by the year 2020. There are a bunch of workshops and other interesting activities like boot camps and all to build a large fund of almost $10 BN. The Ministry of Communication and Technology turns into a liaison with Kibar to make starting up around 200 new tech start-ups in a single year throughout all over Indonesia possible to completion of the project. In order to boost up the spirit of new entrepreneurs and new-fangled tech enterprise, the government comes up with a user-friendly peer-to-peer policy such as HUB.ID so that the investors can quickly get in touch with such local and new start-up companies. Also, the president chose four ministry departments to get to the bottom of such start-up issues. In this way, the government has made the footprint to stir up the wealth of the country.
The president announces to make necessary amendments to support new small ventures and endow with grants to incubators, making it smooth for start-ups to prosper in the country’s business scenario. There is another project called ‘Making Indonesia 4.0’ to create healthy competition in the manufacturing industry that is on the verge of getting a leap. The president makes the nationals understand that without implementing technology and science and without some innovative ideas, nothing can be persuaded.
Policies boosting up the confidence of the start-ups
Moreover, the president also makes the course of action to eliminate investment barriers for eCommerce companies to encourage more investments. Except this, the government also support core stock exchange so that they can facilitate primary offerings to the start-up companies. It focuses on the vision of the president as well so that would-be entrepreneurs feel stress-free to operate their business efficiently all around Indonesia.
Factors affecting hitting the zenith
Though the foreign investors are interested and it has been reported that the investment just went triple in the last five years and it has the potential to get more and more growth. Still, the market is not in prime, and that causes an assortment of hurdles to get to the top of hit and grow to be the next Silicon Valley.
Despite the massive amount of investment, the leading market researchers are still unconvinced about the future of new start-ups and who will stay ahead in the race. Recently it has been found that the whole system is sustaining the scaling industry more freely than authorizing the fresh business ideas. There is a cutthroat competition between investors that host start-ups and cost is so soaring to validate a profit. Furthermore, several small investors can’t lend a sufficient amount of capital to get involved in the growth of capital rounds.
For instance, in 2010, there was a small investment company named East Ventures make primary investment for Tokopedia which is a digital platform designed for small as well as the mid-sized enterprises., but in the year of 2017, the investment giant Alibaba took the initiative to back the company with USD 1.1 billion which swept away East Venture’s dream to support this platform as they do not have the round-up capital for later participation.
The market is just on the verge of getting maturity creates new capital risks and also creates possibilities for further investment.
Obstacles related to culture and language
Foreign investors that get massive profit in any of the Southern Asian countries does not validate money-making in another country because of cultural differences as well as styles of these countries also prove to be the main hindrance for growth. Every country has its government, financially viable setup and other factors that have affected overall economic growth. According to the report, it has also shown that GDP can make differences.
As the southern part of Asia is so complicated, no start-ups can operate their business with just fit-for-all approach. Several companies make the most if they build relationships with well-known local organizations for the reason that those local players are well familiar with culture, languages and also the government policies.
Indonesia falls short of advanced infrastructure
However, Indonesia has an emerging market; still, there is a lack of support, average business regulations and policies. There is also a lack of talent pools for the hierarchy of employees. According to reports, the country should put more money to make talent management, handle transportation and below the mark treatment facilities. To continue such flow of investment, the whole Asian continent needs to spend over USD 2 trillion on highly developed infrastructure every year.
Bland business ownership policies
Also, the approach of business ownership is very intricate, so investors lose interest to put their money on start-ups. The business ownership policies also lack the transparency that gets in the way of growth in such countries. They even lose interest as the government does not have any firm legal structure to save their money goes in the vein.
Lack of talent pool
Last but not least; Changing work designs, implementation of advanced technology it needs an expert workforce to carry out the business in the best possible manner. It is very tough to get experienced and knowledgeable employees who can lead the start-ups from the front. It has been reported that scores of Indonesian nationals are going aboard to get higher education and get established there. They are not at all interested in staying in their own country and helping those emerging start-ups, so this makes a hindrance to these growing markets. Renowned tech-organizations like Facebook or twitter are facing challenges in developing their business in this country because of an efficient workforce. Though it has an emerging market still, they are unable to make profits, so they lose confidence in further investment.
Despite these factors, as mentioned above, becoming challenges for the country to reach the ace, it is being tech-savvy and thus may lead it to become the next tech hub in the Asian continent. The government is trying to make amendments in their business regulations to grab the attention of more foreign investors. The financial institutes like banks and others that are using cloud storage to keep immense data on the server getting legal authorization to have data centres to collect massive data. In the next ten years from now, nearly 90 million Indonesian get into the consuming class, thus raising their GDP. Indonesia experiences more or less 6% growth in GDP every year, and it makes them compatible to sit as one of the G-20 members after India and China. The Indonesian clients are very much engrossed about huge discounts so it won’t be your cup of tea if you do not have the fundamental structure of cuts to catch the eyes of vast clientele.
Any new start-up that runs e-stores in Indonesia has to be aware of making profits by giving attractive discounts to the customers. Emerging start-ups operating in Indonesia is all set to get hike by 20-30% in the next 2 or 3 years as Creative Economy Agency Says.
Following reports of Novistair, there are plenty of rooms for new investors as there are large numbers of willing users, but they need to be more flexible to grasp the attention of new investors. Access to multinational brands and hiring proficient employees helps to encourage the potential of the market. The local tech start-ups need to collaborate with international brands so that they can find out how those international organizations work, how their culture is, share innovative ideas to make the most. The completion is healthy for local companies as well as the foreign companies also need not bother about hiring capable professionals from outside and local issues to be fixed by the local players, aiming the best expansion in business. This way, the local players also can show their efficiency in doing the deal without disrupting the policies.
Though foreign investors are interested in the market is not natural to do business as there are some limitations in different sector of business ownership in Indonesia. Due to their strict legal issues, big names like Reddit or NetFlix are bound to ban certain business operations. For example, Uber is facing trouble in the area of transportation business in Indonesia. The Indonesian government is changing regulations frequently, and business organizations lose their tracks to a set legal policy hence makes it more problematic to go further.
Due to a leading market research company called Novistair, the government should stand with the young so that they can come up with more innovative ideas that are appropriate to the current market trends despite the laws and regulations of the country.
To grab the notice of foreign professionals, a few start-ups come up with some exciting contest to take part in so that they can get their tech-job in Indonesia. There are some interesting mobile apps as well to boost up the spirit of young Indonesian to generate new-fangled digital solutions to resolve real-life problems.
How Indonesia hold the attention of future investors?
Bali is the next hub for any start-up activity as it has a population of 4.2 million. Bali gets hold on records like creating healthy co-working spaces and events based on entrepreneurship regularly. Such actions are hosted by an industry leader to make people get familiar with tricky tech solutions. Moreover, Bali comes up with the world’s prime remote work conference, Running Remote, which endows education and tools for experts to do well in the upcoming prospect of remote work.
Indonesia’s policy to support start-ups was implemented first in the year 2010 with some renowned tech players like Go-Jek, and Traveloka. They faced the crisis but remain in the race and thus help the young Indonesian people to get back to their country and promote start-ups to serve the nation with better ideas and innovation. It takes a surprising turn in the year 2015 and following the trend, the market is budding impressively.
A few market unicorns like Bukalapak and Tokopedia has legitimately led the Thai market. Most of the young generations are tech-savvy, and they feel interested in doing transactions with the aid of e-wallets. The funding includes an expansive range of industries like FinTech and Agritech.
Though this is the era of making digital payments, Indonesians prefer to do transactions with cash over credit cards. With the implementation of advanced technology government and leading banks are encouraging people to make use of cashless digital payment system and such institutes are spending over thousands of dollars to develop a customer-centric digital platform to ease the payment system and make it safe. So it makes the country positioned 2nd that rotates more cash. Indonesia’s per capita income is 50%of Thailand. Consequently, it makes low-cost living that catches the attention of employment, although the market is not mature enough.
Like all other countries, Indonesian people also like to scroll through social media platforms like Facebook, Youtube and others. So it makes them be acquainted with latest market trends.
Though most of the people are Muslims in Indonesia, this new generation is more open as they are educated and love to adopt western cultures. This, in turn, creates a niche market for the food industry, the fashion industry as well.
There are nearly 30 e-wallet services that come up with hassle-free peer-to-peer lending services, and several new start-ups also make the most of such apps.
Logistics seems to be the essential part that creates pain in the back for the companies willing to do business in Indonesia. Especially in e-commerce sectors, the Indonesian government and investors should take care of this logistics part so that more enterprises find its way to Indonesia.
Jakarta the epicentre of the tech revolution
Indonesia is having abundant opportunities for investment in the technological sector. Specially Jakarta, have the perspective of being the next tech hub in whole south Asia. It has over 10 million people residing in the city itself, and in greater Jakarta, there are around 30 million people out there. Thus it makes the city the central hub for business, improvement and others. Many big players like Facebook, Google and Microsoft have their base in Indonesia doing business throughout the globe. The large market is facing positive growth in past five years. Companies like Tokopedia and Go-Jek have raised over 1 billion USD more rapidly than other business.
The Indonesian market has shown steady growth in the past decade as the start-up venture companies are quite dynamic. Another company called Venturra, supported by Lippo Group declares around USD 150 million in coming years. Convergence Ventures, another tech player, most recently stated that they would spend $30 million in outstanding entrepreneurs aiming the market of Indonesia.
Several other big names in a venture such as KKR, Sequoia Capital and a few others to mention are directly put a significant amount of money into the internet market of Indonesia. Following another leading research company Google-Temasek, it is estimated to rise to around $100 billion by the period of the next five years. Local investment firms are also putting their foot in the shoe of investment in Indonesian market.
There is a rising demand of talent as most businesses are looking for fresh and local professionals to cut down the labour cost to an extent thus, in turn, helps to create a cost-effective business plan and make more revenue. Jakarta is having many renowned technology colleges from where thousands of students are getting passed every year and looking for getting placed. But many big names are going for overseas talent hunt to get the posts filled. As the city of Jakarta is falling short of efficient and skilled internet executives who can handle the sphere of digital marketing and online data analysis along with business intelligence as said before the local people are getting an education in foreign countries and get the job over there. So it leads the companies to hire professionals from other countries. Moreover, as international tech houses fetch inexperienced professionals, there will be a relocation of talent to native employees that will fill the space in the future.
Jakarta being the centre for government activities and a hub for big companies and renowned banks it is in focus for start-ups to raise capital and serve more customers as well as acquiring talent. Not only business centre Jakarta is an administrative hub as well in Indonesia. As a result, it is the central place that gets the most benefits out of government initiatives like 1000 start-ups movement. Having the critical heap for a system is essential as scores networks of entrepreneurs, investors, as well as talent, build better opportunities for all stakeholders to take on and face the upcoming challenges and take advantage of opportunities.
As regional as well as home-based companies come together in Jakarta, this will make the city better and emerge as the national technology centre today and in the coming years. As a regional hub, Jakarta will welcome more people to invest and solve critical digital issues shortly. By 2025 it might happen that most of the leading tech companies are operating their business from this city itself. Not only Jakarta, other cities like Denpasar, Bandung is also looking promising to make Indonesia a tech hub in the next decade.
In Indonesia, there are scores of people who do not have banking activity. Companies like KinerjaPay promote banking services through secure mobile wallet and e-commerce platform as well. There is another Logitech venture, namely Tanigroup are like an angel for poor farmers in Indonesia as they help farmers to get a reasonable rate for their crops and get $10 million in the year of 2019. To help street vendors, there is Kedai group that facilitates to obtain more from the products the street vendors put on the market. Not just making more money, such tech ventures also make it easy to gain more orders.
Companies that participate in the revolution
Tokopedia: It is a firm that helps small and medium companies, and at present, it becomes the first unicorn in Indonesia as Alibaba raises an enormous investment for supporting their business.
Bukalapak: Bukalapak, another start-up that makes it mark on Indonesia’s eCommerce scenario. It has grown within the nation with the aid of investment made by EmTek Group which also does business with 500 another start-ups.
Go-Jek: Another unicorn start-up named Go-Jek that builds up with logistics and digital payment services. It is now ready to make entry to markets of the Southeast Asian region. Its primary financier is Tencent, that is also a Chinese giant.
Traveloka: It is a Travel-Tech establishment that is also a unicorn in Indonesia. It helps customers to get airline ticketing along with hotel booking services online. It covers customers from six countries on the Asian continent. The prime investor for this start-up is Expedia, international travel Technology business.
IDN Media: IDN Media is one more online media start-up company that has multiple platforms for easy navigation for the customers that wraps up day-to-day lifestyle news aiming Millennials and Gen Z. It is presently on the lookout for Series B funding with its top investors being East Ventures in addition to Central Exchange.
HappyFresh: Moreover, HappyFresh is an eCommerce start-up that helps in delivering consumer products by collaborating with renowned supermarkets. It is one of the start-ups which is the native start-ups in Indonesia and now has stretched to other countries, together with Thailand.
Co-working space that helps to succeed
There are several co-working spaces that one needs to look for as it also facilitates the country to become next Silicon Valley.
We work Co-Working Space: This large-scale co-working space crosses the threshold of the Indonesian market by merger process with Spacemob, a local co-working space in Indonesia.
Clockwork: It is a co-working space which has a well-built network throughout Indonesia. It changes its brand name from EV Hive so that it can expand its business out of the country.
Menara: Menara by kibar is another renowned co-working space that has coupled with Google Entrepreneur to turn out to be an incubator for tech start-up companies.
Guide to Shape the Tech Market of Indonesia
Since, technology and innovation playing a crucial part in the economic growth of the country but still, there are many prospective to work on. Unlike Singapore and Malaysia, Indonesia too is creating a mark on the map as an emerging tech hub, Indonesian government have to put their focus on start-up infrastructures and making their regulations more friendly to do business with. The local entrepreneurs should be more participating so that foreign investors can easily rely on them to resolve the domestic legal issues. They need to be more flexible to eradicate cultural barriers and language items, so catch the attention of more investors.
Nonetheless, with growing capital per capita along with increasing internet penetration, the country still has abundant opportunity for investors, principally for expansion of capital funds and the investors who are willing to put their eyes beyond the early- as well as late-stage start-ups that lead the marketplace. Constant growth in investment and per capita income in Indonesia creates a curiosity to the world what the reasons behind such leap of success are.
To sum up the whole topic, you should know the factors affecting the sphere of tech business in Indonesia. Before you enter the market of Indonesia, you need to be familiar about which type of companies gets support from the government. The laws and rules are changed in every three years, so you need to be very cautious before choosing the location to operate your business. If you are dealing in the public sector, you need to be wary about choosing the right candidates who are having skills and expertise to excel in their knowledge. You need to know the offline channel very careful to do business in the best possible manner. After knowing the local market trend, you need to chalk out your strategy to operate there in Indonesia. English is not the primary language in Indonesia, so become skilled at Bahasa Indonesia. This way, you can quickly run your start-up business in any corner of Indonesia.