Startups in Indonesia: Pros and Cons Before You Launch
Weighing a launch? See the pros and cons of startups in Indonesia, from record venture capital and booming e-commerce to talent and logistics gaps.
Indonesia's middle-class businesses are growing fast. The digital and technology sectors have also seen a big jump in venture capital activity. On top of that, mobile devices get more affordable every day for everyone. All of this shapes the fintech ecosystem in Indonesia, which is why there is no better way for Indonesian startups to explore the ride-hailing or e-commerce market.
Still, starting a startup in this country is not easy. Here are the positive and negative sides of the Indonesian startup business that you should watch out for.
The Upside of Startups in Indonesia
On the investment front, the country has long been known as the largest online market in Southeast Asia. Indonesia has long received the most venture capital deals of any emerging market in the world. Global giants such as Alibaba, Expedia, JD.id and Tencent Holdings have poured a lot of money into the country. In 2016 alone, Indonesia received up to US$631 million in disclosed venture capital, a huge increase from US$31 million in 2015.
In addition, Indonesia's capital, Jakarta, ranks number one among the top ten startup cities, followed by Vienna, Dubai, Kuala Lumpur and Istanbul. International startups are clearly becoming more interested in Indonesia. By 2025, the country is projected to have an ecosystem that covers more than 50% of all e-commerce markets in Southeast Asia, with an anticipated value of US$46 billion, all thanks to a fast-growing, mobile-first market.
Read Also: The Role of Venture Capital for SMEs
On the government side, Joko Widodo, the President of Indonesia, has proven himself a loyal supporter of digital and technology innovation. His influence has contributed to the rapid growth of Indonesian startups. One of his plans for this booming market even includes creating 1,000 domestic tech startups with a total value of US$10 billion by 2020.
The Downside of Startups in Indonesia
But several things may hinder the success of startup companies in the country. For starters, Indonesia is still seen as a largely unbanked nation, and only a small share of the population has a credit card. Furthermore, according to the International Labour Organization, with globalization advancing, work patterns evolving and revolutionary technology arriving, the nation now faces a major challenge in the skills and talent needed to meet workforce requirements.
The gap between skills and talent is caused by poor education. It leads to a lack of critical thinking, which is needed to run a startup company.
Then, while poor transport infrastructure contributes to the growth of startups in Indonesia, unclear addresses and bad roads make the process burdensome.
Those are some of the positive and negative sides of startup development in Indonesia.
