Global firms bet on Indonesia start-ups
Big-name investors including Expedia and Alibaba are pumping billions of dollars into Indonesian tech start-ups in a bid to capitalise on the country’s burgeoning digital economy and potential as Southeast Asia’s largest online market.
Indonesia has experienced a surge of cash into its technology sector over the past two years, helping to support dozens of homegrown start-ups ranging from ride-hailing apps to ecommerce firms.
And with a population of more than 250-million, a swelling middle class and growing availability of cheap mobile devices, companies from across the world are piling in.
“We believe that Indonesia is poised for a huge leap forward for its digital economy, following China’s growth and becoming the leading tech destination in Southeast Asia,” Adrian Li, a partner in Jakarta-based Convergence Ventures, said.
In 2016, $631m in disclosed venture capital was ploughed into the country, according to research firm CB Insights, up from $31m in 2015. But that figure has already been shattered in 2017, with $3bn worth of deals clinched as of September, said Meghna Rao, a tech industry analyst at the firm.
Tokopedia — a marketplace that allows users to set up online shops and handles transactions — won $1.1bn in capital from China’s Alibaba in August. Motorbike on-demand service Go-Jek secured $1.2bn from China’s JD.com and Tencent Holdings in May, according to data from Crunchbase.
In another sign of confidence, Koison became Indonesia’s first e-commerce service to go public in October.
“While it’s too soon to say that this investment is indicative of a larger pattern of Indonesian start-ups pulling in many bigticket investors, it is part of a growing clutch of megarounds,” Rao said.
Internet use is growing faster in Southeast Asia than any other world region, with 124,000 users coming online every day over the next five years, according to a 2016 report from Google and Singapore’s Temasek.
By 2020, about 480- million people in Southeast Asia are expected to be connected to the internet, up from 260-million in the region in 2016.
“When you do start-up business in Malaysia, Singapore, Thailand and Indonesia, the cost, effort and time that you spend is almost even. But when you go to Indonesia [growth] is unlimited — the market is so big,” said Willson Cuaca, whose venture capital firm East Ventures specialises in early-stage investment.
As a result, big names such as US venture capitalist Sequoia Capital, Japan’s Rakuten Ventures and travel company Expedia — as well as Chinese tech giants — have all made investments in the country.