Indonesia Leading the Region’s Digital Startup Ecosystem

Indonesia has grabbed international attention in recent years by positioning itself as the next emerging digital hub. Despite economic uncertainty attributed to the COVID-19 pandemic and global tensions, the long-term trends of Indonesia’s sustained GDP growth and rapid internet penetration have encouraged investors’ trust in the potential of its tech-centric startups.

In 2020, during the first year of the COVID-19 pandemic, when everything slowed down, the Indonesian Venture Capital and Startup Association (AMVESINDO) calculated that around US$1.9 billion  was raised by Indonesia’s top 56 startups as of September 2020. This figure indicates that Indonesia is a promising country for investors in the Southeast Asian region. 

As of January 2022, there were 2,229 startup companies in Indonesia. Most of them are digital startups. Indonesia has the most unicorn startups in Southeast Asia, with nine unicorns – those that are valued above US$1 billion , and two decacorns – those that have more than a US$10 billion valuation. One of the decacorns, J&T Express, a courier and logistics service company, started to deliver its services in Mexico in February this year. It is now operating with 12 sorting centers and 26 distribution centers and covers key regions throughout Mexico. This is the first expansion of J&T Express in Latin America, after previously succeeding in Southeast Asian countries, China, UAE, and Saudi Arabia.

The other Indonesian decacorn is GoJek, a ride-hailing service company that has merged with Tokopedia, the biggest e-commerce platform in Indonesia and recently debuted on the Indonesia Stock Exchange. For the unicorns, the sector of their operations ranges widely, from travel and ticketing to financial technology services.

The development of startups is supported by the growing digital infrastructure Indonesian cities are experiencing. Multiple network operators launched 5G last year and are projected to have 9 million subscribers by the end of this year. That will multiply to 183 million by 2027, around 43.5 percent of all connections. In 2019, the Indonesian government completed the US$1.3 billion Palapa Ring national broadband network. All these in turn created a blooming digital startup ecosystem in Indonesia.

Some of the elements of a startup ecosystem include ideas, inventions and research, startups at various stages, entrepreneurs, investors, mentors, advisers, and more. In addition, resources like skills, time and money are also essential components of a startup ecosystem. The Indonesian government did not stop at supporting the infrastructures but has continued to launch programs and initiatives aimed at cultivating the startup landscape, seen as one of the biggest factors on the road to economic recovery. 

There are several programs created by the Indonesian government with the close participation of the startup community. The first is the “1,000 Digital Startup National Movement,” founded in 2016 by the Ministry of Communications and Informatics (MCI) of the Republic of Indonesia. It is a national initiative to build a sustainable digital startup ecosystem in Indonesia through workshops, hackathons, and incubation programs. The same ministry also launched “Start-up Studio Indonesia,” an intensive program to empower early-stage startups, focusing on product and team acceleration, validation of marketing strategies, assisting technology development and business skills. It aims to facilitate the acceleration of quality startups by providing resources and networks to expand their business scale. 

Indonesian President Joko Widodo himself launched the Merah Putih Fund in December last year. It is a state-owned enterprise-backed venture capital fund that will target local startups considered “soonicorns” (soon-to-be-unicorns). The venture capital fund will support the ecosystem by investing in early-stage capital for promising local startups with a valuation of over US$200 million.

The Ministry of Communications and Informatics of the Republic of Indonesia also provided “HUB.ID,” a platform focusing on enabling post-seed local Indonesian startups to scale regionally by leveraging the MCI’s vast network of corporate and governmental partners. The program consists of short accelerator programs, business matching and pitch training in front of investors.

Lastly, there is the JEJALA ID (Joint Exhibition & Junction of Startup Landscape in Indonesia) in 2021. It is a four-month, multifaceted event and roadshow, spanning multiple regions all over the world. Its objective is to help connect startup founders with investors and venture capitalists by sharing information for investors interested in taking advantage of the growing tech startup scene in Indonesia.

The infrastructure and programs combined has resulted in a flourishing startup community across the country. Jakarta, the country’s capital city, ranks third on Start-up Genome’s 2021 “Emerging Ecosystems” with a combined startup valuation of US$34 billion. Recent developments point to the emergence of a mature startup ecosystem in Indonesia, one which is self-sustaining and generates considerable momentum for entrepreneurship. Additionally, the cities of Bandung, Surabaya, Medan and Yogyakarta are ranked by Start-up Blink’s Global Startup Ecosystem Index Report as the top Indonesian cities for startups.

Indonesia’s presidency of the G20 this year put digital transformation as one of their priority issues. Through the G20 Digital Economy Working Group, on May 17, Indonesia launched the National Digital Talent Program through scholarships and several academies, working with universities and tech companies, including Google, Oracle, Microsoft, GoJek, and Alibaba. Indonesia also notes the already established HUB.ID platform as one of the best practices for improving the startup environment.

Supported by the multiple programs underway, Indonesia will continue to grow as one of the most high-growth economic regions of the startup world and targeting itself as the next digital hub of Asia. Indonesia has a promising ecosystem that could soon reach the level of more mature markets, such as China and the US, through the disruptive innovation of a skilled, tech-savvy population and decisive government support.