Indonesia’s startups are gaining serious traction from international investors, positioning the country’s ecosystem to lift off as a dominant destination in Southeast Asia. But that success is not guaranteed.

Indonesia’s government, investors and founders have to make strategic moves in order to bring the country to the level of Singapore or Silicon Valley.

The capital funneling into Indonesian startups is unprecedented. The country pulled in more than $3 billion of venture capital in the first half of last year, netting about 20 percent of all VC funding in Southeast Asia, according to a survey by Google and consultancy A.T. Kearney. Even more impressive than the weight of money flowing into startups is the growth in investments; as recently as 2012, Indonesia garnered just $44 million in capital. Indonesian unicorns also stand out amid the region’s giants, with Tokopedia, Go-Jek and Traveloka cinching three spots among the top 5 most funded startups in Southeast Asia, according to Tech in Asia.

Venture capital might even be overcommitted to the market, with dozens of new firms springing up in Indonesia, each with funds of $100 million or more, while U.S. and Chinese VC firms establish Southeast Asian branches in the country.

Eventually, Indonesia should encourage more local corporations to fund fledgling companies, but for now, the foreign funding is a great sign. Following the tide of prominent Indonesian unicorns, international investors are expressing their confidence in the country’s startups, and recipient founders gain a boost in credibility with support from known global brands.

The show of support also gives creative founders the confidence to pursue new ideas. Founders no longer fear that they’ll have trouble raising seed funding, so they plow into their business plans and pitch decks with confidence and tenacity.

The Government Must Take the Lead

Though founders and investors are eager to push Indonesia’s startup ecosystem forward, the country still lacks the fervent government support that drove Singapore to the forefront of the Southeast Asian tech economy.

The Indonesian government recognizes the country’s potential. President Joko Widodo even flew to Silicon Valley to glean inspiration and convince expat Indonesians there to bring their innovations home. However, in order for the ecosystem to really take off, the government would need to actively remove regulatory bottlenecks such as high salary and capital gain taxes, limitations on foreign ownership and strict regulations on industries like fintech.

The current ecosystem is still lopsided, with plenty of great ideas but few teams capable of implementing them. Talented Indonesian founders have built unicorns in the country or taken prominent roles in some of its most exciting upstarts, but companies still have to outsource their technical teams to the Philippines or Vietnam because there aren’t enough developers on the ground in Indonesia. Finding CTOs is even a challenge, as the most talented developers are quickly snapped up by established unicorns or firms. The task of cultivating a crowd of young developers ought to fall to the government, which should fund technology programs, contests and scholarships to entice students to enter the field.

And even if the startups in the bustling hubs of Jakarta and Jogjakarta impress, the whole country is unevenly connected to the tech sphere. True, smartphone penetration is on the rise, and cheap phones and data plans are propelling technology access forward, but the country still has a large unbanked population, and it could take another generation or two for more universal adoption of both banking and mobile phone use.

The Future’s In The Founders

If Indonesia is on the road to startup success, the founders will be the ones to push the ecosystem forward or run it into a dead end. Unicorns from Indonesia have barreled forward at a stunning pace, but the majority of startups are still not at the level of quality common in more advanced ecosystems. However, while the country waits for more educational and financial support from the government, founders themselves can take the lead.

The trends to watch are often coming from the sea turtles, or Indonesians who return home after living or studying abroad. Following the path of the Berkeley Mafia returning to Indonesia to rebuild the economy from famine in the 1960s, sea turtles have taken to Indonesia’s startup ecosystem. Some of the biggest names, notably Go-Jek and Traveloka, have sea turtles on their boards and/or on their founding teams. After learning best practices in Silicon Valley, Singapore or other overseas tech incubators, sea turtles have been behind the push to fill gaps and exceed expectations for startups.

Even without any experience abroad, Indonesian founders have a keen eye for identifying solutions from other markets that could be adapted to fit their market. To do so, they must take the country’s massive and stratified population into account, embracing localizations that make the market feel connected to a product.

Whether they’re accepting initial or Series C funding, Indonesian founders are seeking advice and gaining new information to propel their businesses forward. They are taking criticism seriously and considering ways they can improve their businesses. With this mentality--supported by international investment and a push for future education from the Indonesian government--the ecosystem has potential to grow into a vibrant startup hub.


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