Big-name investors, including Expedia Inc and Alibaba Group Holding Ltd (阿里巴巴), are pumping billions of US dollars into Indonesian tech start-ups in a bid to capitalize on the country’s burgeoning digital economy and potential as Southeast Asia’s largest online market.
Indonesia has seen a surge of cash into its technology sector over the past two years, helping support dozens of homegrown start-ups ranging from ride-hailing apps to e-commerce firms.
With a population of more than 250 million, a swelling middle class and growing availability of cheap mobile devices, firms 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 the Southeast Asia region,” said Adrian Li (李家銘), a partner in Jakarta-based Convergence Ventures.
Last year, US$631 million in disclosed venture capital was ploughed into the country, according to research firm CB Insights, up from US$31 million in 2015.
However, that figure has already been shattered this year, with US$3 billion worth of deals clinched as of last month, said Meghna Rao, a tech industry analyst at the firm.
Tokopedia — a marketplace that allows users to set up online shops and handles transactions — in August won US$1.1 billion in capital from Alibaba, while motorbike on-demand service Go-Jek in May secured US$1.2 billion from JD.com Inc (京東) and Tencent Holdings Ltd (騰訊), according to data from Crunchbase.
In another sign of confidence, Koison this month became Indonesia’s first e-commerce service to go public.
“While it’s too soon to say that this investment is indicative of a larger pattern of Indonesian start-ups pulling in many big-ticket investors, it is part of a growing clutch of mega-rounds,” Rao said.
Internet use is growing faster in Southeast Asia than any other region in the world, with 124,000 users coming online every day over the next five years, according to a report last year from Google and Temasek Holdings Pte.
By 2020, about 480 million people in the region are expected to be connected to the Internet, up from 260 million last year.
Indonesia’s mobile-first market will comprise more than half of Southeast Asia’s e-commerce market by 2025, with an estimated value of US$46 billion, the report said.
“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, specializes in early-stage investments.
As a result, big names like 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.
Indonesian President Joko Widodo has been a vocal supporter of digital innovation, most notably in his plan to create 1,000 local tech start-ups worth US$10 billion by 2020.
However, the sector still faces a number of challenges.
A limited pool of engineering talent to draw from, low rates of Internet penetration outside densely populated Java, bureaucratic delays and poor-quality infrastructure are all obstacles to growth.
For e-commerce companies, the large number of “unbanked” Indonesians limits the scope of online transactions and logistics problems make it hard to move goods.
While young entrepreneurs and small businesses are flocking to coworking spaces springing up in major centers, it is a decidedly different scene in most parts of the country.
Farid Naufal Aslam, the chief executive of Aruna, an e-commerce company that links fishermen to buyers, said navigating Indonesia’s disparate communities is a challenge too.
“One of the biggest challenges faced is on social approach,” Aslam, 23, said. “Indonesia is a unique country with diverse communities and different customs in each region.”
However, many venture capitalists and entrepreneurs remain optimistic.
“The window of opportunity is there,” Cuaca said. “As long as you can innovate and solve real problems using technology, you can be successful.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts