Indonesia Is The Next Big Thing
"If a window of opportunity appears, don't pull down the shade" - Tom Peters
Indonesia is often highlighted by Venture Capital investors and Startups as being the next big market. Its hype is tangible and to find out more about it, I spent a month there meeting with as many founders, investors and tech savvy individuals who helped me decode it. We’re talking about the 4th largest country in the world, 263 million people living on a 18.307 wide archipelago with the highest GDP in South East Asia. Certainly one needs a lifetime & more to fully crack it, nevertheless here's what I discovered about this unique market.
A huge opportunity building up
Indonesia’s large population is appealing for businesses and investors. According to forecasts, it will become the 3rd largest consumer base in the world with 135 million consumers by 2030. Its internet penetration is growing alongside mobile penetration with 100 million smartphone owners next year, surpassing countries like Japan, Russia, UK and Germany. Businesses are thereby accessing to an ever growing market.
Also, the existing ecosystem is vibrant. Beyond the 15+ Indonesian VCs, the majority of VC funds in SEA do look at investing in Indonesia and recent fund close news are a great sign for Indonesian startups: capital will flow. Last year, along Indonesia’s first unicorn (private business valued over $ 1 billion) called Gojek, local startups have attracted close to $1 billion investments.
To add on it, with 2000 universities spread across the country, startups can count on a growing number of qualified talents as by 2020 the government aims to have a quarter of the college aged population enrolled in higher education.
It is obvious that companies in Indonesia are on a great ground to emerge from, get funded and execute effectively.
The other side of the coin
“Take calculated risks” - George Patton
Naturally, every opportunity has to be assessed before it’s seized. Let’s take a step back to get a bit more perspective on it.
Although market figures show great signs, the size of the addressable market is smaller. According to a World Bank report, 28 million Indonesians live under the poverty line and 40% of the entire population remains vulnerable of falling into poverty. When noting that half of the population is under 28 and has thereby a lower income, this shrinks the market considerably both in size and spend.
According to the World Bank, Indonesia ranks 151 in the ease to start a business (v.s 78 for Thailand or 112 for Malaysia). Also, being a vast archipelago makes it difficult for companies to operate and grow beyond the urban population in Jakarta, Surabaya, Medan, Bandung etc… This creates infrastructural issues for business expansion.
As Indonesia shows appealing forecasts, it’s important to bear the actual status in mind.
A solid confidence in its future
“The best way to predict the future is to create it” - Peter Drucker
Fortunately, Indonesia is aware of its strengths and is solving its issues.
As a matter of fact Indonesia’s international recognition is validated by the increase of its credit ratings from firms such as Standard & Poor's, Fitch Ratings and Moody's. This should lead to more FDIs ($29 billion in 2016) helping to build a greater ground for the economy to blossom. Economy on which Indonesia’s middle class will grow reaching 20 million households each earning $11,300 by 2030.
On the startup end, there is a noticeable interest from established foreign companies such as Tencent and Softbank who respectively led the latest rounds of Gojek and Tokopedia, 2 of the largest startups in the country. This not only confirms Indonesia’s hype but also materialises it.
Finally, among SEA, Indonesia is truly a market by itself. Investors expect high returns, startups foresee high growth and the population estimates ever growing living standards. It is now clear that Indonesia’s hype is based on a big potential that is being unleashed.
The window of opportunity is progressively opening, it's time to seize it.
Youssef - Founder at www.thebridge.vc