Investment in Indonesian Startups Predicted to Increase

The Financial Services Authority (OJK) noted that funding for Indonesian venture capital companies to startups rose 5.69% annually (year on year / yoy) to IDR 13.44 trillion last year. The Venture Capital Association for Indonesian Startups (Amvesindo) estimates that this year’s growth will be higher because risks related to Covid-19 have been anticipated.

Amvesindo Deputy Chairman William Gozali said venture capital investors chose to wait and see last year. This year, he predicts funding to startups will increase. “The investors are all ready,” he said in an educational event at Amvesindo Institute, Wednesday (10/2).

This is because investors have calculated the risk of the corona pandemic on the startup business. Meanwhile, last year, investors could not predict the resilience of startup companies. “Currently, the risk is increasingly measurable,” William said.

Amvesindo Deputy Secretary Andreas Surya added that the two risks that investors are examining during a pandemic are the ability to survive and the crisis management of startup founders. “The corona pandemic has become a filter for us to invest in,” he said.

Before investing, investors will analyze cases of startup failure due to the coronavirus pandemic. “From there we can learn, why did they fail? Is it due to uncontrollable factors or something?” said Andreas.

Vaccines and Job Creation Act Increase Investment Potential

Apart from more measurable risks, PwC Indonesia’s NextLevel Leader Radju Munusamy said that investment has the potential to increase this year due to the Covid-19 vaccination and the Omnibus Law on Employment Creation.

He assessed that investors will study issues last year, including the Omnibus Law which is considered to make it easier for startups to develop business. “At the same time, startups need funding to scale up,” he said at the PwC NextLevel – 2021 Outlook: Start-ups, Investments, and Corporate Collaborations event, last month (19/1).

That is because the Job Creation Omnibus Law contains rules related to the recruitment of foreign workers which is an issue for startup companies. “This will have a positive impact. Startups can restart (their business) to grow,” said Radju.

Startups Targeted by Investors This Year

William assessed that the potential startup sector this year is targeting stalls or grocery stores. Based on Euromonitor International’s research in 2019, the majority of Indonesians, Indians and Filipinos shop at stalls.

Meanwhile, the government noted that there were 3.7 million new online merchants since the launch of the Proud Made Indonesia program in May 2020. With this addition, there are 11.7 million out of a total of more than 64 million MSMEs that have penetrated the digital ecosystem.

In November last year, he estimated that social commerce startups were potential this year. Moreover, GlobalWebIndex data shows that Indonesians have 10-11 social media accounts on average in the first quarter of 2020.

William also assessed that the prospect of other e-commerce derivatives, namely the digitization of online to offline (O2O) stalls, will continue to grow. “The effect of the coronavirus, a startup that drives the supply chain, has very good prospects,” he said at a virtual media gathering entitled “Exploring the Dynamics and Trends of Startup Funding 2020-2021”, last November (2/11/2020).

Last year, he noted there were six startup sectors that were being hunted by investors. They are financial technology (fintech), Software as a Services (SaaS), education (edutech), new retail, e-commerce, and logistics.

Financial technology (fintech) has dominated funding for Indonesian startups since 2017, including during the corona pandemic. Some venture capitalists estimate that startups in this sector will still control investment in 2021.

Mandiri Capital Indonesia President Director Eddi Danusaputro said that financial services are needed by all levels of society, including retail to Micro, Small and Medium Enterprises (MSMEs). Therefore, “fintech is in demand,” he said, Tuesday (29/12).