The Reason Why Many Indian Startups are Expanding to Indonesia

Tech startups from India continue to expand into the Southeast Asian market, including Indonesia. Rows of startups such as OYO, Ola, Meesho, Livspace, and Pine Labs are targeting markets that are considered to have the same culture and demographics as the country of Bollywood.

The similarity in culture and demographics between India and Indonesia is expected to make the business model in both countries easy to implement. “This makes Indonesia’s market share attractive for startups from India to expand,” said Indonesian Venture Capital Association (Amvesindo) Treasurer Edward Ismawan Chamdani, Tuesday (2/3).

The adaptation of Indian startups when entering the Indonesian market is also easy. Indian startups only need to do a little customization or personalization of their business model in Indonesia.

DataLabs analysis said 35 major Indian startups in the past year had big plans to expand their operations to Southeast Asian markets, such as Indonesia, Singapore, the Philippines, Thailand, and Vietnam.

Some of these startups have operated in Indonesia, such as the OYO hotel chain which has expanded to Indonesia since 2018. At the beginning of its appearance, OYO even budgeted US$ 100 million or around IDR 1.5 trillion to expand to 35 cities in Indonesia.

“Entering Indonesia is a relevant step to lead the market,” said the founder and CEO of OYO Hotels Ritesh Agarwal at the launch of OYO in Indonesia. The Meesho social commerce platform supported by Sequoia Capital India also entered Indonesia in early 2020. The company targets to attract a million resellers in Indonesia.

Car retail platform, CarDekho, has expanded to Indonesia in 2016 through a joint venture with local media conglomerate Emtek Group. The home interior and renovation platform Livspace has also announced its intention to expand further into Indonesia and Malaysia. Livspace currently operates in Singapore.

Indian and Indonesian Startup Investors Intersect

Amvesindo said that the startup investment climate between India and Indonesia is interrelated. Amvesindo has also collaborated several times with startup incubators from India such as the India Fund Fest, then held events similar to the Indonesia Fund Fest.

Venture capitalists such as Sequoia Capital India and Singapore-based Jungle Ventures are also actively investing in Indian and Southeast Asian startups, including Indonesia. In 2019, Sequoia Capital India, for example, invested in the Kopi Kenangan startup worth US$ 20 million (around IDR 288 billion).

Then, earlier this year, mutual fund investment startup Bibit received US$ 30 million in funding from Sequoia Capital India. Sequoia Capital India is also funding several startups such as Meesho, Pine Labs, and CarDekho.

Meanwhile, Livspace is supported by Jungle Ventures. Domestic startups are also looking to India because of the similarity of culture. Decacorn Tanah Air Gojek in 2019 then invested US$ 5 million or around IDR 70 billion for an Indian startup in the field of specialty restaurant delivery Rebel Foods.

Two high-ranking Gojek officials, namely co-CEO Kevin Aluwi and Head of Merchant Ryu Suliawan, also invested in a stall digitalization startup in India, M. Paani. “So in terms of investment climate and cooperation, there have been quite a lot of things that have been done between the two countries,” said Edward.

Indonesia and India Have a Similar Population Composition

Like India, Indonesia has an equally dense population composition. The two countries are also building their digital economy. Indonesia is considered to have the potential for a large digital economy market in Southeast Asia.

The e-Conomy SEA 2020 report from Google, Temasek, and Bain & Company project the value of Indonesia’s digital economy to reach US$ 44 billion by 2020. By 2025, the economic value is estimated to reach US$ 124 billion or around IDR 1,744 trillion.

Far away from other Southeast Asian countries which can only reach US$ 22 billion-53 billion in the next five years. One of the driving factors is the growing number of domestic internet users.