The rise of startups in Indonesia
The growth of startups and venture capital financing are tightly linked. The value of venture capital funding in Indonesia has nearly doubled in a span of five years. Spread over 340 investments in 2022, this was the highest number of venture capital deals in the country. The increasing number of larger investment deals also reflects the growth of investments in Indonesian startups. More than 200 startups in Indonesia raised at least a million dollars in funding by the beginning of 2022. Furthermore, Indonesia's foreign direct investments (FDIs) have grown significantly, jumping from 3.92 billion U.S. dollars in 2016 to 22 billion U.S. dollars in 2022.Indonesia ranked among countries with the highest number of startups, with eight unicorns and two decacorns – GoTo Group and J&T Express, and GoTo Group launched their initial public offering (IPO) in 2022. The first five Indonesian e-commerce platforms—Gojek, Tokopedia, Traveloka, Bukalapak, and OVO—attained unicorn status before the pandemic hit the country between 2016 and 2019. In 2021, ride-hailing giant Gojek and e-commerce firm Tokopedia merged to create GoTo Group, at least five-folding each of their assets. Not long after the merger, GoTo announced the sale of 75 percent of Tokopedia's shares to TikTok in December 2023. While most Indonesian startups are digital startups, their unicorn companies span a range of industries, from logistics, travel and ticketing to financial technology services.
Building Indonesian startups outside of Jakarta
With more than 500 startup businesses in the Indonesian capital, Jakarta is ranked 29th for its startup environment in 2022. Other top Indonesian cities for startups are Bandung, Yogyakarta, and Denpasar. Despite the rise of successful startups, the Indonesian startup ecosystem and the digital solutions it provides are primarily concentrated in the Greater Jakarta area, while large parts of the outlying areas in Indonesia remain untouched. Scaling logistical efficiency while keeping prices low is a continuous challenge. Moreover, the shortage of skilled talent continues to be the main issue for foreign and local businesses in Indonesia.The Indonesian government started local startup-focused initiatives such as Gerakan Nasional 1000 Startup Digital, Startup Studio Indonesia, and HUB.ID platform to address these problems. Through these programs, the government helps entrepreneurs of early-stage startups develop their prototypes and reach product market readiness. A state-backed venture capital fund, the Merah Putih Fund, that will focus on regional businesses known as "soonicorns" (soon-to-be-unicorns) was also officially launched in December 2021 to stimulate the number of local startup investors. The numerous programs already in place will help to develop Indonesia's economy and increase its income per capita and the startup ecosystem in the archipelago.
