7 building blocks to foster Indonesia’s startup ecosystem

Andi S. Boediman is the managing partner of Ideosource Venture Capital. This is republished from Andi’s Medium post with permission.

Before I lay out the seven building blocks that we need to foster the Indonesia startup ecosystem, let me explain where Indonesia’s tech industry stands at the moment relative to its neighbors.

Late last year, I was invited to South Korea as part of Dreamplus Alliance. Initiated by the Korean Hanwha Group, this is an alliance between 11 accelerators from different countries in Asia to promote startup ecosystems. The idea is to form a global alliance of key regional accelerators and to assist promising startups to reach their dreams on the global stage. After learning the maturity of each ecosystem, I see the difference between each country’s technology ecosystem and market maturity.

1. Isolated technology nation

China and India clearly are mature ecosystems by themselves. They have the technology, funding, and big markets. Most of the China and India players getting into Indonesia are already winners in their own nation. They are either already so big that they can get into the Indonesia market by themselves or they will partner with a local firm in Indonesia. US technology companies like Google, Facebook, and Twitter are doing this in Indonesia too.

2. Advanced technology nation with limited market

Japan, South Korea, and Taiwan are advanced technology countries with mature markets, but each has limited size. They have the technology that we need – and they need the Indonesian market to expand. They are Indonesia’s natural partners; we can obtain technology leadership from these countries and localize the tech for Indonesia. Some big companies will get into Indonesia by themselves. A good model is to license the IP, know-how, and technology. The best model is doing a win-win partnership through a joint venture in which each party will contribute value.

3. Advanced technology nation with small market

Singapore is a country with very advanced technology but no market, so Singaporean firms have to think globally from day one. Most of the Singaporean technology startups will face a big challenge when entering Indonesia since there’s a huge gap between the technology and market readiness. Singapore’s government has been a very strong proponent for the startup ecosystem, from providing the conducive environment and various funding schemes, all the way to providing access to the US market by opening an office in US. This makes Singapore aspire to become the regional/global access and startup funding hub in the region, but not for a real, scalable market.

4. Emerging technology nation with limited market

Thailand and the Philippines are quite similar to Indonesia. Vietnam is slightly behind Indonesia while Malaysia is slightly ahead of Indonesia in terms of technology and market maturity. Any technology and solution that is successful in each country can be replicated to another country. This has been a model for some regional players, including online retail logistics startup aCommerce (which is invested by Ideosource). Then, the collaboration between Indonesia and these other emerging technology countries is about opening the other market for the startup companies to consolidate and become regional players.

5. Indonesia is the emerging technology nation with vast market

Indonesia has a vast market, so local startups can sustain and scale by only targeting the home market. With 250 million people, Indonesia is projected to become the third most populous country behind India and China within the next 20 years. Indonesia’s per capita GDP is US$3,500 – which sits between India and China’s – but it is growing at double the rate within the past five years. The new Indonesia government is targeting to increase GDP five to seven percent by inviting foreign investment for infrastructure and new industries.