Why foreign startups fail in Indonesia

In my 10 years in Indonesia, I have seen enough foreign-owned startups fail both in traditional and tech businesses to make any expatriate entrepreneur swear off the idea for good.

It is a commonly accepted fact that startups have the advantage to be leaner than their corporate counterpart, but unless you are backed up by a significant amount of knowledge about the local market, culture and work ethics, you are running the risk of not just creating a lot of unnecessary hurdles, but of simply failing before even getting a definitive name for your product.

Thinking of Indonesia as an easy ride might be your first and potentially last mistake. If Jakarta, Bandung and Bali offers seemingly endless possibilities (enough for Bloomberg TV to evoke the “Indonesian dream”), many fail to realize that, while opportunities might be there for the taking, even the proverbial low-hanging fruits are difficult to pick.

Coming to Indonesia with pre-existing business strategy and applying it directly because “It worked at home” is a very risky move for 3 main reasons:

1. Misunderstanding the job market

To start with, unless you’re not planning on scaling-up within your first two years of business, be ready to face solid challenges when it comes to recruiting.  Skill sets availability will differ from a city to another, and you can expect a turn-up rate below 15 percent for all your scheduled interviews, as well as a plethora of early resignations.

This situation is the result of a high demand for qualified IT specialists, which gives available candidates the possibility to chose an environment they like, being even leaner than their potential employers.

In effect, talents are here, but they will be met via networking and communities rather than job vacancies – a serious factor to consider, knowing speed is vital to a Startup.

Takeaway: Network, network, network.

2. Overlooking local market behavior

Why is Uber Indonesia experiencing growth difficulties while GrabTaxi isn’t? Why is Kaskus so popular when eBay never really took off?

Both have made the mistake of not diving into the local market long enough to be aware of important, not-so-subtle consumer behaviors: Uber neglected that credit card and online payment are still of minimal use (they are now actually implementing cash solutions…. in India) and eBay ignored the fact that, in Indonesia, community based and peer-to-peer trust will trump auction every single time.

Another major aspect of the Indonesian market is its sensibility to do good PR and marketing, starting with face-to-face interaction with community influencer, and ending with serious and creative social media and campaigns. This is another reason why Zalora and Lazada have seen far more success that Blanja.com, eBay’s attempt at online shopping in Indonesia.