Business

Indonesia's home-grown tech start-ups get leg up from investors

JAKARTA Big-name investors including Expedia and Alibaba are pumping billions of dollars into Indonesian tech start-ups in a bid to capitalise on the country's burgeoning digital economy and potential as South-east Asia's largest online market.

Indonesia has seen a surge of cash into its tech sector over the past two years, helping support dozens of home-grown start-ups ranging from ride-hailing apps to e-commerce firms.

And with a population of more than 250 million, a swelling middle class and growing availability of cheap mobile devices, firms from across the world are piling in.

"We believe that Indonesia is poised for a huge leap forward for its digital economy, following China's growth and becoming the leading tech destination in the South-east Asia region," said Mr Adrian Li, a partner in Jakarta-based Convergence Ventures.

Last year, US$631 million (S$862 million) in venture capital was ploughed into the country, according to research firm CB Insights, up from US$31 million in 2015.

But that figure has already been shattered this year, with US$3 billion worth of deals clinched as of last month, said Ms Meghna Rao, a tech industry analyst at the firm.

Tokopedia - a marketplace that allows users to set up online shops and handles transactions - won US$1.1 billion in capital from China's Alibaba in August.

Motorbike on-demand service Go-Jek secured US$1.2 billion from Chinese tech giants JD.com and Tencent Holdings in May, according to data from Crunchbase.

Kioson became Indonesia's first e-commerce service to go public this month.

"While it is too soon to say that this investment is indicative of a larger pattern of Indonesian start-ups pulling in many big-ticket investors, it is part of a growing clutch of mega-rounds," Ms Rao said.

Internet use is growing faster in South-east Asia than any other region in the world, with 124,000 users coming online every day over the next five years, according to a report last year from Google and Singapore's Temasek Holdings.

By 2020, an estimated 480 million people are expected to be connected to the Internet, up from 260 million in the region last year.

Indonesia's mobile-first market will comprise more than half of South-east Asia's e-commerce market by 2025, with an estimated value of US$46 billion, Google said.

But the sector still faces a number of challenges: A limited pool of talent, low rates of internet penetration outside densely populated Java, bureaucratic delays, and poor infrastructure.

Mr Farid Naufal Aslam, the chief executive of Aruna, an e-commerce company that links fishermen to buyers, said navigating Indonesia's disparate communities is a challenge too.

"One of the biggest challenges faced is... social approach," Mr Farid, 23, said.

"Indonesia is a unique country with diverse communities and different customs in each region." - AFP

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