The Effect of the Explosion of the Dotcom Bubble in Indonesia on the Development of Local Startups

"After rain comes sunshine". This term may well describe the conditions that occurred in the world's technology industry in the early 2000s. At that time a phenomenon known as 'dotcom bubble', where this phenomenon is considered as a dark history in the IT business. So many internet companies that had triumphed, then suddenly just ran aground. Although the biggest impact is felt by companies in America, the business ecosystem in Indonesia is also not immune from the influence of this phenomenon.

At the time dot com bubble took place between 1995-2001, several internet-based companies from Indonesia were also born including Astaga.com, KopiTime.com, KafeGaul.com, and Lipposhop.com and although they were widely known by the public, these names eventually dropped (currently only Astaga.com can still be visited).

However, the failure experienced by several businesses in the past dot com bubble the past actually became a marker in the journey of internet business, which then opened up opportunities for Indonesian startups to be wiser in moving forward. Here are 5 (five) important lessons from the explosion dot com bubble, which has been the driving force behind Indonesian startups to become as successful as they are today.

1. Pivot can be an option, but it must match the company's DNA

During the explosion dot com bubble happens, one of the big problems for startups is that companies don't focus on the business model they are in. Like Kopitime.com for example. First established as a media portal, at that time Kopitime.com also had a retail business under the banner of PT Kopitime Tbk with Kopimall products which were allegedly unprofitable - even though the company had carried out an IPO in 2001 and had funds of 15 billion Rupiah from the public. Instead of pivoting to save the business, the fate of Kopitime.com in 2002 was even more swayed by its decision laid off most of the employees as a result of declining business performance. Until finally in mid 2004, the company with the code of issuer KOPI receive sanctions in the form of a suspension of shares from the stock exchange which resulted in obstacles in accepting new investors. Had discussed expanding the business to the infrastructure business, BTS (base transceiver station) to the construction of the toll road, but until now the news is not clear.

From this experience, it can be seen that despite having the support of large capital and investment, consistency in maintaining the company's DNA plays a very important role in maintaining business continuity even in the midst of an uncertain economic climate. Or in other words, building the right business model is very important for the progress and sustainability of a company. Armed with lessons from the rupture dot com bubble In the early 2000s, many founders started to establish startups with clear, sustainable and profitable business models.

2. A successful product is a product that the market wants

In building a business, the basic law of economics is law demand and supply (the law of demand and supply) should still be a guide. When building a company, it is very important to understand the needs and conditions of the market and adjust the business model accordingly. Especially for technology-based businesses, founders need to know clearly the level of literacy and use of technology used in the people who are their target market. Sometimes, a technology-based business model has been successful abroad, but it will only be accepted by the local market in the next 5 or 10 years.

Such is the experience of Lipposhop.com, a B2C e-commerce which was founded in 2000 for the Jakarta market area and the surrounding area. At that time, Lipposhop.com's preparations were actually quite mature. With the support of one of Indonesia's giant corporations, Lipposhop.com's movements are quite massive. Starting with building a warehouse, an independent expedition fleet, to advertising capital on the front pages of well-known newspapers, he did two full pages to try to educate the market.

But unfortunately, at that time the adoption of internet use for individuals was still very low, even the number of computer equipment ownership in Indonesia was the lowest in Asia. Not surprisingly, Lipposhop.com's business was very sluggish, and it only lasted for about a year before finally closing in 2001.

Armed with lessons from the past, especially from phenomena dot com bubble, many founders also started to build products according to market needs. One of them is through the lean startup method to ensure that the solutions offered have clear demands and markets. So that capital does not run out at the beginning just to advertise products that are not necessarily what the market wants. This shows that the initial steps to build a company need to be supported by research and knowledge of market conditions, so that the products and services offered can be well received, according to the needs of the market at that time.

3. Not only support through capital support, investors also play an important role in sharing knowledge for startups

In the early 2000s, the focus of investors was generally limited to disbursing funding to startups and waiting for the investment to return. However, since the explosion dot com bubble, investors are starting to realize the importance of guidance and direction for startup founders in order to build profitable and sustainable companies and businesses. So, it's not surprising that in this era, many good investors have come from Venture Capital, to angel investors take an active role in educating new startups so that they are more mature and developed. There are various ways, by facilitating them through various programs, ranging from incubation, acceleration, to mentorship from experts.

As the digital-based entrepreneurial ecosystem matures, large corporations - even from countries - are also supporting the growth of the startup ecosystem through capital support, which comes mostly from State-Owned Enterprises (BUMN). One example of this is by establishing a Corporate Venture Capital (CVC). With an increasingly favorable investment climate, the startup ecosystem in Indonesia is also growing in a more mature direction.

4. Collaboration with other startups helps accelerate the pace of business growth

Building a successful startup cannot be done by only focusing on your own organization. Various other elements are needed such as users, partners, and also a solid organization in offering the products and services needed by users. One quick way to do this is by collaborating.

Collaboration is the key to success for startups. With a variety of services, startups in Indonesia are able to support the progress of other businesses such as MSMEs and other startups. One of them is Midtrans, which has contributed to the development of the e-commerce industry in Indonesia, through payment gateway services used by Tokopedia, Bukalapak, Blibli, as well as MSMEs, financial institutions, and multinational companies. By exerting their best efforts to help their business partners succeed, startups like Midtrans also support their business growth.

With a strong and diverse ecosystem, startups can also have an impact on the social and economic life of the community. Like Gojek which opened up millions of new jobs for its driver partners, and was able to contribute IDR 104,6 trillion to the Indonesian economy throughout 2019 based on FEB UI research. Gojek also supports the progress of other startups of the nation's children through various collaborations that are carried out, as well as acceleration programs Gojek Xcelerate and owned Go-Ventures capital units.

5. In innovating to dominate the market, it is important to build a long-term customer base

One of the interesting lessons from the eruption phenomenon dot com bubble is, at that time companies and investors only focused on short-term targets. Most investors think that the internet will dominate life, everything can be sold online, and with the power of the internet they will dominate the market in a short time. However, the fundamental values ​​in building a company, namely effort and persistence to hook the target market and build a customer base, often go unnoticed.

An example that can be seen is that the big startup names we know as unicorns, decacorns, and so on don't necessarily achieve success overnight. The long journey of many years has been successfully passed by startups such as Tokopedia, Traveloka, and so on Gojek.

It took many years for these startups to gain public trust, which eventually could build the large customer base it is today. Various efforts have been made, one of which is through consistent market education, and continuous innovation which is diligently carried out to deliver increasingly high quality services. From this it can also be concluded that expertise in concocting technology should also be balanced by holding on to basic business values ​​for business continuity.

Explosion phenomenon dot com bubble in the early 2000s it was shocking for the startup world, but at least from five lessons dot com bubble earlier can be a provision for digital startups in the current era to have high resilience. Especially in the midst of a pandemic that has occurred since 2020 with the impact of a tremendous economic blow, startups are expected not only to be able to survive, but also to grow significantly. As the saying goes “out of darkness comes light”, the ability of startups to adapt to various situations, including facing a pandemic like today also increasingly shows the quality of Indonesia's startup foundation which is getting better and ready to prosper in the future. Hopefully!