Incubators and VCs Complain about the Readiness of Indonesian Startups

In recent months, so many people from big groups have begun to be interested in investing in tech startups in Indonesia, even companies from Japan, Singapore, Malaysia, China, and the US are starting to slowly enter the startup market in Indonesia. Most of them are financial companies that want to invest in Indonesian tech startups that are currently "hot".

But unfortunately, the burning intentions of these investors were suddenly extinguished when they met several Indonesian startups which they judged were not ready and tended to be consumed by "Silicon Valley Romanticism" - borrowing a term I heard from Budi Putra.

Have a brilliant idea, find a co-founder, succeed in getting funding from investors, get acquired by Google and become rich with an extraordinary reputation and maybe a red Ferrari in the garage. Enjoy the world.

But the reality is not so, although the dreams of these startups can be a good motivation, the dreams of investors who come to Indonesia are actually destroyed after meeting with Indonesian startups.

These investors complain about many things from Indonesian startups, ranging from the weak concept created, weak differentiation and innovation, lack of management readiness and legal aspects, to inflated valuations that are not included in financial and economic calculations.

The weakness of the concept of a startup is actually very very subjective from the point of view of each different investor, sometimes a weak concept if executed by the right founder can evolve into something extraordinary, for example AirBnB which was initially rejected by many VCs because of a strange concept). But even a strong concept if executed by a weak founder can be disastrous for investors, for example Color which disbursed US$40 million for an extraordinary concept but failed to satisfy users.

And somehow there are still many Indonesian startups that come out with solutions to problems that don't actually exist, armed with the tagline "the next Facebook" or "the next Twitter" without a clear differentiation, of course investors are tired of hearing that. A concept that is not solid like this certainly has the potential to harm investors, especially investors who are relatively new to the online business.

Management readiness and legal aspects are also optional, but they can show how serious the founders are in running this startup. Company legalization, financial reports, business plans are a bit annoying to make, but they are a plus if they are carried out by startups.

This third point that really makes many investors immediately discouraged, soaring valuations without revenue, without profit, and even without a business plan is of course only a dream that is too expensive. And most startups find it difficult to explain the reasons for such unreasonable valuations, even investors fail to be convinced.

Of course, not all Indonesian startups are like this, many are actually running their startups with skills, knowledge and passion. These startups are the ones that will be successful in the long run, not the ones chasing the hype.

Tech startups in Indonesia are indeed growing very fast, but with so many reckless "startups" like this, it can certainly become a bad reputation in the eyes of foreign and domestic investors. In the long term, it can make investors lazy to invest in Indonesian startups, but if investors follow this unreasonable valuation, it can trigger an imbalance in the economic ecosystem, the tech bubble.