Observing the Development of Indonesia's Startup Ecosystem Through the New Wave of Unicorns

It's undeniable, since the pandemic, the investment disbursement given by investors to startups is getting more and more fertile to give birth to potential unicorn new generation from Indonesia. Xendit become the next startup from the vertical fintech who has officially won the status unicorn last September 15th.

There are a number of startups that have achieved centaur late stage [valuation above $500 million], like Akulaku, Ruangguru, SiCepat, Kopi Kenangan, and Ajaib which are predicted to follow Xendit soon. This phenomenon is interesting because it can be more and more unicorn impact on a much more competitive startup ecosystem.

To discuss this, #TuesdayStartup invite Founder & Managing Partners AC VenturesAdrian Li as a speaker. AC Ventures was one of Xendit's early investors. He shared a lot about the funding conditions to his initial impression of how he met Xendit CEO Moses Lo. Here's a summary:

Supporting factors for the startup ecosystem

Compared to current conditions AC Ventures first invested in Indonesia in 2014, now the conditions for starting a startup are much easier. Infrastructure, penetration smartphone, logistics, hardware is much more advanced than before. Besides, the early generation unicorn give birth to seeds entrepreneur new which is a good provision for printing unicorn next.

Adrian said, the ecosystem that was successfully formed by the early generations unicorn Indonesia before the pandemic era, triggered the birth of entrepreneur who dared to start their own startup. The various experiences they bring from their old office to their startups can be ascertained to be of good quality and to provide solutions that are more effective.

"In addition, we ourselves have also built a network with various entrepreneur from far away. Every level of need founder, we have fund each,” said Adrian.

These factors make the level of startup disruption much more significant than before. Indonesia is also considered a large enough market for printing unicorn more than now. From a rough count, Indonesia has managed to score eight unicorn, at least, from a total of 2 thousand startups that exist today.

“From the very beginning we invested in 2014, we only hoped that one day a $1 billion company would emerge, but we didn't anticipate there would be decacorn born in Indonesia. So don't be surprised if in the next five years more billion-dollar companies are born from here."

The initial funding supply is still lacking

Although it has been supported by many supporting factors, continued Adrian, Indonesia actually still lacks early stage investors. The number also needs to be increased at least between three and five times the number of early stage VCs currently available.

In China alone, there are thousands of VCs that focus on investing in the early stages which eventually are able to produce thousands unicorn in a few years later. “So we need more backup from many local companies, so you don't have to rely on outside investors alone.”

For AC Ventures itself, funding a startup at an early stage does have a high risk of failure. With a variety of metric measurements, AC Ventures always installs mindset and find out if the company to be funded could be worth millions of dollars in the future.

This also happened when Adrian met Moses Lo (Co-founder of Xendit). He said that what Xendit did when he was first established and what he is now is very different. Initially Xendit wanted to make payments easier by using split bills and money transfer is much easier, now a company payment gateway which focuses on convenience for business consumers.

“Xendit from the start had such a solid team, a lot credit which I gave at that early stage to his team because it was not an easy journey, making payment gateway with a very user friendly. "

Prediction unicorn next

In accordance with Adrian's previous prediction, that there will be many forerunners unicorn coming from various startup verticals in the next few years. From these various factors, he predicts that in at least the next five to 10 years there will be many companies worth $2 billion to $3 billion coming from Indonesia.

He exemplifies, vertical fintech broad will be the successor unicorn next, after Xendit and OVO. "lending would be another interesting area to create unicorn next, like Kredivo and Akulaku. Even digital banks will aggregate all digital financial services.”

Logistics startups will also donate as a generation unicorn next, considering the e-commerce industry that was squirming throughout the pandemic. Moreover, the e-commerce industry is a major contributor to the digital economy in Indonesia according to various studies.

"If healthtech and EdTech this really is market large, but still dominated by traditional businesses. This old business So it's hard to change habits. Even though the adoption of both has increased rapidly during the pandemic, it will still take a long time [to dominate the market].”

Although Adrian predicts each industry will contribute unicorn, does not mean that the startup will monopolize the market. This is because the technology startup industry adheres to an oligopoly market. That is, there are a number of big players who dominate the market.

“Some are monopoly, some are multiplayer. For example, in industry E-commerce there are Tokopedia, Shopee, Bukalapak that are superior. Especially in fintech there are many verticals that appear as unicorn because of the great opportunity and uniqueness in each product as a value propositionher," he concluded.