Unicorns are not the main focus, startups need to pay more attention to fundamentals

According to APJII, internet penetration in Indonesia in 2023 has reached 78,19% or penetrated 215.626.156 people out of a total population of 275.773.901 people. This figure is an increase of almost 200% from 71,9 million a decade ago, about 34,9% of the total population at that time.

In line with that, the growth of technology companies is also increasing rapidly. So far there are at least 14 unicorn or startups with a valuation of more than $1 billion in Indonesia. This figure has increased rapidly compared to the 2016-2020 period which scored 5 companies unicorn.

Seeing the potential for development of the Indonesian technology industry, OCBC NISP bank held the "OCBC NISP Business Forum 2023" with one of the main themes entitled "Finding the Next Unicorn". OCBC NISP itself supports the growth of the technology industry through extending its hand in the form of investment OCBC NISP Ventures.

Several well-known figures in the Indonesian investment ecosystem were present as panelists, including Willson Cuaca (East Ventures), Alexander Rusli (Digiasia), and Darryl Ratulangi (OCBC NISP Ventura). The three share their views on unicorn in the technology industry, as well as recommendations and strategies for startup companies amidst the issues tech winter and recession.

Prioritize fundamental

It is absolutely necessary for a start-up company to create solutions to existing problems in the market. Building a good product requires a defensible value proposition. To achieve this, startups need to establish a strong product positioning, find product-market fit, and leverage technology to disrupt traditional business models.

Co-Founder & Managing Partner of East Ventures Willson Cuaca emphasized, "We invest based on conviction, rather than looking for valuation or unicorn. We never looked unicorn, because unicorn is a byproduct of being able to create value. What we are looking for is problem statements to be resolved, which will determine whether the solution is a 'painkiller' or simply a 'vitamin',"

Co-Founder & Co-CEO Digiasia Alexander Rusli agree with this. According to him, companies should not focus on missions to achieve unicorns, but rather devote one's mind completely to efforts to build a good business. "If it works, valuation will follow," he stressed.

Alex considers that many founders have mindset that valuation is everything and set out with the dream of becoming unicorns. Pandemic and tech winter This is said to be a reminder and a mental formation process for the founders. "We need people who understand how to fight and don't give up when faced with challenges," he said.

Apart from that, Darryl Ratulangi as Director of OCBC NISP Ventura also revealed the influence of market sentiment on the sustainability of an industry. "Technology companies with good fundamentals but bad sentiment in society will result in depressed valuations," he said.

Therefore, cooperation from the entire ecosystem is needed to be able to create a market that has good sentiment, so that in the future it can also build investor confidence to be able to invest capital in the company.

Pursue profitability

In the digital industry, the attribute of a good digital startup is disruption, creating something completely new, which requires time and resources. So, the main goal of a startup in the beginning is not to make money, but to build a strong product.

“Looking back, no one would have thought that ride hailing or OTA (online travel agents)becomes the right solution for the majority of Indonesian people. Terminology'burning money' can be interpreted as an effort to buy time and build trust. "The process of society going from not knowing to knowing, then starting to use, to becoming increasingly dependent on these services," explained Darryl.

With rapid growth rates, there are some business models that simply cannot scale up so that growth will stagnate at one point. In the application realm, scalability is often called, namely the system's ability to continue to grow according to the volume of data. "This is where technology plays a role in accelerating a business and increasing its scalability," said Alex.

When it comes to this stage, Willson said, "We don't encourage our startups to 'burn money' to acquire customers, instead companies need to focus on achieving profitability; because customer acquisition is cheaper, and customers are more likely to retain the product."

Regarding profitability, Alex also added, "I believe in every transaction, economic units"It must be positive, until it reaches a certain scale where this figure can cover production costs, thereby ultimately creating a profit."

Potential market

2022 itself will be quite a tough year for the technology and investment industry. Starting from the challenges posed by the global recession, tech winter happenings in the technology industry, and the collapse of Silicon Valley Bank in the United States, have all affected startup valuations.

Despite this, East Ventures claims to remain committed to investing in Indonesia – the largest market in Southeast Asia. In 2022, East Ventures has recorded a total of 105 deals, 85 of which are new portfolios, with total funding of around US$211 million distributed to early and late stage startups.

Meanwhile, OCBC NISP Ventura as venture capital supported by the bank will continue to focus on investing in sectors related to banking. However, seeing technological developments in the banking industry and the many digital innovations emerging, Darryl believes that "All start-up companies will eventually become companies." fintech!"

As an investor and also a company leader fintech as a service First in Indonesia, Alex believes that investment flows when trust is formed. This also applies to East Ventures which is led Willson Cuaca.

"At East Ventures, we usually assess using the “3P” formula – People, Product, and Potential Market. However, good products are built by good people who address a large market. So what we focus on now is “2P”: People and Potential Market. "We don't consider ourselves digital investors, but rather ordinary investors who invest in founders who are leveraging digital technology to disrupt traditional industries," said Willson.