img1

As we attended Indonesia Startups Insight 2016 last week, we got the opportunity to meet promising startups from Indonesia and to understand better this huge but still mysterious market. The event was organized by KinerjaBisa, a company supporting SMEs to expand through Singapore.  Some major insights really caught our attention during the event, which are:

  1. E-Commerce is taking its stronghold over Indonesia’s startups
  2. Market suitability is preferred over brand new innovation
  3. Incompetent payment system
  4. The problems of Indonesian talents

E-Commerce is taking its stronghold over Indonesia’s startups

The trend on e-commerce growth might on the surface seem unsurprising to some of you, even us! Yet, after we dig deeper on the details, the exponential rate of the growth is shocking.

Referring to World Economic Outlook data compiled by the Internet Service Providers Association, Indonesia’s e-commerce market was estimated at Rp 18 trillion ( US$ 1.3 billion ) in 2015, with 37 million consumers from a total population of 255 million.

img2

  The use of social media among Indonesian is arising

The figures are up from Rp 12 trillion and 27 million consumers recorded in 2014. As for 2016, the association predicted that the e-commerce market would reach Rp 25 trillion with 49 million consumers. These numbers itself already indicate a 108% increase in the value in just 2 years.

From various different industries, an overwhelming majority of the startups who pitched at the event engage e-commerce as their main business platform. These startup industries ranged from online business matchmaking provider (Koneksi), food ordering platform (Laparkali and QJump) to barber intermediary (Cukur) and car wash intermediary provider (MobWash). It is evident here, that e-commerce is indeed the giant of Indonesia’s startup industry.


img3

Qjump, food ordering startup at Start Up pitching session

 


This trend is however not without reason. Many of these startups are enticed by the e-commerce market size of Indonesia, which is a total of 73 million of internet user as per 2015. Additionally, this figure is only 29% of the total population (The Jakarta Post) which indicates the huge room for growth.

On top of that, Indonesia’s e-commerce market is also predicted to grow to a total of 140 million of people by 2020 (Redwing Asia).  The intensive use of messaging apps, chatbots and social networks by Indonesians should also have an important impact on e-commerce and we are probably going to see more startups in “social commerce”.


Market suitability is preferred over brand new innovations.

Indonesian startups are prioritizing utility and usability of their products for their niche demands over innovation, and the understanding of the demographic is especially crucial here.

Niki Tsuraya Yaumi, the COO of the Indonesian event discovery app Goers, shared about her past failure experience of 5 unsuccessful tech startups. Among these past failures, the company which survives is the one which serves as a lifestyle provider for the market.


According to TechInAsia, the top 3 reasons on why startups fail in Indonesia are:

  1.                  Misunderstanding the job market,
  2.                  Overlooking local market behaviours, and
  3.                  Misunderstanding cultural adaptation,

This is clearly illustrated by the market’s preference of Kaskus (the biggest Indonesian online forum and e-commerce marketplace) over ebay (e-commerce company); or the preference of GrabTaxi (Mobile e-hailing platform) over Uber (Online transportation network).

Both ebay and Uber have made the mistake of not diving into the local market long enough to be aware of important, not-so-subtle consumer behaviors: Uber neglected that credit card and online payment are still of minimal use and eBay ignored the fact that, in Indonesia, community based and peer-to-peer trust will trump auction every single time.


img4

Panel discussion 1 with Maulana Bachtiar (GIV), Rica Handayani (Google) and Rio Sutanto (LinkedIn)


This misunderstanding might come from the diversity of the market landscape in Indonesia, as explained by Maulana Bachtiar from the online media startup GIV News. The market is very diverse. Jakarta population would have concerns about traffic while Papua population have more concerns about the cost”.

With this information, startups in Indonesia are leveraging on existing technologies and business models to suit the needs of their specific market rather than new products.

img5

RoomRoom, the winner of “Most Insightful StartUp 2016” award


RoomRoom, for example, winner of the Most Insightful Startup 2016 award at the event, provides a platform connecting homeowners, tenants and roommate seekers. RoomRoom insightfully realized there was a market for long-term temporary housing, and integrated existing systems like matchmaking, listings and user interface in their model.

These systems are commonly used by businesses like Carousell (online marketplace), Airbnb (temporary accommodation) and Tinder (dating app); the technology is not something new, but the tailoring targets the needs unfulfilled by the current service providers.


img6

RoomRoom identifies areas unaddressed by its competitors


Yet despite the blooming of ecommerce and the tailoring of the niche market, there are major hurdles in the payment system in Indonesia.

There is still a “lack of trust into paying online”, as said Niki. Indonesia is indeed, reported by Forter as the country with the highest level of ecommerce payment fraud. It is reported that 35% of transactions from Indonesia are fraudulent, and fraud rates exceed 10% in the five riskiest nations.

Furthermore, the banking rate of Indonesian adult is 65%, whom are also still more accustomed in bank transfer as a method of payment. This creates a problem of hassle, risk and security issues.

Various startups have tried to tackle this issue, by integrating secure bank transfer system in their payment method. Shopee ID, an e-commerce marketplace confirms payments from customer and forwards the confirmation to sellers, ensuring security for both the customers and the sellers. However, the ubiquity of such payment is still limited as compared to the large Indonesia’s population.

The problem of talent demographics.

Lastly, another major topic largely discussed was also the problem of talent.


img7

Panel Discussion 2 with Niki Tsuraya Yaumi (Goers), Sunil Tolani (Calibreworks) and Rudy Fang (SBC)


It was mentioned by Niki, that there’s a mentality of “We know we’re good, let’s lay back”. On top of that there’s a considerably high rate of startups failing, which is around 50-80% failure rate as reported in Strategic Review, the Indonesian Journal of Leadership, Policy and World Affair.

 Sunil Tolani, one of the expert panel from the digital marketing and branding company Calibreworks whom has been largely involved in mentoring startups said that It’s not because they don’t know what to do, they simply just want to stop, indicating a persistent unwillingness to go the extra mile that’s crucial in this environment.

Indonesia needs to build the mindset culture of pushing themselves to excellence. When facing obstacles, some startups don’t go the extra mile. That’s the main reason why lots of startups fail, added Sunil Tolani. On this topic Niki also added The attitude towards failure is what really differentiates the Indonesian ecosytem and the Silicon Valley ecosystem.



This is also worsened by the mismatch between expectations of the young population and the actual environment they are dealing with. With very prominent Asian conservative values still encompassing Indonesia’s demography, Indonesian talents tend to seek for corporate-like work environment in terms of work security.  

Indonesia has actually a very large pool of talented individuals. Indonesia is one of the main source of freelance designers for 99designs, a worldwide marketplace for creative design, with 129,000 registered Indonesian designers.

To say that Indonesian startups are not able to compete globally is also a fallacy. As a matter of fact, Mr. Deny Rahardjo as CEO of PT. Kinerja Pay Indonesia (the first Indonesian e-commerce in Indonesia listed in the US Stock Market), provided the example of Personaedu.

Personaedu is an education software company in Indonesia which has acquired contracts with 1900 schools in Holland and collaborated with 2 worldwide publishers. Personaedu has also won the most prestigious Education Software Competition worldwide, BETT Awards 2011. He elaborated, that Indonesia “does have the potential and should go global”.

The problem is that some of these talents do not realize that they do have indispensable talents. We have a lot of smart people in Indonesia, but it’s a challenge to make them realize they have talent. That is why startups tend to look for talents outside Indonesia” explained Rica Handayani, strategic partner manager at Google.

An international recruitment agency which has dealt with a lot of Indonesian talents, RGF which was also present on the event elaborated that the main problem is that they are still undiscovered and unpolished. The key to solve this problem is then the government, education and infrastructure.


Those are the major insights from Indonesia Startup Insights 2016!

We do realize that Indonesia still has a lot to uncover and we are still working on all the materials we have collected for more insights on various other areas in Indonesia; Market and demographic analysis of Indonesia and how the start-up industry reacts to these factors, key factors and stakeholders determining the sustainability of Indonesian startups, and the future of Indonesia’s startup.

Which will be up on our incoming Indonesia Market page in our Market section !  So do look out for our various updates. Subscribe to our mailing list to not miss any important updates from us and in the meantime, do check out our website for insights on other markets and industries!


Indonesia StartUp Insights 2016 was an event organized by KinerjaBisa in collaboration with EcoWorld, ThinkFolks, Hawksford and ICN held on the 4th of June 2016 at EcoWold Singapore. Special thanks to BKPM Singapore or IIPC (Indonesia Investment Promotion Board) as Guest of Honour, Mr. Ricky Kudmayadi (Director of IIPC) and Mr. Stephanus Titus Widjaja as CEO of KinerjaBisa Holding Pte Ltd for inviting us as a media partner.