In fact, deal values are skyrocketing all across the region, even for smaller start-ups that have yet to become household names. It is clear that there is no shortage of talent or potential in the region. So why has there always been an inherent risk of investing in start-ups in Indonesia, ASEAN’s largest market?

For one, there has traditionally been a lack of exit options for Indonesian start-ups. Mergers and acquisitions (M&A) have pretty much been the primary exit strategy to date. From 2015 to 2020, only 2.7 percent of exits were done via IPO. In 2021, the region’s tech deals remain largely fueled by M&A, particularly when it comes to start-ups being acquired by the local decacorns mentioned above.

But private buyout as a default setting presents multiple challenges to investors in the region, especially if it is the sole exit strategy. For one, it significantly dilutes shareholder value. M&A deals are also notoriously difficult to negotiate and execute, for reasons like company infrastructure, incompatibility in operations and cultural differences between companies. All these can be conundrums for investors, who then naturally shy away from placing large bets on the nation’s digital economy.

The popularity of M&A is not exactly surprising, though. The ASEAN tech IPO market is still nascent compared to mature markets in the West.

For example, most of the region’s markets do not allow special purpose acquisition companies (SPACs) to list, even though they are a quicker way for companies to go public and raise capital compared to the traditional IPO process. This makes them attractive to fast-growing but cash-burning tech start-ups.

But things are starting to change, and recent developments should get investors fired up to get their money into the high-multiple tech space.