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Indonesian tech firms seek profitability as digital economy grows
Of the five Indonesian start-ups valued at over $1 billion, not one has recorded a profit.
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In the business sense, a unicorn is any privately held start-up valued at over US$1 billion. The choice of the mythical animal alludes to the rarity of such start-ups. (Shutterstock.com/fatmawati achmad zaenuri)
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recent report forecasts that the Indonesian digital economy will be worth more than US$120 billion within five years, stoking hopes that the country’s biggest start-ups may eventually turn a profit.
According to the e-Conomy SEA 2020 report by Google, Singapore state investor Temasek Holdings and business consultancy Bain & Co., Indonesia’s gross merchandise value (GMV) from the digital sphere is projected to grow by 11 percent year-on-year (yoy) this year to $44 billion. The figure is expected to reach $124 billion by 2025, making up a large portion of Southeast Asia’s projected $310 billion GMV that year.
The report noted that while business in the digital sphere continued to grow, investors remained “cautiously optimistic” and were “doing fewer deals at more attractive valuations”.
Investment in Indonesia’s internet sector increased to $2.8 billion in the first half of this year, from $1.8 billion in the same period last year, the report found.
“Where the goal of years prior has been ‘blitzscaling’, investors are now looking for sustainable, profitable growth,” the report noted. “Blitzscaling” refers to the quick expansion of a service as it becomes more popular.
Five Indonesian start-ups are valued at more than $1 billion: ride-hailing company Gojek, travel booking firm Traveloka, e-commerce outlets Bukalapak and Tokopedia and e-wallet provider OVO. Despite their significant funding and soaring GMV, not one has recorded a profit.
The study suggested that mature and consolidated start-ups in the transportation, food and e-commerce sectors would likely not continue to obtain record fundraising. They would instead shift toward profit.
