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View all search resultsThe land of unicorns: The rise of start-ups in Indonesia
COVID-19’s silver lining has created a strong tailwind for Indonesia's digital economy, with the pandemic having accelerated digital adoption and brought about innovations faster than before.
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I
ndonesia is on an upward trajectory. Just last year, the country cemented its status as an upper-middle-income nation, based on an income classification report released by the World Bank. As of July 2020, Indonesia’s gross national income (GNI) per capita stood at US$4,050. The world’s fourth-most populous nation also currently holds the distinction of being Southeast Asia’s largest economy.
At the forefront of this accelerated economic transformation are home-grown companies that deliver goods, products and services to Indonesia's huge market of more than 270 million citizens. Notably, what was once an economy primarily reliant on traditional sources of wealth such as natural resources and agricultural products is increasingly becoming driven by digital service technologies.
The country is poised to be the next emerging digital hub, with 51 percent of its population below 30 years old, a nominal gross domestic product (GDP) projected to grow at a compounded annual rate of 5.0 percent and more than 197 million internet users.
Opportunities for tech start-ups continue to abound, in line with the government’s push for more direct investment. Both home-grown and foreign firms are venturing into digital, fintech and venture capital markets. In the next five years, wealth creation will mainly be driven by venture capital. Tech start-ups will become unicorns, and their founders will join the ranks of the world's billionaires.
Indonesia’s tech start-up ecosystem started booming in the early 2010s, along with the forays of digital service providers like Tokopedia, Traveloka and Gojek into the market. Much has changed since then, and moving forward, we will see tech start-ups turning into billion-dollar companies in shorter time frames as the start-up ecosystem in Indonesia matures even further.
In fact, Indonesian start-ups such as Gojek and OVO have attained unicorn status in the past five years on the back of support from venture capital partners. Our study with Kearney in March validates this position.
Despite the devastating effects of the COVID-19 pandemic both on micro and macroeconomic scales, enterprises in the digital sector are booming more than ever, spurred by increased consumer demand. E-commerce, taxi-hailing businesses, online hotel reservation platforms and parcel and food delivery services are indeed flourishing in an environment typified by the closure of brick-and-mortar businesses and movement restrictions.
