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.

A 2020 report by McKinsey & Company presents detailed insights on why “the recovery into the new normal will be digital”. We are going to see the emergence of more than six unicorns in Indonesia before 2025 and at least 10 more in the next decade. Four of these will certainly be backed by Alpha JWC Ventures.

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 and with better infrastructure and a growing middle class. Technology has been democratized for the masses, becoming an integral part of life for millions of Indonesians.

What will it take to realize Indonesia’s potential as a land of unicorns? In a nutshell, it will entail a paradigm shift within Indonesia’s start-up ecosystem. Instead of fast returns and quick gains, start-ups, traditional businesses and investors alike should focus on long-term sustainability.

Large parts of Indonesia remain untouched despite the significant growth of the country’s tech ecosystem and the rise of a middle class with spending power. The majority of tech start-ups in Indonesia are located in Greater Jakarta, and the digital solutions they offer are concentrated in this region. Satellite regions like Sumatra and Sulawesi remain isolated. To put things into perspective, the island of Sumatra is inhabited by 21.68 percent of the Indonesian population, according to data from official 2020 census results.

Tier two and three Indonesian cities will outpace the growth of tier one cities and increase their share of national GDP by 3 to 5 percent ($46 to $77 billion) by 2030. Sectors such as e-commerce, e-payments and lending are close to mass adoption, growing from 27 percent to 46 percent CAGR toward 2025. This is enormous untapped potential. As investors, we believe the next Indonesian unicorns will be the ones that originate from tier-two and tier-three cities such as Denpasar and Bandung.

From our research-based viewpoint and with our experience with local players, we know the potential of these cities. What we have witnessed so far in the digital space is only the tip of what Indonesia’s digital economy can achieve.

The COVID-19 pandemic may have caused major economic and social upsets worldwide, but many Indonesian start-ups have adapted and readjusted since then. The rise of the young and tech-savvy Indonesian generation, most of whom have dived into entrepreneurship and are building the country’s start-up landscape, has served as a significant tailwind during the pandemic for the tech industry. The firms that will be able to survive the pandemic will be the new wealth generation vehicles for Indonesia.

With the right partnerships and knowledge-based insights in high growth regions, Indonesian tech firms can realize their potential as major global players. The government and private investors have expressed interest in partnering with local firms.

Such partnerships will not only strengthen Indonesia’s economy but will also bolster Southeast Asia’s start-up ecosystem, making the emergence of unicorns within the next decade a reality.

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The writer is cofounder and general partner, Alpha JWC Ventures.

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