#Asia After Go-Jek, Tokopedia & Traveloka, Indonesia won’t see new unicorns soon: investors



Indonesia’s Go-Jek started out with motorbikes, then added cars later. Photo credit: Go-Jek.

Anyone following Indonesia’s tech scene is probably familiar with “GTT” – Go-Jek, Tokopedia, and Traveloka, the country’s three billion-dollar startups. This year alone, Tokopedia and Traveloka got a significant boost following investments from backers like China’s Alibaba and US firm Expedia, respectively. Will we see a new Indonesian startup join the unicorn club next year?

Willson Cuaca, managing partner at East Ventures – a prolific early-stage investor in Indonesia and the rest of Southeast Asia – doesn’t think so. “There’s a huge gap between those big companies and the mid-tier ones,” he said during Tech in Asia Jakarta 2017. (Disclosure: East Ventures is an investor in Tech in Asia. See our ethics statement for more info).

Sharing the stage with Cuaca, Pieter Kemps of Sequoia Capital – an investor in both Go-Jek and Tokopedia – agreed that other startups would need time to catch up.

While it may not happen soon, it doesn’t mean Indonesia’s tech scene is “drying up,” Kemps assured the audience.

“You have this first wave of startups in horizontal marketplaces, logistics, travel that have emerged and they’re very dominant right now.” More interesting things are coming up – there’s going to be a “second cycle,” he said.

It’s a trend seen in China, where Toutiao, Meituan, and Didi Chuxing – also known as “TMD” – are following in the footsteps of “BAT” (Baidu, Alibaba, and Tencent). Kemps said TMD might be less known in the region, but each boasts a valuation ranging from US$20 billion to US$50 billion.

In Indonesia, opportunities abound for startups to get a grip on the highly “inefficient” market. “There’s so many things broken in this country, lots of problems to solve,” Cuaca said.

That’s true even for ecommerce – despite the dominance of Tokopedia and another Alibaba-backed firm, Lazada – because the sector accounts for only 2 percent of total trade happening in the country.

Skills shortage

But before Indonesian startups can jump to the next level, they must surpass what could be their biggest hurdle – a talent shortage that has been a drag on the country’s tech sector.

Indonesia is one of Asia’s most populous nations, with millions of internet users coming online every month, but tech talent is limited. Specifically, there’s a lack of engineers, the investors said.

“If you look at the quality of engineering in China, I’d say it’s on par with the US, which wasn’t the case in the past. The sheer volume of companies, the scale companies in China are operating at, the complexities of the problems that need to be solved means you have to innovate a lot. Here it’s still a challenge,” explained Kemps.

“We’re very bullish about Indonesia but we’d love to see more engineering capabilities and a faster learning curve at that,” he added.

“We talked to some startups – small and big ones. Many of them said ‘we’ve seen every single good engineer in Indonesia and now we’re done. We can’t find them anymore,’” stated Cuaca.

To fill the gap, the companies have resorted to offshoring tech work or scouting for talent overseas to bring to Indonesia. Go-Jek, for example, set up an engineering hub in Bangalore and a data center in Singapore.

Investors have also taken an active role in helping their portfolio companies in Indonesia find talent.

“With Go-Jek, we helped them a lot on working with certain developers and capabilities, and ultimately they ended up acquiring several companies and forming an engineering hub in Bangalore. With Tokopedia, it’s similar. We were very much involved in the early days, helping them hire their VP of engineering,” commented Kemps.

Another workaround is a fly-in, fly-out approach where Indonesian founders go on trips to China, for example, to get advice and learn from local startups.

Grace Xia of Jungle Ventures cited China’s favorite messaging app WeChat as a “business model proven in China which works here as well.”

She said Go-Jek has certainly taken stock of how WeChat evolved from a simple chat app to an ecommerce, gaming and video sharing platform. Today, WeChat is also used by the Chinese for almost everything, from booking a cab to paying their bills.

Similarly, Go-Jek started out with motorcycle-hailing then cars, and later expanded into other on-demand services like parcel couriers, food and medicine deliveries, cleaners, and massages.

Xia expects the entry of Chinese investors like Alibaba in Indonesia to bring not just capital but also technology and knowledge sharing.

This is part of the coverage of Tech in Asia Jakarta 2017, our conference taking place on November 1 and 2.

This post After Go-Jek, Tokopedia & Traveloka, Indonesia won’t see new unicorns soon: investors appeared first on Tech in Asia.

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