A year of breakthrough: Establishing a breeding ground for unicorns

Hatchlings: Startup workers share working space at Kejora HQ in the Barito Pacific Building in Jakarta. The government aims to have 10 unicorn startup companies in five years’ time.(JP/Jerry Adiguna) - See more at: http://www.thejakartapost.com/news/2015/12/29/a-year-breakthrough-establishing-a-breeding-ground-unicorns.html#sthash.1LTJ4n9z.dpuf
This  year marks the start of a nationwide policy to set up an environment  fit for tech startups, accelerating their growth to help them reach  ultimate valuations of US$1 billion.

While it seems a far-fetched  ambition to start with, the Indonesian government is confident that two  such tech companies, called unicorns, could emerge next year.

It  has set out a five-year plan to scout thousands of local startups,  incubate the selected hundreds and provide them sufficient funding to  scale up.

In 2020, so the plan goes, Indonesia is expected to have raised 10 unicorns to be frontrunners in the new global economy.

In  order to give access to foreign mentors and venture capitalists, the  government will loosen up regulations on foreign direct investment and  taxes, among other things.

Although everything is a bit premature  at this point — a roadmap is still being drawn up — there have been  some milestones that could favorably drive the tipping points that are  required to enable the fast growth of startups.

On internet  penetration, according to Google, more than two out of five Indonesians,  43 percent of the population of more than 250 million, owns a  smartphone and the penetration of smartphones has increased this year to  61 percent in cities.

Communication and Information Minister  Rudiantara also encouraged telecommunications operators to focus on the  improvement of 4G broadband before moving on to a 5G network.

The  ministry also aimed to see cheaper 4G-enabled smartphones more widely  available in the next three years, expecting that a fully optimized  broadband network would spur the growth of the digital economy.

Google  and TNS Australia recently released survey results about Indonesian  online commerce behavior that would be lucrative for any Indonesian  startup.

The data shows that each individual installed 31 mobile  applications on average and 34 percent of smartphone users don’t mind  installing paid applications priced under Rp 48,000 (US$3.5).

The  online payment system is maturing well, as seen in the steadily  increasing number of transactions, especially on National Online  Shopping Day — the local version of Cyber Monday aimed at public  education about safe online transactions — which has been held every  Dec. 12 since 2012.

Under these conditions, thousands of local  developers entered the mobile application and games market of tens of  thousands of gamers and urban dwellers who are optimizing the  convenience of technology for a higher quality life.

Global online coupon database Coupofy’s blog recorded Indonesia as the fourth highest country in terms of the number of startups this year with 771,000, after the US, India and the United Kingdom and followed by Brazil with 584,000 startups.

And the number is going up.

Besides the administrations of Jakarta, Bandung and Surabaya that are pushing digital initiatives, local and international startup incubators this year held a series of workshop and pitching events alongside business plan competitions and award events organized by traditional companies seeking a niche in the new economy.

Among the initiatives taken by Google in Indonesia this year were Android Academy, Launchpad Week, Hack for Impact and, most recently, the Indonesian Developer Showcase.

In Launchpad Week that was held from Nov. 9 to 13 in Jakarta, aspiring entrepreneurs took part in workshops and intensive mentoring sessions to help them refine their business models and launch their apps.

For the already existing ones, the event helped them to scale their presence.

Shinto Nugroho, head of public policy and government relations with Google Indonesia, said that the company was committed to supporting the Indonesian government’s initiative and contribute to building its digital ecosystem.

“The size of our population means there is a tremendous pool of talent here. Google is very committed to helping Indonesian developers and startups refine their ideas and help bring them to market,” she said.

Nugroho pointed out how the Indonesian government can benefit from the new economy, aside from increasing employment.

“Indonesians benefit from the convenience and information that apps can deliver. For example, when more public data is shared openly, developers can create an infinite number of apps that help people find healthcare centers, public transportation, emergency services and other key public utilities.

“E-commerce platforms and marketplaces are also allowing small businesses to reach new customers and grow their businesses,” she said.

She also cited a recent report by Deloitte Access Economics showing that doubling broadband penetration rates and lifting digital engagement by small- and medium-scale businesses could increase Indonesia’s annual economic growth by 2 percent — the additional growth it needs to achieve the 7 percent target required to become a middle-income country by 2025.

“By going online, the report also shows that small and medium businesses are one-and-a-half times more likely to increase employment and can experience up to 80 percent higher revenue growth,” she added.

It was still difficult to map out the landscape of startups in Indonesia since it was very diverse, not to mention the conglomerates of traditional businesses entering the market with their “online business” versions.

They technically cannot be categorized as startups, but nevertheless they contribute to the dynamics of the digital economy.

Not only as players, these conglomerate families this year offered commitment to tech startups as angel investors or venture capitalists, some of them in collaboration with international networks.

Tech community media platform Tech in Asia made a list of 10 conglomerates that joined in the tech boom, namely: Lippo Group (MatahariMall), Sinar Mas (aCommerce, HappyFresh), Emtek (Bobobobo, Bukalapak), Salim Group (shares in Rocket Internet), Djarum (Kaskus, BliBli), Kompas Gramedia Group (Skystar Capital), Ciputra Group (Ciputra GEPI incubator), MedcoEnergi (Grupara VC, Maskoolin), MNC Group (MNC Tencent) and Bakrie Group (Path).

The startups trend would clearly continue in the coming year with the government taking the lead in its development.

The question of whether the time is right to establish two unicorns in 2016 would, however, remain with the awareness of the projected bubble phenomenon, as what happened to once highly valued tech startups such as Dropbox, Square and Snapchat.

Nugroho reminded the Indonesian government of the importance of a robust and supportive regulatory framework for e-commerce and tech companies to thrive and for the ecosystem to grow.

“Indonesia is at the beginning of the growth stage for startups. We understand that the government is working with multiple stakeholders to create the framework and we are encouraged to see them providing input from the entrepreneurs as well as reflecting users’ needs.”

Tertiani ZB Simanjutak/UrbanIndonesia

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