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Sound strategy: a make-or-break factor for startups in Indonesia

Published on May 16, 2023

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Even in a bear market like today’s, the Indonesian startup ecosystem is a gold mine of opportunities. The local digital economy is projected to grow at a CAGR of 19% to reach US$130 billion by 2025 and surge to around US$360 billion by 2030. As the world’s fourth-largest population with a growing middle class and tech-savvy consumers, our country holds immense potential.

However, in this rapidly evolving landscape, just having a groundbreaking idea or product is no longer enough. What truly sets successful startups apart is the founding team’s ability to strategize from day one — a critical trait that can make or break a startup’s journey.

Strategic business building is the alignment of a startup’s resources and capabilities with its market opportunities. It’s not just about having a business plan, but devising a comprehensive strategy for every aspect of the business: from market entry and product development to scalability and risk management. This strategic foundation is the key determinant of a founding team’s ability to navigate the complex, challenging waters of the Indonesian market.

Talent, alignment, and profitability

As someone who now lives and breathes value creation for startups, I’ve seen how critical strategic planning is for the success of our portfolio companies. These days, venture capitalists (VCs) do more than provide funding; we offer startups strategic guidance, helping them shape their business model, analyze the market, and plan for growth. It’s our role to ensure that the companies we invest in are not just chasing the next big thing, but are smartly positioned for long-term success.

So, what should Indonesian startups do to build strategic businesses? They need to grasp their market, including customers, competitors, and regulations, and find their unique gap-filling role. They should prioritize customer-centric innovation that addresses real issues. Scalability is key, so they need a robust plan for nationwide expansion. Above all, a clear route toward profitability is a must, no matter how distant it may seem.

Without divulging names, I’ll highlight a couple of unique cases from our portfolio. The first one is a fast-growing B2B e-commerce platform. Having already disrupted the supply chain, the team was seeking to bolster its customer-centric focus and achieve profitability. However, the co-founders saw a problem in their middle management team’s ability to make independent decisions and take actions that made sense in pursuit of profitability, despite training.

To remedy this, we initiated a focused leadership development program with surveys, interviews, workshops, and a roadmap for the company’s leaders to improve their strategy skills and sync their collective efforts. Early results show that these managers now understand profit better, and are becoming bolder in making decisions. Having since stepped back, we can see that this work is helping the company grow.

Another company we invest in is a local fintech firm that serves a market of over 15 million potential customers. But despite having a solid product, from a tech perspective, they grappled with low brand awareness and lacked marketing direction. Our value creation team stepped in, assisting with a successful rebrand and the establishment of a proper marketing team, complete with an aggressive recruitment drive that scoured the nation for top talent. Today, we are watching them acquire customers faster with the help of a wonderful in-house marketing crew.

A note on talent. In emerging markets like Indonesia, hiring correctly is an absolute must-have on your strategic checklist. According to recent Kearney data, as much as 90% of tech companies in AESAN admit to having trouble finding suitable talent with the right skills. Since last year, my team has helped place more than 48 key hires across the portfolio. To our way of thinking, having the right people in your C-suite is half the strategic battle to getting positioned for real growth. Underestimate Indonesia’s talent war at your own risk.

Competition and long-term survival

Policymakers also have a critical role to play in fostering strategic business building in Indonesia. Regulatory policies should be supportive of startups, enabling them to experiment and innovate while also safeguarding consumer interests. Financial incentives, such as grants and tax breaks, can be instrumental in encouraging entrepreneurs to focus on the right things.

For example, the Indonesian Health Ministry recently launched a regulatory sandbox to develop the digital health ecosystem in Indonesia, which includes telemedicine. Based on data from the Indonesian Telemedicine Alliance in 2022, there were more than 17.9 million telemedicine consultation activities from 19 telemedicine companies. 

The sandbox program (akin to the now well-oiled and conducive one for fintech) opens the door for tech startups to solve big problems in healthcare, such as helping hospitals expand their reach nationwide while bolstering protection for both consumers and the livelihoods of healthcare professionals.  

As we continue to attract more entrepreneurs, investors, and innovators, the importance of government alliances will only grow. Startups must recognize that they are not merely in a race to secure funding or achieve market penetration but in a strategic game of long-term survival and success.

Ideas and execution are not enough

We have seen promising signs already. Companies like newly minted unicorn Xendit, as well as rising stars like Astro, Ula, Aruna, Stockbit, and others, have shown that a thorough understanding of the market, customer-centric product development, and a focus on talent can catapult startups to new heights.

As VCs, we pledge to foster strategic thinking beyond just writing checks, leveraging our expertise to guide portfolio companies. However, we need a collective push from entrepreneurs, policymakers, and the entire ecosystem. 

Global investors are eyeing the Indonesian startup scene, now with ample talent and resources. Yet, to produce world-class startups, we need more than just brilliant ideas — we need more tacticians.

This story originally appeared on DealStreetAsia.

See also: Business Development & Partnerships for Startups (Playbook)