Written By Adrian Li
Original Post by Forbes
July 21, 2019
There’s never been a better time for entrepreneurs, investors and society in Indonesia. This statement was true 5 years ago when the current cohort of digital giants started gaining momentum but is also true today as the next wave of entrepreneurs start their businesses.
In the past 5 years Indonesia has seen a veritable explosion in the growth of the digital economy creating no less than 4 multi billion US dollar local technology companies including Gojek, Traveloka, Tokopedia and Bukalapak. If we include regional businesses whose valuation depends on their growth in Indonesia that number rises to 6. Given this remarkable growth some may say that the golden opportunity to create highly valuable digital businesses has come and gone.
The initial cohort of digital unicorns started and grew in spite of a challenging early stage environment. Several key factors including, low accessibility to the internet due to poor mobile internet infrastructure (lack of 4G roll out, low adoption and poor quality, high cost smart phones); friction arising from limited last mile logistics, poor payments infrastructure as well as low trust in online commerce.
But in the past 5 years we have seen significant improvements to each of these challenging factors which supported the growth of these unicorn businesses. The cost of a smart phone has dropped 42% between 2012 to 2017 while speed and features grew rapidly. 4G broad band now covers more than 72%of Indonesia’s population with data costs being among the lowest in the region. ECommerce parcel delivery reached 260M in 2017 and the presence of Gojek and Grab and numerous last mile logistics companies have enabled food delivery to cleaning services on demand. Yet challenges still remained stemming from the available supply of growth stage financial capital, talented human capital and poor payments infrastructure.
Now, most recently we have also seen a change in these remaining restraining factors. Mobile adoption and connectivity have reached a tipping point in access. Over half the population is connected with smart phones with 133M internet users in 2018 and almost 100% of the middle class is online. A confluence of factors including the influx of stronger entrepreneurial talent as well as managerial staff with digital experience have entered the market. There is far more downstream venture capital now with several US$100M regional funds focused on Indonesia and billion dollar global funds making direct investments. Robust local platforms such as Gojek, Tokopedia and Traveloka are investing in payments and platforms creating frictionless environments on which to scale new and exciting businesses. In this way the next 5 years represent an extremely exciting time for technology and internet enabled businesses
To win in the next 5 years it is necessary to identify long term structural trends which will upend multiple industries. Three of the most disruptive changes will be a move to a cashless digital economy, the shift to a ubiquitous cloud connected environment through the emergence of 5G technologies and the emergence of artificial intelligence and automation in many aspects of our lives.
On the back of these structural changes many long standing Industries are ripe for change. At the same time these trends will solve a great many societal problems such as greater financial inclusion and ubiquitous access to education and health care.
There’s never been a better time to be an entrepreneur and to harness technology to drive positive change and benefit for society. In particular, the next wave of disruption will move past focusing on improving convenience for consumption and create greater equality for the broader population.