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Indonesia’s mushrooming start-up companies have the potential to boost the country’s economy, thanks to their large customer base.
According to Sillicon Valley-based Fenox Venture Capital, the movement could drive the Indonesian economy to expand faster than its Southeast Asian neighbors.
“Indonesian start-ups are very powerful, in the sense that Indonesia has a very big consumer base. There are actually a lot of customers who can give feedback,” president and CEO Anis Uzzaman said on Friday.
He said they had the advantage of endorsement from President Joko “Jokowi” Widodo’s administration, resulting in supportive regulations.
Indonesia’s current rules are quite liberal in terms of supporting start-ups, compared to several other countries, particularly in the field of financing. For instance, Indonesia allows venture capital firms to invest with convertible notes, which are banned in many countries, said Uzzaman.
A convertible note is a short-term debt that converts into equity. Under the scheme, investors can lend money to a start-up during the first round of funding and receive shares of preferred stock, rather than getting a payback loan plus interest rates.
“Regulation issues are a common problem across the world, but the current Indonesian government is willing to make changes. It is a good thing,” he said.
The Jokowi administration expressed its seriousness in expanding into the digital economy when the President visited Silicon Valley, the world’s center of technological innovation, during a working visit to the US in February.
Envisioning the birth of 1,000 technopreneurs in the country, the administration allows foreign e-commerce players valued over Rp 100 billion (US$7.62 million) to open businesses and team up with financial authorities to support funding for IT companies and small and medium enterprises (SMEs).
Several start-ups in Indonesia have gained prominence, such as Go-Jek, a motorcycle taxi service application.
However, Uzzaman claimed that Indonesia often thwarted the efforts of venture capitalists and investors to reach out to start-ups in regions beyond Java.
In an effort to provide business opportunities for start-ups across the country, Fenox Venture Capital, a Silicon Valley-based venture capital firm, plans to hold a global contest called the Startup World Cup 2017, in partnership with the government’s Creative Economy Agency (Bekraf).
The event will comprise a start-up conference and competition with participants coming from 15 countries, including Indonesia.
The countries will hold their own regional qualifications to select the top 10 participants to present their ideas in front of international judges, as well as world investors and tech company CEOs.
The regional winners will compete to win a $1 million prize in the grand finale, which will be held in Silicon Valley on March 24 next year. Part of the prize will take the form of investments in the winning start-up.
Fenox expects to see at least 750 startup entrepreneurs from the ASEAN region apply for the competition.
In Indonesia, the company is conducting road shows in six cities to ensure that start-ups in the region take part in the event.
“The start-ups should be a PT and we prefer those that already obtained financing, whether from institutional or individual investors,” said Aldi Adrian Hartanto, an associate member at the firm’s Jakarta branch office.
