Large customer base benefits RI start-ups

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).