Technology / November 2018

The Search for Indonesia's Next Unicorn

With the digital economy rapidly changing the business landscape in Indonesia, armies of startups are trying their luck to become the country's next unicorn. Following this trend, the Ministry of Communication and Information Technology last month presented the second Next Indonesian Unicorn International Convention, or NextICorn, to promote growth of the country's digital sector, which saw early stage companies attracting more than $4 billion in investment last year – a 60-fold increase over the past five years.

Gilang Al Farisi

The convention, which took place in Kuta, Bali, on Oct. 13-14, coincided with this year's International Monetary Fund-World Bank Group Annual Meetings, which also took place on the holiday island. NextICorn is an initiative by the Ministry of Communication and Information Technology, in collaboration with the Indonesian Venture Capital and Startups Association (Amvesindo), global consulting firm Ernst & Young, and the founders of Indonesian unicorns Go-Jek, Tokopedia, Traveloka and Bukalapak.

The inaugural event in May this year was met with tremendous success, with more than 1,000 facilitated meetings and upwards of 2,000 connections between 70 well-known Indonesian startups and 89 local and international investors. Last month's event was aimed at further developing the digital industry and creating more connections between business players and investors.

Communication and Information Technology Minister Rudiantara believes the digital economy may become the future backbone of the national economy. "This is our digital economy wave," he said, adding that the government wanted to become a mediator between startups and investors.

This was also the main motivation behind the initiative to host NextICorn, which aims to make Indonesian startups globally competitive, such as ride-hailing service Go-Jek's recent expansion into Vietnam and other Southeast Asian countries. "The Next Indonesian Unicorn initiative is an implementation of a program started by President Joko Widodo to make 'Indonesia the Digital Energy of Asia,'" the minister said.

Regulations to Support Growth

"By accepting foreign investment, we are not giving out our resources. Investors may come from foreign countries or domestically, but the startups will remain unicorns in Indonesia," Rudiantara said.

He added that Indonesia was projected to become the world's fifth-largest economy by 2030, spurred by massive investment inflows and an expected demographic bonus. This alone shows that the country is the perfect home for investors.

The government has also issued various regulations over the past few years to facilitate growth in the country's digital economy. These include a 2016 presidential regulation to amend the country's negative investment list; a 2016 ministerial circular on a safe harbor policy for e-commerce platforms; and a 2017 presidential regulation on an e-commerce roadmap.

Investment Coordinating Board (BKPM) chairman Thomas Lembong explained that with the new set of regulations, digital industry players would now have more leeway to develop their businesses. "Like President Joko Widodo said, the internet is an open platform that does not limit itself to national boundaries. As such, we must be more flexible in regulating digital industry players," he said, adding that the developing industry needs a light touch from government regulations but that players should also be directed to keep them in line.

Vetting Process

All companies featured and curated by NextICorn have been thoroughly vetted and went through a selection process, with most meeting the primary requirements, namely 25 percent Indonesian ownership and having received over $100,000 in funding from non-founders. The approved startups were introduced to various investors from across the globe during the event, while encouraged to cultivate partnership through one-on-one meetings.

The ministry's team contacted more than 150 global venture capital firms during earlier roadshows in South Korea, Japan, China and Singapore. Among those that attended last month's NextICorn were Accel Partners, SoftBank Ventures Korea, Temasek, Yahoo Japan Capital, Line Ventures, East Ventures, Eight Roads, Quona, Reinventure and Jubilee Capital Management. They are all prominent investors in Southeast Asia, specializing in series A to C funding.