The first country we lived in as part of this project was Indonesia. We spent the fall/winter of 2015/2016 (Northern Hemisphere calendar) in Jakarta and got to know a lot of great entrepreneurs, accelerators and investment funds. This is a summary of what we learned.
E-commerce is hot
E-commerce is very hot and competitive. If we were to start a company in Jakarta, it would be a SaaS tool for e-commerce. A lot of money is spent in the war to become the Amazon of Indonesia, and a lot of sales is made in messenger groups and on social media. Some of the biggest e-commerce players are:
MatahariMall is a traditional online retailer. It was founded by one of Indonesia’s biggest conglomerates, Lippo Group, who owns bricks-and-mortar shopping malls under a similar brand. MatahariMall has raised $600 million to date.
Lazada was started by Rocket Internet and is operating all over South East Asia. In April 2016 Chinese online retailer Alibaba bought a majority stake in the company for $1 billion. (Shortly thereafter Singapore state funds GIC and Temasek each purchased $500 million of Alibaba shares.)
You need a local investor
If you’re a foreigner and want to start a company in Indonesia, make sure you get local investors with a good network onboard. Laws are changing fast and are often intentionally vague. You will need help navigating the regulatory landscape and ideally someone who can talk to ministers on your behalf.
100 million smartphone users
There is a lot of low-hanging fruit and a huge regional market hungry for mobile-first products and services. Many successful startups in the region are local versions of products that have been proven in Silicon Valley.
Payments are tricky
Only about 20% of the population have a bank account, which makes it challenging to charge for things online; 4% have a credit card. Startups, as well as banks, are trying to create mobile banking services. No one has succeeded in making something ubiquitous yet. The payment landscape remains fragmented. Almost a third of all e-commerce transactions in Indonesia are done by cash on delivery.
Logistics is a challenge
Indonesia is comprised of 17,508 islands of which about 6000 are inhabited. There is no one solution to ship your goods to all potential customers.
One company, Go-Jek, is trying to solve both the payment and logistics issue by turning its motorcycle taxi hailing app into an e-commerce and service platform. Whether it has the product and technical acumen required to pull it off remains to be seen, but we love the ambition and are cheering for the team. Go-Jek was valued at 3 billion USD earlier this year. Investors include Tencent, Sequoia Capital, NSI Ventures, DST Global, KKR and Japanese e-commerce giant Rakuten.
Perhaps Go-Jek will also solve online payments in Indonesia. This is the one company we regret not trying harder to get to invest in while living in Jakarta.