Heaptalk, Jakarta — Although the digital economy is projected to continue growing in the next few years, Indonesia’s startup ecosystem has experienced several obstacles in the last few years.
Google, Temasek, and Bain & Company revealed that SEA’s private funding, including Indonesia, reached a low level in the last six years. In the archipelago, the report disclosed that private funding trends fell by 87% YoY, from US$3.3 billion to US$400 million in the first half of 2023. Meanwhile, strategic investment trends in the Southeast Asian startup also diminished by 69.2% YoY, from US$13 billion to US$4 billion during the first half of last year.
“The decline in funding is part of a global trend. The funding trend has reached a baseline, and it is crucial to see how the market circumstances, specifically the United States as a worldwide leader, show whether indicators are bottoming out or flattening in,” The Partner of East Ventures, Melisa Irene, responds to the trend to the Heaptalk team.
From her perspective, Melisa perceived that the funding climate basically has stayed the same this year. Nevertheless, he underlined that the funding situation abroad illustrates several possibilities that founders must implement in the archipelago.
Perceiving the lofty American interest rate affecting central banks globally, Melisa admitted that funding allocation would be at high risk of decreasing. Consequently, investors will continue to carry out stricter risk management for startup companies. They must initiate a strategy to adjust current market conditions and continue strengthening the company’s mission and vision.
“If we trace back 15 years when venture funding in Indonesia emerged, it was the first moment we encountered a significant bump in interest rate alteration. Moreover, plenty of Founders who have not faced the financial crisis, even though the pandemic crisis has forced them to discover mitigation efforts,” Melisa said in her statement.
East Ventures’ attempt to retrieve 2024’s investment climate in startups
Regardless of the current issues, this East Ventures Partner emphasized that investors will continue to provide funding by looking for good investment targets. According to her, startup founders who continue to reinforce a clear and disruptive value proposition will have the potential to seize strategic investment.
As one of the most active venture capital firms, East Ventures remains optimistic about investing in Indonesia by continuing to focus on the People and Potential Market owned by early-stage startups. Those who have integrity, self-awareness, and paradoxical traits will be the primary targets in the seed round, and they are expected to be able to focus on the core strengths of their business.
In the growth funds, East Venture will concentrate on traction by hunting for companies with the potential to become category leaders. The firm will also direct growth-stage founders to focus on unit economics, ensuring that every transaction is profitable to ensure business sustainability.
“This year, we perceived the investment climate in startups would gradually recover. We believe interest rates would tumble, eventually contributing to the growth of the investment climate and valuations. For this reason, we look forward to Indonesia’s startups continuing to retain their runway until 2025.” Melisa concluded her statement.
This positive sentiment is amplified by the latest Venture Capital Association for Indonesian Startups (Amvesindo) report, whereby venture capital investment mounted 14% YoY, reaching US$310 million in Q1 2024. This upshot intensifies compared to the previous year’s trend, which only touched US$270 million.
Meanwhile, the value of fintech investment reached US$185 million, with the number of investment agreements increasing to 10. Meanwhile, investments outside fintech, including insurance tech and climate tech, were worth US$45 million and US$43 million, respectively, in Q1 this year.
