Ilham Habibie (centre) with Ayoconnect CEO Jakob Rost (left) and COO Chiragh Kirpalani
There have been many exciting updates in the Indonesian startup ecosystem in recent years. This year alone, we got to see Bukalapak becoming the first local unicorn startup to get listed on the stock exchange. We have also seen the birth of many unicorns, with Kopi Kenangan being the latest addition to the group. Outside of funding-related announcements, we also saw how the ecosystem continued to thrive despite challenges possessed by the COVID-19 pandemic.
These updates have attracted the attention of various parties to the local startup ecosystem, from investors to government institutions.
Recently, fintech startup Ayoconnect announced that entrepreneur Ilham Habibie has joined the company as Strategic Advisor.
Known as the son of former Indonesian President B. J. Habibie –who was a notable aerospace engineer with 46 global patents and formulas named after himself, and a pioneer in the local tech industry — Ilham Habibie has more than 25 years of experience in equity investing. He is actively involved in various organisations that focus on research and technology in the country, including the Indonesian Chamber of Commerce and Industry (KADIN) and the National Information and Communication Technology Council (WANTIKNAS).
“I am always drawn to innovation,” Habibie says in an interview with e27. “I personally believe that building tech for the sake of building it is somewhat misguided, as there has to be a purpose for what we are building. And that purpose is to provide a better living for many people. This is often present in impactful innovation.”
Habibie says that he is particularly passionate about how fintech can help bring financial services to the underserved communities in Indonesia –the reason why he was drawn to Ayoconnect in the first place.
But what are his thoughts about the Indonesian startup ecosystem, and how we can move forward? Find out in this edited interview excerpt with e27.
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What are some of the most unique characteristics of the Indonesian startup ecosystem?
Our country makes up about 41 per cent of ASEAN. Recently, there has been a strong tendency for global investors to straight to Indonesia, instead of setting up in Singapore, as this is where the market is, where the opportunities exist. Our society’s readiness to become users of mobile apps has also improved due to our demographic aspect. Fifty per cent of our citizens are under 30, being the so-called digital native, making it easier for them to use the services provided by tech startups.
Our smartphone penetration rate is also predicted to reach 90 per cent by 2025. The pattern in Indonesia is that our citizens are first connected to the internet through their smartphones, instead of their computers like in Europe or Northern America.
But what are the challenges that the ecosystem faced that might hamper its potential today?
Digital literacy remains a challenge. While 90 per cent of our citizens are able to own smartphones, it does not guarantee that they are able to use them properly. There has to be an initiative from the industry for them to be able to maximise [the use of the tech]. There has to be a collaboration between startups and financial institutions to reach out to the underbanked society. This is not just those who reside in Java; there are many outside [of the island] who has no access to financial services.
There are many types of financial services, including micro-credits, that fintech startups can help facilitate, turning them into collaborative partners for banks.
Talking about the collaboration, what kind of support do you think the government should provide?
There is a great need for fair, transparent regulations that include rewards and punishments … the government need to play its role in deciding the rule of the game.
In growing this ecosystem, the government should also intensify partnerships with startup ecosystems in other parts of the world. For example, in Jakarta, we have a dynamic and lively startup ecosystem that has been in touch with its counterpart in Berlin –under a sister city concept. I have witnessed in many visits to Berlin how these ecosystems are visiting each other, and they seem very satisfied with the partnership.
Collaboration is a two-way street; we need to be open about sharing with them. While there is certainly a limit to what extend we can share, we must realise the importance of sharing our experiences and challenges. We must also note how the existing digital platform is making this process more cost-efficient.
Nowadays, words about new tech innovation on the other side of the world spread way more quickly. If we really want to do better than other countries, at the very least we need to collaborate.
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In the old days, tech innovation in Indonesia used to be led by government institutions. But nowadays, startups seem to be at the forefront of innovations, especially with their ability to reach out to the general public.
With startups, the tendency is to implement and not to develop the tech itself. This is related to their need to adjust tech innovation with a business model that can reach out to the customers effectively.
In implementing tech innovation, startups are not restricted to the resources that are available domestically. For example, Indonesian startups have the ability to outsource talents from other countries, such as India. This enables them to move faster, and in a more agile manner. Their innovation is not restricted by country borders, enabling them to move fast.
This is something that we could not find in government agencies because the state has to consider its interests, and also the interests of local business players –and this is normal. But in the future, perhaps we can change the orientation a bit by not relying too much on the resources that are available in Indonesia, and by integrating them with what is available abroad.
Businesses may have to move fast due to competition, but unfortunately, this is not something that other sectors can afford.
Compared to two to three years ago, there seems to be a greater awareness of the importance of profitability among startups. How will this affect the ecosystem in the future?
There used to be a strong emphasis on growth at all costs; it was all about market share, market share, market share. There was an emphasis on winning the market through promotions which are often not in line with the company’s ability to generate revenue. But in the future, we are going to be more balanced. It is not that cash-burning will completely disappear, but it will be less dramatic.
This is especially the case with startups that have gone public … it will become some kind of a test for them. Does the projection actually fit their capacity [to generate revenue]? We have seen it many times before in startups that have gone public and experienced a difference in their valuation, before and after the IPO. It is even more urgent if we consider that there are many startups out there with similar offerings. So there has got to be a winner and loser in the market, encouraging investors to be extra careful.
We can no longer afford to force blitzcalling; there will be stronger pressure to be more reasonable.
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What will the ecosystem look like in the future?
Indonesia has the fundamental to build a strong and big ecosystem in ASEAN –and potentially the world.
This is also great timing as Indonesia is a relatively stable country in terms of politics and security. This is a fundamental factor for investors to enter the country; it is also important to note that not all ASEAN countries have this level of stability.
We may not be as strong as Silicon Valley, Shenzhen, or Stockholm, but it is not a problem.
Here is also an opportunity that we can tap into: We do not develop our own tech here. This may sound bad at first, but this can be a good opportunity. If we see how things are like in Silicon Valley, innovation is birthed and implemented on the same ground. We may not be able to get to that level as it depends on the quality of human resources, but this is an opportunity for those with a focus on tech innovation.
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Image Credit: Ayoconnect
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