In August, we republished the three listicles featuring the biggest headlines in Singapore, Indonesia, and Malaysia that year—as part of the national day celebrations in these countries which happen to fall in the same month.
These listicles give us a bird-eye view of what is going on in these ecosystems. While each market is unique with its own situations and challenges, they can help us gauge the state of the ecosystem in the first half of the year.
In Indonesia particularly, we also published two stories that stood out when it comes to their portrayal of the state of Indonesian startup ecosystem. First, we published a report by AMVESINDO which revealed a “consistent growth” of VC investments in Indonesia in H1 2023. This sounds good enough, especially as we are going through what many believe to be a funding winter—challenging time as a result of back-to-back global crises.
But the interesting part comes with this report by Tracxn, which specifically looked at the state of fintech investment in Indonesia in H1 2023.
“While 2021 marked the peak of fintech funding, subsequent years have witnessed a decline. Funding in the fintech sector fell by 46 per cent in 2022 compared to the previous year, with the first half of 2023 experiencing a 38 per cent drop in funding compared to the second half of 2022. This decline has led to the least funded half-year period (H1 2023) since 2020,” the report elaborates.
Does this mean bad news? We do not think so.
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There are many reasons that could contribute to a decreasing number of VC investments going to a particular vertical. Does this mean the trend is fading to the background? People are no longer seeing this vertical as promising? (Ahem, Web3). Possibly. But when it comes to a popular and “evergreen” verticals such as fintech, the lack of VC investments in one particular year does not mean things are falling apart.
“As a consequence of the global macroeconomic slowdown, investor sentiment has been cautious, affecting funding across regions, which has led many Indonesian startups to focus more on their domestic market. However, despite the recent challenges, long-term prospects for the sector remain optimistic,” the report stated.
If anything, investors being more selective and careful with where their money is going might lead to a stronger startup ecosystem—where only the best, most resilient players are given the right kind of support.
In the past one year, the narrative about being a more resilient and sustainable startup ecosystem has been circulating in the region. The idea that VC investments are no longer the only reliable source of lifeline for a startup means that the message has been delivered: (Fintech) startups are able to self-sustain and make money.
We are certain that this is the direction that many will take in H2 2023. The pressure to become sustainable is no longer viewed as a burden; if anything, this will become the norm for most of us.
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Image Credit: RunwayML
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