The great decline: How Indonesia’s tech funding hit a 3-year low

Indonesia’s tech startup ecosystem experienced a significant downturn in funding during 2024, according to the ‘Indonesia Tech Annual Report 2024’ released by the startup data intelligence platform Tracxn.

The total amount raised was US$323 million, a 75 per cent drop from the US$1.3 billion raised in 2023 and a staggering 90.05 per cent decrease from the US$3.24 billion raised in 2022.

This decline indicates a challenging year for the Indonesian tech sector, with funding drying up across all stages of investment.

VC funding trends

The report highlights a consistent decline in funding across all stages:

• Late-stage funding saw the most dramatic drop, with only US$71.2 million raised in 2024. This is a 91.95 per cent decrease compared to US$884 million in 2023 and a 95.84 per cent decrease compared to US$1.71 billion in 2022.
• Seed-stage funding also experienced a sharp fall, with a total of US$30.3 million in 2024. This represents a 61.54 per cent decrease compared to US$78.8 million in 2023 and an 85.57 per cent drop compared to US$210 million in 2022.
• Early-stage funding fared slightly better but still declined to US$221 million in 2024. This is a 32.18 per cent decrease from US$326 million in 2023 and an 83.24 per cent drop compared to US$1.32 billion in 2022.

Looking at the funding trends in the second half of 2024 (H2 2024), the total of US$107 million was 50.39 per cent lower than the US$215.7 million raised in the first half of 2024 (H1). This also represents an 86.07 per cent drop from US$768.3 million raised in H2 2023.

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The fourth quarter of 2024 (Q4) saw a slight increase of 1.89 per cent with US$54 million compared to US$53 million in Q3 2024 but is still 81.36 per cent lower compared to the US$289.8 million raised in Q4 2023. These figures highlight a continuous downward trend in funding for the Indonesian tech sector throughout 2024.

Sector-wise performance

Despite the overall downturn, some sectors performed better than others in attracting investment in Indonesia:

Fintech, enterprise applications, and insurtech were the top-performing sectors in 2024.

• Fintech received US$189.5 million in funding, which is still a significant decrease of 68.45 per cent compared to US$600.5 million in 2023 and a drop of 89.27 per cent compared to US$1.8 billion in 2022.
• Enterprise applications secured US$94.6 million in 2024, a 32.65 per cent decrease compared to US$140.5 million in 2023 and a 90.83 per cent drop compared to US$1 billion in 2022.
• Insurtech stood out with a 431.58 per cent increase in funding to US$50.5 million in 2024, compared to US$9.5 million in 2023, although this was still a 28.39 per cent drop compared to US$70.5 million in 2022.

IPOs and exits

The report reveals a decline in exit activity as well:

Only one company, Topindoku, went public in 2024, raising US$34.9 million.

There were no new unicorns created in 2024 compared to one in 2023.

Tech companies in Indonesia saw nine acquisitions in 2024, a 25 per cent decrease from 12 in 2023 and a 55 per cent decrease from 20 in 2022.

Key acquisitions include IDEAL, RajaOngkir, and Gredu.

The average funding raised before the IPO was only US$6 million, a significant drop from US$514 million in 2023.

Year-on-year funding trends

The overall funding trend shows a sharp decline:

The compound annual growth rate (CAGR) for funding over the past three years is -54 per cent and over the past five years is -32 per cent. The number of funding rounds also decreased, from 58 in 2024 to 97 in 2023, a 40 per cent drop.

First-time funded companies also declined to 24 in 2024 from 34 in 2023, representing a 29 per cent decrease.

Series A+ rounds dropped from 48 in 2023 to 29 in 2024, a decline of 39 per cent.

City-wise funding trends

Also Read: 2024 fintech highlights: The startups dominating Southeast Asia’s financial landscape

Funding is heavily concentrated in Jakarta, which accounts for 85.36 per cent of all funding in Indonesia:

• Jakarta received the lion’s share of funding with US$275 million in 2024.
• Klaten was a distant second with US$20 million, followed by Cilandak with US$17.5 million.
• Other cities, such as Yogyakarta (US$3.5 million) and Bandung (US$2.5 million) received significantly less funding.
• Jakarta also dominates in cumulative funding with US$22.9 billion, with Tangerang at a distant second with US$1 billion in all-time funding.

Top investors

The report identifies key investors in the Indonesian tech ecosystem:

• East Ventures, AC Ventures, and Alpha JWC Ventures were the overall top investors.
• Antler, 500 Global, and East Ventures were the top seed-stage investors.
• Argor Capital Management, Openspace Ventures, and MUFG Innovation Partners were the top early-stage investors.

Among VCs, East Ventures led the most number of investments with five rounds, while 500 Global added 24 new companies to its portfolio.

Conclusion

The Indonesian tech startup ecosystem faced considerable challenges in 2024, with a significant decrease in funding across all stages and a decline in exits. While some sectors, like insurtech, showed positive growth, the overall trend indicates a period of adjustment for the market. The concentration of funding in Jakarta remains prominent, highlighting the need for broader regional development in the tech sector. The lack of new unicorns and a decrease in acquisition activities reflect the difficult conditions Indonesian tech companies face.

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