Despite the challenges following the coronavirus outbreak, tech startups in Indonesia managed to secure $1.9 billion USD in funding by Q3 2020, according to venture capital (VC) firm association Amvesindo. There were 52 funding rounds, with the fintech sector’s eight transactions dominating the list, followed by six transactions in edtech, another six in SaaS, five in retail and four in logistics and eCommerce.

While Indonesian tech startups experienced a decline in investment in 2017, the numbers kept rising over the following two years, reaching $1.4 billion USD in 2018 and $2.9 billion USD in 2019. Amvesindo anticipates the 2020 year-end figure to be lower than last year at $2 billion USD, due to funding delays in Q3 caused by the COVID-19 pandemic.

Nevertheless, Indonesia topped this year’s Q2 fundraising deals in Southeast Asia, with a 45.8% share of the $2.7 billion USD total investment. Singapore followed with 33.2%, and Vietnam came third with 7.9%.   

Startup champions in funding rounds

Culinary startup Kopi Kenangan raised $109 million USD of Series B funding in May, led by its existing investor, Sequoia Capital India. Other investors included Horizon Ventures, Kunlun, the company’s first investor Alpha JWC Ventures as well as B Capital. 

Despite COVID-19, Indonesia’s investment landscape was strong.

The latter was founded by Facebook’s co-founder, Eduardo Saverin, who will also be joining Kopi Kenangan’s board of directors to help accelerate its expansion and growth. 

Founded in 2017, Kopi Kenangan is Southeast Asia’s fastest-growing coffee retail chain, operating 324 stores across Indonesia and serving more than a million customers via its mobile app.

The startup raised $8 million USD in seed funding in 2018 and $20 million USD in its Series A round in June 2019. It received additional investments in December 2019 from VCs of renowned celebrities, notably tennis star Serena Williams, basketball player Caris LeVert and rapper Jay-Z.

The latest funds are likely to be used for widening its product range, implementing new technology for improved customer service, investing in employee protection amid the COVID-19 pandemic and expanding to 500 stores across the country by the end of 2020. 

The chain currently employs 3,000 people and intends to spread across Thailand, Malaysia and the Philippines post-pandemic. 

Freight logistics firm Kargo Technologies were the second-biggest investment winners by securing $31 million USD in a Series A funding round in April, led by Tenaya Capital. Other investors included Intudo Ventures, Coca-Cola Amatil and more. 

The funds will find a home in scaling up the startup and fighting COVID-19 challenges while maintaining the country’s supply chain of essential items.

Last year Kargo raised $7.6 million USD in seed funding led by Sequoia India and several seed backers, including Uber co-founder Travis Kalanick’s 10100 Fund. The startup’s current core members emanate from giants like Amazon, Facebook, Uber, DHL and APL. 

Founded in 2018, Kargo has rapidly evolved into a platform that connects 6,000 shippers and 50,000 truckers with their customers through an app, thus addressing one of the biggest pain points in Indonesian operations. 

Tackling the lack of infrastructure in rural areas and seeking to replace the outdated use of intermediaries that raise prices for end-users, the company aims to provide transparency and better quality of service via online transactions.
Other beneficiaries of significant funding were GudangAda’s $25.4 million USD, Investree’s $23.5 million USD, KoinWorks’s $20 million USD, and Shipper’s $20 million USD.

The growth of the Indonesian VC industry

The recent increase in VC activity has had a positive social impact on the country’s microfinance sector, particularly in the aspect of financial inclusion. Additionally, it has played a vital role in building a sustainable ecosystem for Indonesian tech startups. 

Indonesia is the second-largest VC market in the ASEAN region, preceded by Singapore and followed by Malaysia. From the region’s total $3.6 billion USD in fresh funding last year, Singaporean VCs raised $2 billion USD, Indonesia followed with $582 million USD—a 79% increase from the $325 million USD in 2018—and Malaysia ranked third with $484 million USD.

Home to four unicorns (Bukalapak, Tokopedia, Traveloka, OVO), a decacorn (Gojek) and a total of around 2,100 startups, Indonesia ranked fifth among the countries with the most startups in the world, preceded by the USA, India, Great Britain and Canada. 

Moreover, Indonesia-based VC East Ventures is ASEAN’s most active startup investor, having funded approximately 300 startups worldwide, with about 170 located in Indonesia. 

Indonesian tech startups have not only managed to overcome the COVID-19 challenges but they also now play a crucial role in helping the country’s economy recuperate from the pandemic’s impact. The Indonesian VC industry will continue to grow, particularly in the verticals linked to the digitalisation of supply chains and small to medium enterprises (SMEs). Resilience-focused leadership and strategic business development models are essential factors for creating sustainable growth prospects, something tech startups in Indonesia seem to be the masters of already.