If you’ve been watching Indonesia’s tech scene these past couple of years only through the lens of Jakarta, you’re definitely missing the bigger picture here.
Yes, while the capital still largely dominates in terms of funding and startup density, cities like Surabaya, Medan, and Makassar are becoming vibrant digital hubs, with each city bringing new energy to Southeast Asia’s fastest-growing digital economy.
The big question we should look at is: Is Indonesia finally decentralising its digital growth, and what does this mean for startups, investors, and the next generation of tech builders?
We examine the top 5 emerging Indonesia VC trends
By this year, we will witness Indonesia reach its peak of USD 109 billion in digital economy value, which is the largest in Southeast Asia. However, that growth is not just driven by Jakarta itself, as the majority would assume. What is fueling this growth are the new digital consumers and small and medium-sized enterprises (SMEs) from Tier-2 and Tier-3 cities like Surabaya and Medan, which are also driven by mobile-first behaviour, digital banking, as well as social commerce.
On top of that, while Java still dominates the digital activity in Indonesia, safe to say that non-Java islands are gaining traction all thanks to the increased government spending and initiatives and the growth in e-logistics and fintech.
From capital-centric to archipelago-wide: What’s driving the shift?
Jakarta remains Indonesia’s digital epicentre, but the problem is that the city is also overcrowded, costly, and competitive. In contrast, second-tier cities such as Medan and Surabaya offer distinct advantages, which include lower burn rates, untapped talent, as well as direct access to localised market pain points.
Take Surabaya, for example, the city is now an emerging logistics hub due to its industrial base and port access. Medan, on the other hand, is seeing an increase in fintech and digital services aimed at Sumatra’s growing middle class. Makassar, which is strategically located in eastern Indonesia, is becoming a testbed for rural-first innovations in fisheries and agriculture, and recently, the Indonesian government plans to establish Makassar Port in South Sulawesi as a new export hub.
All of these efforts and advantages of second-, third-tier cities are a reflection of a structural shift. Projection to many experts, Indonesia’s tech scene is ready to break out of its “Jakarta shell” — of course, not just in terms of innovation, but also in terms of access and opportunity for the people.
Digital natives, rural-first innovation, and Gen Z momentum
Interestingly, the Indonesian youth, with a median age of 29, are actually powering their digital economy from the ground up, which is one of the highest mobile penetration rates in Asia. We can see that many of them are also skipping traditional infrastructure, as 74 per cent of Indonesians are online, to go directly into mobile commerce, digital wallets, as well as livestream shopping.
It is also important to note that the rural and semi-urban users are no longer on the fringe — they’re fast becoming the core audience. For instance, agritech platforms such as eFishery and TaniHub are not necessarily just offering their digital services, but they are also redefining access to supply chains, financing, and fairer pricing in traditionally underserved sectors.
What also differentiates Indonesia from other Southeast Asia countries is that their digital economy is not just one of the largest, but potentially the most inclusive in the region — at this rate, it will be if connectivity and affordability keep pace.
The investment curve: A turning point for Indonesia’s second-wave tech boom
As Indonesia continues to dominate regional startup funding, the nature of that investment is also changing. Yes, fintech and e-commerce are still leading, however, we must also acknowledge that there is growing interest in sectors such as agritech, B2B SaaS, and healthtech — especially those building for mass-market segments beyond the urban middle class.
In terms of the investor field, they are looking to extend beyond Jakarta. Local venture capitalists (VCs) like East Ventures and Alpha JWC Ventures are now backing early-stage startups in cities such as Yogyakarta, Semarang, as well as Balikpapan — all of which are drawn by lower customer acquisition costs (CACs), ESG-friendly business models, and deep local insight.
While we do look at this broadly in terms of investor relations to the growing startups in Indonesia, for a lot of these ventures, they are not chasing crazy goals here. In fact, one of their main focuses is on solving basic but large-scale issues, which include informal financing, rural education, as well as SME digitisation.
What’s next: Scaling infrastructure for an archipelago-wide digital future
For Indonesia, the real challenge is not necessarily demand — they already have it, but it is the infrastructure that is still lacking. Sure, their mobile and broadband access are slowly improving, but the gaps in infrastructure, delivery, regional talent development, as well as digital literacy, are slowing them down, especially outside Java and Bali.
We see that government-wide initiatives such as 100 Smart Cities and Making Indonesia 4.0 are helping to tackle the issues. However, the coordination remains fragmented, especially across provincial, smaller, and district-level authorities. On top of that, there is also a growing effort to build more regional tech campuses, incubators, as well as venture capital alliances.
Aside from these government efforts, logistics and infrastructure players are also increasingly collaborating with VCs and accelerators to bridge these divides, which signals a shift toward more ecosystem-wide participation, not just top-down policy.
Yes, although Indonesia is showing what a smaller, much more fragmented digital economy than the other Southeast Asian countries can look like — in doing so, they can offer somewhat of a blueprint for this region’s next digital transformation.
What we’re seeing isn’t just a wave of startups from unexpected cities; it’s a mindset shift. The belief that you have to be in Jakarta to scale is fading. In its place: a nationwide confidence that innovation can come from anywhere — and serve everyone.
We are witnessing more than just a wave of startups from what the majority would assume are unexpected cities to flourish, but also a shift in mindset. Let’s also acknowledge that the mindset and hope are the overlooked factors that contributed to this growth. A long-standing perception was that many investors thought that scaling in Indonesia meant being based solely in Jakarta, and that narrative has changed.
Indonesia is not just building Southeast Asia’s largest digital economy, but aims to be one of the most inclusive digital economies, which will give it the greatest competitive edge yet.