For more than a decade, Indonesia’s startup story has been defined by scale at any cost. The model was familiar: pour in venture capital, offer heavy subsidies to capture users and postpone profitability. Unicorns like Gojek and Tokopedia embodied this approach, fuelling investor excitement and drawing international attention to Southeast Asia’s largest economy. But the playbook is beginning to fray. As the funding winter drags into its second year, investors are pulling back from high-burn startups and redirecting capital towards ventures with clearer revenue streams and stronger fundamentals.
In fact, Indonesia’s startup ecosystem faced a sharp downturn in the first half of 2025, with total funding plunging 43.5 percent year‑on‑year to just US $161.3 million across 34 disclosed deals, down from US $285.4 million in H1 2024. These figures tell a stark story: the easy money era is over and venture capitalists are recalibrating their strategies. Instead of doubling down on platforms built on subsidies, investors are eyeing the so-called “real sector”- agriculture, logistics, healthcare and other industries that provide tangible value and measurable returns.
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The end of growth at all costs
The funding squeeze has been a wake-up call. For years, Indonesian startups chased growth at all costs, burning through piles of cash to win users and build scale. Cheap rides, food delivery discounts and endless cashback offers turned into everyday perks for consumers. But with interest rates higher and capital harder to come by, investors are starting to wonder if those freebies were ever a sustainable way to build a business.
Globally, venture capital is facing pressure from limited partners who want real returns rather than paper valuations. With liquidity tightening, VCs in Indonesia can no longer justify pumping capital into businesses without clear paths to profitability. This has created a new emphasis on fundamentals: unit economics, cash flow visibility and capital efficiency. Startups that once raised millions on the strength of user growth are now being asked tougher questions about their gross margins and cost structures.
The impact on founders is significant. Fundraising cycles are stretching from months to over a year in some cases and investors are demanding stronger governance and transparency. According to a LinkedIn essay by McKiernon, this shift represents a kind of “apology tour” for the Indonesian ecosystem, an acknowledgement that unchecked spending has left too many businesses vulnerable when capital dries up. The subsidy-driven race for dominance is giving way to a focus on resilience and discipline, marking a transition point for the country’s entrepreneurial landscape.
Real sector startups rise to prominence
Amid the pullback from consumer apps, investors are discovering opportunities in sectors that had previously struggled to attract attention. Agriculture is a prime example. Indonesia is home to more than 33 million farmers, many of whom lack access to markets, financing or efficient supply chains. Agritech startups that connect smallholder farmers to buyers or provide data-driven tools for crop management are finding favour with investors looking for grounded, revenue-based models.
Logistics is another growth area. With Indonesia’s geography spanning more than 17,000 islands, the movement of goods remains a complex challenge. Startups building infrastructure to reduce bottlenecks or improve last-mile delivery efficiency are well-positioned to capture demand in e-commerce and trade. Rather than burning cash on subsidies, these companies are solving systemic problems, making their business models easier for VCs to justify.
Healthcare and education technology are also gaining traction. As Indonesia’s middle class expands, the demand for affordable, accessible services in these sectors is rising. Investors are showing interest in ventures that combine technology with essential services, delivering measurable impact and recurring revenue. While these verticals may not generate the same hype as app-based consumer plays, they align with the investor preference for sustainable growth and defensible models.
This redirection of capital is not just a reaction to scarcity. It also signals a maturation of Indonesia’s venture capital ecosystem. Instead of chasing unicorn valuations, investors are looking to build a broader base of “workhorse” startups, companies that may not dominate headlines but are capable of delivering steady returns over time.
The risks of overcorrection
While the shift towards real sector opportunities appears healthy, it comes with its own risks. One concern is that investors, wary of past excesses, may become too conservative. If capital only flows to businesses with predictable revenue, the ecosystem could lose the appetite for innovation and risk-taking that fuels disruptive breakthroughs. Global limited partners, particularly those accustomed to Silicon Valley’s bold bets, may view Indonesia’s tilt towards defensibility as lacking ambition.
Another challenge is managing expectations. Startups in agriculture or logistics often face longer timelines to scale, given regulatory hurdles, fragmented markets and infrastructure gaps. Investors will need patience and a realistic view of growth trajectories. At the same time, founders must balance efficiency with creativity, ensuring they do not become so cautious that they miss opportunities to differentiate themselves.
The Indonesian government also plays a role. Policy support, from easing regulations for agritech platforms to investing in digital infrastructure, will be critical to sustaining momentum in these sectors. Without an enabling environment, even well-intentioned capital could fail to translate into meaningful outcomes.
Ultimately, the ecosystem must avoid swinging from one extreme to the other. The past decade’s “growth at all costs” mantra was unsustainable, but so too would be an environment where bold innovation is stifled in favour of safe bets. Finding the right balance between profitability and experimentation will determine whether Indonesia produces not only resilient startups but also transformative ones.
What’s next for Indonesia’s startups?
Indonesia’s venture capital scene is at a crossroads. The end of cheap capital has exposed the fragility of subsidy-driven models and pushed investors to prioritise fundamentals. Real sector startups in agriculture, logistics, healthcare and education are stepping into the spotlight, reflecting a more disciplined approach to funding. At the same time, the risks of overcorrection are real: if the ecosystem tilts too far towards caution, it may sacrifice the ambition that made Indonesia’s startup story compelling in the first place.
What emerges from this funding winter could define the next chapter of Indonesia’s entrepreneurial journey. A leaner, more sustainable ecosystem may ultimately prove more resilient, better equipped to weather market cycles and deliver long-term value. For founders, the message is clear: the era of easy money is over, but opportunities remain for those who can pair efficiency with vision. For investors, the task is to nurture this balance, ensuring Indonesia’s startup scene continues to evolve not just in size, but in strength.