Indonesian tech start-ups face struggles with funding, innovation

Foreign rivals have wider funding pool, regional reach and more aggressive tactics

- Wahyudi Soeriaatmadja

JAKARTA - Indonesia's start-ups are struggling to compete against their cash-rich foreign rivals, with the nation's two largest unicorns GoTo and Bukalapak seeing their valuations slide substantially in 2024.

Investment in local start-ups has also slowed by about two-thirds, from around US$3.5 billion (S$4.8 billion) annually in 2020 and 2021, according to a November 2023 joint report by venture fund AC Ventures and management consultancy Bain & Company. This places more pressure on local companies to innovate, stop burning cash and become profitable, say analysts.

GoTo, formed by the merger of ride-hailing firm Gojek and e-commerce giant Tokopedia in 2021, has seen its share price fall by 55 per cent year to date. It is currently valued at 60 trillion rupiah (S$4.98 billion) on the Indonesia Stock Exchange.

Meanwhile, e-commerce unicorn Bukalapak is down by 33 per cent, bringing its market capitalisation to 14 trillion rupiah.

Both companies have significantly underperformed on the exchange's broader composite index, which has declined around 4 per cent in 2024. Tough competition from their larger, regional rivals as well as slower innovation are largely to blame, say experts.

Key competitors such as Sea Limited's Shopee and Grab have access to a wider pool of funding, regional reach and more aggressive tactics.

Sea is listed on the New York Stock Exchange and has a market capitalisation of US$43.6 billion, while Grab is worth US$14 billion on Nasdaq.

"Being listed in the US market allows you to raise US$1 billion relatively easier. This is a small figure compared with the total market capitalisation there. While for GoTo, which is listed on the Indonesia Stock Exchange, such size is an upper value," said senior equity analyst Henry Pranoto.