<article>The last 10 years have passed like a sweet dream for Southeast Asia’s tech ecosystem. During this time, the region went from an emerging Asian backwater to IPO market potential. Indonesia’s VCs and startups enjoyed a streak of undisrupted fundraising success, leading to the rise of some of the region’s largest funds and tech unicorns.</article>

The last 10 years have passed like a sweet dream for Southeast Asia’s tech ecosystem. During this time, the region went from an emerging Asian backwater to IPO market potential. Indonesia’s VCs and startups enjoyed a streak of undisrupted fundraising success, leading to the rise of some of the region’s largest funds and tech unicorns.
But since US private and public markets corrected last year, Indonesia’s tech ecosystem has struggled to come to terms with the changed landscape. Cash is now king. Investors prefer profitability over “growth at all costs”, and the lofty valuations spurred by the COVID supernormal are now seen as abnormal by today’s projections. 
Nothing can be more disconcerting for a founder than realising that the game rules no longer apply to a startup that was baked in the frothiness of 2020-21. Do I fight or do I fold? Will this market get any better?
The recent spur of startup layoffs in Indonesia has already begun to remove the sheen of the once-glamorous startup life. Harder decisions have yet to be made by founders, whether it’s a second or third pivot, merging with a competitor, or dealing with the scrutiny of governance lapses and lack of controls. 
All of Indonesia’s top VCs are now in portfolio management mode. Many are frantically trying to merge their investments together, some are hiring external bankers to find a compatible match. In other cases, startups like Lummo are urged to <a href="https://www.dealstreetasia.com/stories/lummo-may-close-operations-340722">bite the bullet early and shutter.</a> 
But even so, there are times when even consolidation may not be the best way forward. A sizable chunk of Indonesia’s early-stage startups raised VC money before achieving product-market fit. They now face the impossible task of proving that it actually exists without buying growth or fudging the numbers.  
VC investors too are raising the bar and asking tough questions. If you are an Indonesian founder today, you may have tens of millions still left in the bank, but is it really worth burning it all to acquire a few more customers? Or do you merge with another player whose business is just as flimsy as yours? How many more convertibles can you raise? Which is worth fighting for, if at all? 
Unlike in India, which has seen Reliance and Tata Group swoop in to pick up stakes in key companies, Indonesia’s conglomerates seem rather passive. It’s not for the lack of knowing, said one Indonesian investor. It’s because they’re cheap. To be fair, why would an Indonesian conglomerate splurge $200-300 million on a startup with little assets and tech which they can easily replicate at a fraction of the cost? 
VCs are also getting self-reflective during this brief pause. The Indonesian tech ecosystem is on the cusp of a new and very different season of its growth. Most of the nation’s key verticals have already been occupied whether it’s in consumer, fintech, transport and logistics. It’s simply not enough to launch another marketplace or B2B software platform anymore. 
While there have been Southeast Asian investors who have eked out a healthy return from this region, the key test now will arguably be whether these returns can be replicated again. The pressure to deliver the Southeast Asian premium will only build as competition continues to grow. 
Until then, more difficult boardroom conversations will be had behind closed doors. Depending on the composition of personalities, it will be a test of character for founders and investors alike as self-interests begin to diverge. 
In 2024, Indonesia will also vote in a general election marking the end of Jokowi&#8217;s second and final term as president. The Javanese statesman has led the country through massive digital transformation, infrastructure growth, and a resilient and thriving economy. 
The nation’s VC and startup ecosystem has been a major beneficiary of his policies. Many will hope things won’t change too much after next year.

Since US markets corrected last year, Indonesia’s tech ecosystem has struggled to come to terms with the changed landscape.

Indonesia’s tech startup ecosystem enters a moment of self-introspection

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