A growing global success: 10 reasons why Indonesia is a magnet for startups

While Indonesia has long been overshadowed in the startup stakes by its more established neighbour, Singapore, this thriving economy is now beginning to make waves in the international community, alongside fellow ‘CIVETS’ nations – Colombia, Vietnam, Egypt, Turkey and South Africa – because of its exciting investment opportunities. 

Despite the fact that Indonesia’s population is scattered across a staggering 15,000 separate islands, Indonesia has, over the last two decades, demonstrated steady growth – averaging around 5 percent per year – and surprising economic resilience to become the largest economy in Southeast Asia and the third-fastest-growing G20 member. Indonesia has grown in significance largely because it provides a fertile ecosystem for entrepreneurs – its capital, Jakarta, now features at number 39 in the top 500 cities list for startups, having vaulted 121 places on its 2017 ranking. 

So, what makes Indonesia so special?

10 facts about Indonesia’s startup culture

1.     Indonesia has a vast internal market that’s ready to embrace innovation: With more than 130 million people online and smartphone users numbering in excess of 63 million, mobile-related startups have a receptive audience.

2.     Compared with Singapore, Indonesia’s startup ecosystem is far less saturated – offering abundant opportunities for entrepreneurs, especially those in the fintech, ecommerce, software-as-a-service (SaaS), and service sectors.

3.     Indonesia can claim several unicorns among its startup community, including ride-sharing company GO-JEK ($9.5 billion), travel booker Traveloka, ($2 billion) and internet marketplace Tokopedia, ($7 billion). 

4.     Indonesia is the second-largest recipient of venture capital (VC) in Southeast Asia and is gaining ground on regional leader, Singapore. VC investments in Indonesia hit $136 million in 2017 – up from just $2.3 million three years earlier.  

5.     Indonesia’s low cost of living, compared to other Asian countries, gives entrepreneurs an edge allowing available funds to be spent on business development and not sky-high rents. 

6.     The Indonesian government is supportive of startups: an initiative was launched in 2016 to create 1000 techpreneur-led businesses worth $10 billion by 2020. 

7.     Indonesia is home to a number of international startup accelerators, including The Founder Institute, GnB Accelerator and SKALA, offering new businesses ready access to seed capital, mentorships and partnerships. 

8.     The Indonesian island of Bali is already a renowned hotspot for digital nomads. It hosts the world’s largest remote work conference, Running Remote, providing the training and tools needed to empower professionals to succeed in the remote workplace.

9.     A recent report by Google-Temasek predicts that the Indonesian internet economy will grow to $100 billion by 2025.

10.  The Indonesia Blockchain Hub provides a national platform for networking and knowledge sharing. This has encouraged the emergence of fintech startups – like mobile wallet provider KinerjaPay and digital lending platform Kredivo – to help solve ecommerce challenges.

Technology and innovation are playing a key role in boosting Indonesia‘s economy, helping to propel it to powerhouse status in the region. While its startup infrastructure may lag behind neighbouring countries like Singapore and Malaysia, its government has shown willingness to back innovation that’s steadily showing returns.

As a result of inward investment, a wave of startups has begun to emerge, together with a growing talent pool of dynamic, tech-savvy founders and employees. If it continues to reward entrepreneurship, Indonesia – and in particular its capital, Jakarta – has the potential to carve itself a leading position on the global startup map in the years to come.

What makes Sweden one of the top entrepreneurial ecosystems in the world?

Sweden has only a 10m people total population but it is 2nd to Silicon Valley when it comes to number of unicorns per capita they produce. With alumni such as Minecraft, Skype, Spotify, King and iZettle, Stockholm is often called Europe’s unicorn factory.

We have recently explored Stockholm’s entrepreneurial ecosystem with a group of executives from UCLA Anderson School of Management and had the opportunity to visit some of the unicorns mentioned above and this is what we have learned.

Here are some of the top incentives which make this small place one of the most potent innovation and entrepreneurial ecosystems in the world:

HIGH TAXATION - the social benefits and the high government taxation provides entrepreneurs with a safe environment to take risks and fail. The Swedish government has also introduced new tax advantaged employee share options for small and early-stage companies to promote the recruitment and retention of key employees. 

INTERNET CONNECTIVITY - almost ¾ of the of country has access to superfast fiber optic broadband and 90% of people use the internet compared with 85% in US. In the 1990’s government subsidized households to buy PCs and present successful founders like Klarna CEO say this is the reasons he started coding at 10.

HIGH TRUST - intrapreneurship thrives when there is a high level of trust both within individual economies and society at large. Employees are thus more innovative if given a lot of responsibility and autonomy. Trust is deeply rooted in the culture – Swedes trust the government to spend their money! Trust also breeds collaborative culture within teams. 

SUCCESS BREEDS SUCCESS – more than 50 people have existed startups in Sweden with more than $100m each. This has created a surge in angel investing and serial entrepreneurs with experience of growing in startups which are critical to an ecosystem 

GO GLOBAL MINDSET – given that Sweden is a relatively small country and commercial market, Swedish entrepreneurs adopt a “go global” mentality from the start which makes them more attractive to venture capitalists and fundable. 

Why China is banking on AI

When it comes to the march of technology, the accepted narrative ranks Silicon Valley at the forefront of discovery and innovation, while relegating China to the subsidiary role of mass fulfilment. It’s a view that’s supported by the operational companies like Apple, whose Cupertino campus incorporates the R&D base that allows it to badge products with the ‘designed in California’ legend, while delegating the assembly of the majority of its iPhones to Foxconn’s vast Shenzhen manufacturing plant.

In many ways, artificial intelligence (AI) has followed the same trajectory, with the people at the cutting edge of research all operating from North America. But while the US is leading the field in AI advancement, China is way ahead in terms of its practical implementation – which plays to the country’s strengths in data gathering, as well as in the quality, speed and execution of manufacturing. Industry expert Kai-Fu Lee has recently written about this topic at length, somewhat controversially predicting that it will be the companies who are able to use AI’s deep learning and pattern recognition powers to make viable products that will triumph – not those who are driving the initial breakthroughs.

Bringing innovations swiftly to market

It’s easy to see why China has a lot of success in bringing tech to market with speed and efficiency. It has a huge domestic market and a business climate that encourages the kind of willing-to-fail behaviour that is essential for a healthy start-up culture. Kai-Fu uses ride-sharing as an example of China’s approach to market-making, outlining the rapid exploration of a number of ride-share concepts from bicycles to concrete mixers which quickly – and, some would argue, inevitably – led to the creation of companies including successful unicorn, Mobike.

The so-called ‘fail fast’ approach in which prototypes are developed and adapted to suit commercial ideas – all the while accepting that the price of success will necessarily be a bunch of failures along the way – makes it simply more likely that successful businesses will ultimately emerge. So, while a particular technology – face-recognition, for instance – might be flagged as the basis for hundreds of applications, it only needs to hit the mark with one to become a billion-dollar solution. And, rather than being a hindrance to progress, the fierce competition that is part and parcel of the Chinese business ethos fuels the speed of development even further.

Leveraging China’s vast consumer base

In China, the early adoption of new technologies isn’t confined to a small percentage of savvy users, in fact the swift and widespread acceptance of the latest developments means that tech companies usually find a willing market for their ideas. This approach is evidenced by the population’s widespread transition to mobile payments over the last few years which is rapidly replacing other payment forms to become the dominant tool. 

Naturally, the size and scale of China’s domestic market makes it more cost-effective for tech providers to address. But it also offers a rich source of data that allows AI engineers to inform and improve their solutions. Whereas the US may be squeamish about the privacy issues that go hand in hand with data mining, China has no such compunction. If the big shifts in the practical application of AI can be attributed to having access to massive amounts of data, China already has the advantage by dint of the fact that it is – according to The Economist– ‘the Saudi Arabia of data’.

Banking on government support

China’s AI developers also benefit from a deep well of government support. This isn’t simply about taking a protectionist approach that subsidises Chinese operations at the expense of foreign competitors. It’s also about creating an environment that provides a fertile growing medium for business – from the cities and roads that are primed for tech upgrades, to the low-regulation policies that enable new and unproven tech to enjoy a frictionless launch without getting bogged down in bureaucracy. The government has also invested heavily in research at China’s universities, increasing funding each year as it prioritises science and tech advancement. 

Beijing continues to launch wave after wave of AI initiatives in a bid to boost an industry that is estimated to be worth north of $150bn over the next decade or so. China has committed more than $2bn to build an AI technology park in West Beijing that will house more than 400 companies and provide a platform for research and development. 

Meanwhile, China’s tech giants – including Baidu and Tencent – are investing heavily in AI; Alibaba recently announced plans to earmark $15bn to build international labs focused on quantum computing and AI. Time was when China’s tech engineers would have headed for Silicon Valley to pursue their careers, whereas now there are increasing incentives for them to stay at home and transform China’s own AI industry. It’s an exciting time for China’s techpreneurs and for MBA students and executives looking to learn from practices at the cutting edge of the AI industry.

What makes Silicon Valley different?

As Facebook comes under tough scrutiny lately and Mark Zuckerberg has to apologise to the world, Silicon Valley and technology companies are making the headlines again. The road to stardom is not smooth but it requires more checks and balances and ultimate accountability as the Silicon Valley behemoths clearly can influence users in surreptitious ways. 

Artificial intelligence is what many companies in the valley like Facebook, Google and Microsoft are chasing frantically. "AI is the brains of the future and data is the new oxygen", Stanford University professor Dr. Burton Lee .

So what makes Silicon Valley different and why is everyone racing to learn about innovation from them?

• They build and grow companies to a global level faster – and more efficiently – than anywhere else in the world
• They create more new jobs and industries – faster – than anywhere globally
• They look for and reward disruptive ideas, technologies, teams and intellectual property that can be scaled globally
• They do world class research and technology development
• They design, build and manufacture great technology products and services

Silicon Valley is where the world learns first many (but not all) new approaches to innovation!

Silicon Valley – Tech Unlimited

A slender, horseshoe-shaped slice of real estate in the southern San Francisco Bay Area, Silicon Valley is less a geographical location and more a state of mind. So-called because of its prominence in the evolution of global tech companies such as Apple, Facebook and Google, the area has become synonymous with technological innovation, inspiring the likes of design guru Steve Jobs and Tesla’s Elon Musk to change the course of history, while elevating Palo Alto’s Stanford University to its status as one of the world’s leading research institutions.

The climate of change

Rewind to the 1960s and Silicon Valley was more agricultural than urban, a place where fruit trees outnumbered tech businesses by quite a margin. As it became the go-to location for microchip developers like Intel, the intellectual and economic climate started to shift and the Valley began to attract wave upon wave of ambitious young entrepreneurs looking for a fresh way to do business.

This focus on innovation helped to create a thriving tech cluster that boosted the network of workers, suppliers and networks needed to support the rapid growth of this highly specialised sector and added considerable value and cachet to San Francisco as the preferred location for ambitious start-ups, as well as more established companies from further afield (Europe and China, for instance) looking to sprinkle a little Silicon Valley gold dust on their operations. Today, although some manufacturing remains, the Valley functions primarily as an ‘incubator’, a forum for hot-housing ideas that lead the world.

Disrupting the status quo

Silicon Valley continues to be the centre of tech-based innovation; the cutting-edge digital developments that enabled start-ups like Google and Amazon to rapidly grow into global brands are providing a new generation of companies with fresh opportunities to challenge the status quo. Far from slowing in scope and ambition, advancements in technology are causing ripples across formerly traditional businesses. A revolution in infrastructure – and in artificial intelligence (AI) – is opening up industries such as logistics, food and hospitality to completely new ways of operating.

So-called ‘disruptors’ like Airbnb and Uber have rocked the foundations of established operators by taking a radical approach to connecting customers with services – something that’s made possible only through technologies that enable a more fluid approach to traditional transactions. This notion of a ‘sharing economy’ doesn’t only allow big players to tap into new markets, it can also benefit businesses and individuals that wouldn’t otherwise be able to access funding. Tech company Kiva – headquartered in San Francisco - sources crowd-funded micro-loans that can change the lives of people in impoverished areas of the world.

A hub for entrepreneurs

The entrepreneurial model that’s gained traction in Silicon Valley has become a blueprint for businesses across the world. This agile approach enables companies to adapt their products and services to new markets and to anticipate changes rather than to react to developments as and when they occur. This process of continuous improvement designed to reduce the risk of stagnation is a start-up mentality that’s embraced by even the largest businesses as part of a drive to stay relevant.

Interestingly, many Silicon Valley companies share a belief in the value of establishing and nurturing an entrepreneurial culture that attracts like-minded employees and benefits the business and encourages disruption. Businesses that specialise in innovative funding opportunities are a product of this kind of entrepreneurial thinking. Early-stage venture capital fund Pear has helped to seed tech start-ups like Dropbox and Zoosk, while Silicon Valley Bank tailors financial services to innovators. Start-ups that need a place to work can get the support they need at co-working facility and corporate incubator RocketSpace.

Immerse yourself in the cool San Fran counter-culture

San Francisco is one of America’s most beguiling cities. Its liberal culture and remarkable bay setting makes it an unmissable destination. Victorian buildings sit comfortably amid striking contemporary architecture, while cable cars share the road with futuristic Teslas.

There’s lots to see and do in and around the city. The Golden Gate Bridge is San Francisco’s most striking landmark. You can walk or drive across it, but the best views of the bridge can be had from the genteel residential area known as Nob Hill. Fisherman’s Wharf offers all the charm of a historic waterfront setting – check out the shops and eateries at Pier 39. It’s also a great starting point for a sightseeing cruise.

Art lovers should head straight for the San Francisco Museum of Modern Art (SFMOMA) that reopened in 2016 following a programme of renovation, though the elegant Palace of Fine Arts is also worth a visit – if only to soak up the tranquillity of its lagoon setting.

Berlin – Europe’s burgeoning tech hub

Berlin is undergoing a quiet revolution. A city that was once scarred by a physical and political schism has cast off its grim cold-war legacy and is being transformed into a buzzing European capital by an avalanche of investment and the influx of talented tech-preneurs from across the world.

Earlier this year, a Savills study awarded the city its global top spot for ‘buzz and wellness’ – a metric that takes account of social, cultural and environmental factors such as entertainment and commuting times. 

Technology is in Berlin’s DNA

Berlin’s technology focus is nothing new. A hundred years ago, the city was something of a prototype Silicon Valley, dubbed ‘Elektropolis’ thanks to innovations pioneered by homegrown electronics manufacturers Siemens and AEG.

Flip the dial to 2017 and Berlin’s thirst for cutting-edge tech is now driving the advancement of the fastest-growing startup eco-system in the world, attracting impressive venture capital inflows and providing exciting investment opportunities for entrepreneurs.

Berlin’s success is due, in part, to its economic agility. Relatively low living costs, coupled with affordable office and studio spaces and a relatively bohemian culture has made it an attractive prospect for digital freelancers and progressive startups everywhere. The explosion of an ambitious, relatively young professional population has, in turn, created a vibrant community of artists and entrepreneurs that is sparking a new wave of innovation in Germany’s uber-cool capital.

Tech startups are leading the way but others are hot on their heels

It’s estimated that a startup business is being founded in Berlin every twenty minutes, with inward investment out-performing traditional business hubs, including London. This traffic is being given additional impetus by Brexit, as foreign investors look for fresh and fertile business locations on the European mainland.

International tech giants like Google and Facebook are at the vanguard of investment; Google already funds the Factory Berlin tech hub and is set to open a campus in Kreuzberg later this year. Locally grown companies like incubator Rocket Internet, music streaming service SoundCloud, food delivery firm Delivery Hero and Auto1, an online used car marketplace, are also making headlines with record levels of market capitalisation.

Berlin’s social and cultural highlights

A visit to Berlin is a must for anyone who’s interested in the anatomy of a successful startup but there’s plenty to enjoy away from the boardroom.

Berlin’s built environment speaks of its political history, as well as being informed by the input of modern architects such as Mies van der Rohe, Le Corbusier and Walter Gropius. No visit to the German capital is complete without a walk along what’s left of the Berlin Wall, more than twenty-seven years after the reunification of Germany.

A trip to the Holocaust Memorial, located just south of the Brandenburg gate, is also time well spent. The memorial pays tribute to the Jewish victims of the Holocaust; the five-acre site features 2,711 concrete ‘stelae’, arranged in a grid pattern on a sloping field in a poignant reminder of lives lost.

How to Make the Most of Your Next Innovation Tour

Whether you are an MBA joining your class on your next international trek or an entrepreneur looking for the optimal environment to start a business – innovation tours can be extremely valuable in providing insight and knowledge into the world’s business and innovation ecosystems.

Our innovation immersions will involve planned visits to a series of notables companies and academic lectures, pitch events, guided tours and conferences with panel discussions. The problem is, these innovation ecosystems are extremely complex and their structure are not easy to grasp. To get at their true essence, it is paramount to go beyond appearances and delve deep into these complex environments by constantly observing, questioning and listening.

Visible activities such as start-up incubators and angel investor meetings merely provide detail to the outer layer and more obvious aspects of the ecosystem. To gain vital insight deep into the core of these ecosystem and understand the real drivers of entrepreneurship, a focus on the subtle elements is needed.

For example, an innovation tour to South Korea would benefit greatly from a visit to a military camp to observe young South Koreans undergoing military exercises. With military service being mandatory in South Korea, our innovation programme will give precious insight to the culture and mindsets of the people there.

Entrepreneurs alone do not reflect the whole entrepreneurship ecosystem. Researchers, investors, non-profits and government officials are just a few of the actors that help make up the network within the ecosystem. Focusing on different actors will help you understand the different motives for innovation in the ecosystem. Look for the conflict and collaboration between these actors and revel in it, not only will it give you a broader view of the whole landscape but will also directly reveal their entrepreneurship culture.

Optimizing the value and knowledge you gain from your innovation immersions requires a degree of susceptibility and inquisitiveness from your part. Innovation tours are not a place for re-active learning – you must be pro-active. As Einstein once said: “the important thing is to not stop questioning. Curiosity has its own reason for existing”. So be curious and be engaged. The responsibility lies on to you have the desire to unearth information from all angles which will be crucial to your quest in understanding these complex entrepreneurship and innovation ecosystems.