MORE FROM KrASIA

Year-end review: Indonesia saw USD 2.9 billion in investment, a new unicorn, CEOs’ resignations, and big merger rumors

2019 has been a year to remember for Indonesia’s tech community.

Photo by Azka Rayhansyah on Unsplash

2019 has certainly been a very memorable year for Indonesia, following many important milestones in the country’s tech industry. In April, Indonesia held its general elections, where President Joko Widodo was re-elected for his second and final term. Widodo’s government has been keen to support and advance Indonesia’s digital community, also with the appointment of tech entrepreneurs as government officials.

Nadiem Makariem, founder and former CEO of Gojek, was appointed as minister of education and culture, while Belva Devara, co-founder and CEO of edtech startup Ruangguru, and Andi Taufan, founder and CEO of fintech startup Amartha, were named as the president’s special staffers, along with five other young professionals from various fields.

KrASIA rounded up a review of important highlights that took place in Indonesia in the past 12 months, a year to remember.

Indonesia saw positive investment flows in 2019

As the biggest market in Southeast Asia, Indonesia is still a favorite destination for investors from inside and outside the region. According to a report by Daily Social, there were at least 110 funding transactions announced by Indonesian startups and/or investors per December 18, 2019. From 60 disclosed investments, total funding raised this year amounted to over USD 2.95 billion, considering the latest funding collected on December 26 by edtech startup Ruangguru, which raised USD 150 million.

The sectors that bagged the biggest number of transactions were the financial field, with 23 transactions, SaaS with nine transactions, and e-commerce and logistics sectors, which both secured eight funding transactions, respectively.

Southeast Asian super-app Gojek is reportedly on track to raise over USD 2 billion on its ongoing Series F round from existing investors including Tencent, JD.com, Google, and Cool Japan Fund. The ride-hailing giant expects to complete the funding, which would become the largest of the year, by January 2020.

Ruangguru recorded the second-largest funding in 2019, collecting USD 150 million, followed by digital credit card platform Kredivo that bagged USD 90 million in December. Other important fundraising activities in 2019 were recorded by healthtech startup Halodoc, which raised USD 65 million in March, while the e-commerce unicorn Bukalapak snagged USD 50 million funding back in January.

Local VC firms saw 14 exits this year. MDI Ventures led with three acquisition records and two IPOs, followed by East Ventures which saw three acquisitions, and Alpha JWC with two acquisitions. Among the startups that successfully exited this year were wedding marketplace Bridestory, which was acquired by Tokopedia, agritech startup Limakilo, which was snapped up by Warung Pintar, and classified marketplace Jualo, which was acquired by automotive online marketplace Carro.

Unicorns: from leadership changes, to IPO plans, to massive layoff and services deactivation

The biggest news in the Indonesian tech community was the resignation of Nadiem Makarim from his position as CEO of the country’s most valuable startup, Gojek. Makarim announced his resignation on October 21, as he was appointed as Indonesia’s minister of education and culture. Gojek’s co-founder Kevin Aluwi and former president Andre Soelistyo have since then taken the lead as co-CEOs of the firm. Makarim still has a stake in Gojek and serves as a passive investor without any authority over the company’s daily operations. In the hands of new leaders, Gojek is currently making progress towards profitability and is preparing for a dual stock market listing in the future.

Bukalapak also surprisingly announced the resignation of its co-founder and CEO, Achmad Zaky, in December. Zaky was succeeded by financier Rachmat Kaimuddin who now serves as the company’s CEO. Zaky remains on board as an advisor and tech startup mentor, and will also be the chairman of the soon-to-be established Achmad Zaky Foundation. The company said that this development is part of its strategy to realize its sustainable e-commerce business mission.

Bukalapak’s co-founder Achmad Zaky and current CEO Rachmat Kaimuddin. Photo courtesy of Bukalapak.

In September, the company also made headlines after it reportedly let go around 10% of its employees, in a “necessary move” for the company to become sustainable, the firm said. Shortly afterward, Bukalapak claimed that it had achieved a three-fold increase in gross profit in the first half of 2019.

Meanwhile, the biggest local e-commerce company, Tokopedia, started 2019 with the appointment of former finance minister and governor of Indonesian Central Bank, Agus Martowardojo, as president commissioner. Tokopedia made another headline when its CEO William Tanuwidjaja announced his intention to take the company public in a dual stock market listing in the next few years. In November, Tokopedia was reportedly in talks to raise USD 1.5 billion in a final private funding round before an initial public offering. The deal is projected to close in the first quarter of 2020.

The country’s travel unicorn Traveloka was reportedly in talks to raise USD 500 million, which could value the company at USD 4.5 billion. This speculation first surfaced in July but it has yet to materialize. The latest capital intake recorded in April 2019 was a USD 420 million private equity investment led by Singaporean sovereign wealth fund GIC. In November, Traveloka’s co-founder and CEO Ferry Unardi said in an interview with Bloomberg Video that the company is also considering going public in the next two or three years. Moreover, Traveloka made two investments; it led an investment in Singapore-based event tech platform PouchNation in June, and it took part in the USD 6 million Series A funding round of Vietnamese point-of-sale software provider KiotViet.

Speaking of investment, we found out that Gojek was preparing to acquire mobile POS startup Moka back in August. It was quite surprising news, considering that Moka is a fast-growing startup with a USD 40 million investment from prominent backers like East Ventures, Sequoia Capital, and Northstar Group. Although the two companies declined to comment on the speculation, it looks like we’ll see the merger soon, as Gojek will reportedly close the deal at the beginning of 2020. The projected value of the deal is over USD 120 million.

2019 has been a busy year for Gojek’s entire communication team. After its leadership change, the company has been constantly receiving media attention with new speculations almost every month. One of the biggest headlines was about Gojek’s reported intentions to spin out its financial arm, Go-Finance, into an independent entity called Digital Katalis, or Dkatalis for short, Tech in Asia reported in November.

This rumor was followed by the acquisition plan of Indonesian lender Bank Artos, by Jerry Ng, senior banker and director of Indonesian private lender BTPN, and Patrick Waluyo, co-founder of Northstar Group, which has backed Gojek since its early days. The acquisition was officially formalized on December 26, KrASIA reported, according to information disclosed by the Indonesian Stock Exchange.

Although Bank Artos denied any linkage or collaboration with Gojek through its public document, the acquisition boosts further speculations about the launch of Gojek’s financial services. Gojek’s archrival, Grab, is already one step ahead in this segment as it is currently working on a banking license in Singapore. With about 400 million unbanked individuals in Southeast Asia, digital financial services are becoming crucial for Gojek and Grab on their path to sustainability and profitability.

When profitability is at stake, it looks like any company would call for drastic measures to ensure that its business will start monetizing instead of burning money. Although Gojek did not call for layoffs as Bukalapak did, it decided to shut down the majority of its GoLife services just two weeks before the year-end due to sluggish business performance. The company decided to only keep two services in operation, GoClean, and GoMassage, which accounted for over 90% of orders in the GoLife app. Analysts said this is the right move for Gojek in order to reach profitability.

Screen capture from GoLife app regarding the termination of services.

OVO: a new kid on the unicorn block

Indonesia is home to most of Southeast Asia’s unicorns. In October, the then-IT minister Rudiantara announced that digital payment platform OVO officially became the country’s fifth unicorn. The statement was later confirmed by OVO’s CEO Jason Thompson on a panel during the Tech in Asia conference, just a day after Rudiantara’s big announcement.

OVO was founded in 2017 as a fintech subsidiary of Indonesia’s conglomerate Lippo Group. Similar to Gojek, OVO has also been a hit newsmaker this year.

OVO’s CEO Jason Thompson at the Tech in Asia conference.

While it is growing at a fast pace with various new financial services, OVO is rumored to merge with its competitor, Alibaba-backed e-wallet Dana. OVO and Dana are Indonesia’s second and third most popular mobile wallets, trailing behind Gojek’s GoPay, so a merger might give the two a better shot at challenging GoPay’s lead in Indonesia’s multi-billion dollar online payments market. The two companies have remained silent about this speculation, but analysts predict that we’ll see more consolidation among tech players in 2020, which might mean that there will be more developments following this OVO-Dana speculation.

Hitting a USD 1 billion valuation does not guarantee that a company will be sustainable and will make money in the future. At least that’s what Lippo Group’s founder Mocthar Riady thinks. During the 2019 Indonesian Digital Conference in Jakarta, the conglomerate said that Lippo has sold 70% of its stake due to OVO’s large spending. Local media cited that Lippo has been paying USD 50 million to OVO every month. Although OVO denied Riady’s statement and the loss figure, it seems that OVO agrees that a burning money strategy might cause trouble in the future. In an exclusive interview with KrASIA, Thompson said that the company will reduce cashback and promotions significantly next year as part of its roadmap of sustainability and profitability.

Technopreneurs play significant roles in the government

It is no secret that President Widodo is close to the millennials, but still, the appointment of Nadiem Makarim was a fresh, surprising twist from the government. While many are confident that Makarim will be able to bring breakthrough innovation in the education sector, some expressed doubts about if he could tackle the bureaucracy nightmare in this sector. Turns out, Makarim did not wait too long to surprise the public with his policies. This month, he announced a plan to terminate the Indonesia’s National Exam by 2021.

Nadiem Makarim with finance minister Sri Mulyani (left) and minister of foreign affairs Retno Marsudi (right). Photo courtesy of Indonesian cabinet secretariat.

The National Exam has long been a specter for Indonesian students, as years of study will be determined through three or four days of exam. As a replacement, the government introduced an Assessment of Minimum Competency and Survey of Character, which tests the ability of language (literacy), math (numeracy), and the strengthening of character education, according to the ministry’s website, which said that it hopes the move will encourage teachers and schools to improve the quality of education.

While many students have supported this decision, it also attracted controversy, especially from the same government opposition. However, this bold move proves that Makarim is not afraid to make major disruptions in the education sector, similar to what he did in the transportation field ten years ago with Gojek.

Beside Makarim, it is also expected that Belva Devara and Andi Taufan, who were were named as the president’s special staffers, will provide fresh and innovative ideas to support the country’s tech community.

We saw many changes in 2019. Change isn’t always easy and sometimes it can be hard to cope with, but it is sometimes necessary to help society grow and evolve, especially in the tech industry. 2020 already looks like another promising year for Indonesia’s startup and entrepreneur community.