Some of China’s biggest internet firms left no doubt about their intention to be part of Southeast Asia’s slowly awakening digital economy. In the past months, companies like Didi Chuxing, Alibaba, Tencent, and JD have poured billions of dollars into funding and acquiring businesses in the region, especially in Indonesia.
Apart from these strategic investors, Chinese VC firms’ appetite for the Indonesian tech sector is also growing.
“Indonesia is lucky to have such a large market,” says Adrian Li, managing partner of Convergence Ventures, an Indonesia-based venture capital firm. One of the fund’s partners is China’s search engine Baidu.
Indonesia’s expanding population of 260 million people is seen as a safe bet by some Chinese investors because of the increased purchasing power that comes with it. And many feel like they can apply what they’ve learned at home to bring businesses to success here.
“I feel here like I felt 20 years ago in China – there are so many opportunities,” said Tony Qu, managing partner at ATM Capital while onstage at Tech in Asia Jakarta 2017. “If we have enough patience, the future will be great. The only way to lose is if you have no patience.”
A veteran Chinese investor, he said he’s relocating to Indonesia by the end of the year to focus his fund’s investments in the archipelago.
VC firms aren’t just backing local startups financially, but they also want to fix one of Indonesia’s key problems: the lack of engineering talent.
Part of Convergence Venture’s deal with Baidu involves bringing technical resources and know-how from China to its portfolio companies, which in turn will boost their chances of success.
ATM Capital’s Tony Qu also pointed out that bringing talent from China will help the industry grow.
No such thing as too much capital
Li countered concerns that too much capital from overseas might squeeze out local startups with less access to funding.
“In the early stage of a #startup ecosystem, the problem is access to capital. In China, Silicon Valley has led all the early investments. China is to Indonesia what Silicon Valley was to China over a decade ago,” he said.
Ian Goh of 01VC, another VC firm that bridges Chinese capital and Indonesian startup opportunities, said that now is the phase in which Indonesia needs to build its “pipes” – the fundamental infrastructure like cashless payments, credit scoring systems, and logistics. “In 2008, a lot of that was still missing in China. When the pipes are done, many more startups will be riding on this,” he said.
It’s unfair, however, to say that massive companies are coming into the country and “eating everyone’s lunch,” Goh added.
“In Indonesia, there’s room for the local players to become dominant. Look at Traveloka. In the end, there will be local giants and local heroes.”
For local companies to be competitive, Qu suggested that they use their home field advantage by understanding the user better.
“Don’t just copy what’s hot in China. You have to know what the users really need. In some cases, the infrastructure is not ready. Do those things for which the infrastructure is ready. Maybe what’s ‘old’ in China is going to work here.”
Li added that local players can succeed by building loyalty with their customers and offering highly localized solutions and local logistics.
This is part of the coverage of Tech in Asia Jakarta 2017, our conference taking place November 1 and 2.