Incubator and VC’s Complaint on Indonesian Startups Readiness

For the past few months big groups are penetrating investment on tech startups in Indonesia, even companies from Japan, Singapore, Malaysia, China, and US  are slowly trying out Indonesian startups market. Most of them are financial company ready to invest Indonesian “sizzling” tech startups.

Unfortunately, some unprepared startups have disappointed the investors the moment they met. The startups are too infatuated with the term “Romanticism of Silicon Valley” – like Budi Putra said.

You have brilliant idea, find a co-founder, funded by investors, acquired by Google, and become ultra rich with outstanding reputation and perhaps a red Ferarri in the garage. And life is beautiful.

Sadly, in reality that’s not how it is. Although dreams can be good motivator, but investors’ dreams when they came to Indonesia were crushed shortly after they meet Indonesian startups.

The investors are complaining about many things on Indonesian startups. Weak concept, weak differentiation and innovation, lack of management readiness and legal aspect, up to high valuation and not calculated in financial and economical calculation.

A startup concept weakness is very subjective from each investor’s point of view. Sometimes a weak concept if executed by the right founder can evolved into something extraordinary. Take AirBnB for example. At first, many investors reject its idea because they think it is absurd. Look how it turns out now. On the contrary, a strong concept when managed by weak founder can turn to be a disaster for investors. Like Color who spent US$40 million for extravagant concept but failed to make their users happy.

And I don’t know why there are still a lot of startups claiming that they have a solution, when there’s no problems to be solved. Using taglines such as “the next Facebook” or “the next Twitter” without clear differentiation. Trust me, investors have had enough of those. Not solid concept like such are bound to give loss instead of revenue to investors, especially for relatively new in online business investors.

Management readiness and legal aspect are optional but it shows how serious founders in running their startups. Company legalization, financial report, business plan, they might be hassle but they will bring you extra points.

The third point really crushed investors’ spirit. High valuation without revenue, without profit, and even without business plan. That’s just an expensive dream. And most startup have difficulties in explaining the ridiculous valuation to investors, and risking losing investors’ faith on them.

Of course this doesn’t happen to every Indonesian startup. Many of them manage their startup with skill, knowledge, and passion. These startups bill be successful in long term future, not just following trend.

Tech startups in Indonesia are growing fast, but many unfocussed startups will cost us our reputation in the eyes of domestic or foreign investors, and if it keeps on happening it will cost us investment as well. On the other hand, if investors grant these senseless valuations investment, this can trigger bubble effect and economic ecosystem imbalance.

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