Indonesian Startup Valuations: Dream and Reality

An article written by my friend, William, about reality check on Indonesian startups catches my attention. Basically, the article complaints the hype in Indonesia in which startup ecosystem in Indonesia is not as good as what people talk. William said that some acquisitions and fundings in local technology startup company should not be responded with such hyped excitement.

Sure, there are some startups being run seriously although not interesting enough for investors. Every startup deal in Indonesia, whether it’s funding/investment or acquisition not once mentioned the company’s valuation. Because there is no official value announced, no benchmark can be set for valuing technology companies in Indonesia.

It becomes an obstacle. Moreover, if Indonesian entrepreneurs always take Sillicon Valley as their benchmark in which startup valuation can reach tens millions dollars only in few months after launched. If it is converted to rupiah, the price doesn’t make any sense, especially for 8-months-company having valued over 5 million dollar (40+ billion rupiah). It may be a normal thing in Sillicon Valley, but not in Indonesia.

According to my discussion with many startups and investors, dream valuation should be eradicated because of two reasons: It is not good for entrepreneurs to drown in their dreams. The second reason is that it gives bad effect for economy in a long time.

When valuing a company, there are crucial considerations such as asset you owned, monthly expenditure, and the most important thing is the revenue projection. Those all should be made as accurate as possible and do not mark it up just for getting the higher valuation, that’s idiosyncracy. However, these are the target for your company and you need to reach it. If the value is too high, you would have to work so hard to reach it.

It’s not a dream after all.

Therefore, if you decided to get investment with million dollars valuation, you need to think twice whether your company value is really million dollars. There are some proofs that most of startups collapse not because the lack of money but they have failed to manage it properly.

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