May 31, 2023
JAKARTA – Most artificial intelligence (AI) development is happening elsewhere for now, but investors in Indonesia and abroad are ready to pounce on the use cases the cutting-edge technology promises to unlock in Southeast Asia’s largest economy.
The country’s macroeconomic trends coupled with a relatively young and increasingly tech-savvy population are seen as creating endless opportunities for homegrown start-ups to adopt as well as advance AI.
The use of AI is growing each day, and, according to a study conducted by United States based-management consulting firm Kearney, AI could contribute US$1 trillion to the ASEAN economy by 2030.
Local and regional venture capital firms (VCs) interviewed by The Jakarta Post are enthusiastic about AI supercharging business activity in Indonesia.
“With the right business model and products, [AI] solutions definitely can be good investment opportunities,” said Edward Ismawan Chamdani, managing partner in VC outfits Gayo Capital and Ideosource. “There will definitely be money coming in from AI Projects.”
He added that, while the world’s largest tech companies had been created during downturns, as new problems and inefficiencies became more apparent, “investors will always see the potential market size and whether the pie is big enough to support the growth story.”
Livinglab Ventures vice president of investment Edmund Carulli said it “makes sense to invest and try out new technology such as AI in Indonesia. The upside will still be far above the risk of failing.”
Openspace vice president Tania Lestari concurred: “AI has been one of the key themes we identified as a space with huge growth potential in the next few years.”
Openspace has invested in Datature, a Singapore-based no-code end-to-end machine learning operations (MLOps) platform, which it believes addresses a big pain point of scarce and expensive AI talent at smaller enterprises or traditional enterprises new to AI development.
Edmund explained that venture investment played an important role in pushing AI innovation: “More investment in this area means accelerated growth and adoption will happen sooner than later.”
Monk’s Hill Ventures partner Susli Lie shared a similar view: “In the case of AI or any other innovative early technology, VC potentially plays a critical role in seeding innovation that other kinds of capital may not be willing to do at this stage of the evolution.”
Monk’s Hill has invested in several AI-enabled start-ups, namely ELSA, an AI-assisted language learning platform and Bot MD, an AI assistant for doctors.
While VCs by and large believe in the technological benefits of AI, many also point to risks, as widespread potential use cases do not automatically make for viable business cases. The firms that spoke to the Post noted that AI was still in its nascent stages, making definitive judgment calls on the path to profitability premature at this point.
“I think whenever you have a new technology that creates a lot of excitement, you’re always going to kind of have these questions,” Susli told the Post on Friday, adding that technology was “neither profitable nor unprofitable. It depends on how you use it.”
Similarly, Edmund cautioned that “we are in the very early phase of the AI revolution.”
“Remember the Web3 and Metaverse craze from a couple of years ago? We found out not so long after that the technology is still years away from its mainstream adoption. The difference is AI is touching real sectors and early iteration shows that AI utilization improves existing processes,” he continued.
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While AI has reinvigorated the VC space after the recent downturn, firms are keen to appear prudent in conducting due diligence and selective in identifying worthy start-ups, rather than falling back into the funding frenzy seen some years ago.
Rexi Christopher, venture partner at Init6, noted that, “not only AI tech companies are the ones who have good odds of being funded by VC this year. I firmly believe that this year we’ll see many new interesting investments across sectors and verticals.”
Even if the market situation was bad, “there will be upsides for VC firms as exit expectation and valuation are being adjusted by the market,” said Vertex Ventures director Elise Tan.
“Investors who have the capital and bandwidth to take on new deals now will find great opportunities in these uncertainties,” she continued, adding however that they had to go “beyond just driving capital toward a particular technology.”
She argued that this was where long-term partnerships come into play. “We believe in co-creating a company together with the founding team. We understand that the road from being an early-stage founder to being a large company solving millions of problems takes time.”