September 2, 2024
JAKARTA – Indonesian unicorns, once thriving start-ups valued at over US$1 billion, seem to have lost their direction over the past few years with funding becoming increasingly difficult to find, while some have seen their market capitalization plummet years after going public.
Follow-up funding for tech companies has become less and less frequent, for late-stage or early-stage companies, with additional venture rounds for existing unicorns taking place at lower valuations.
Edward Ismawan Chamdani, treasurer of the Venture Capital and Start-up Indonesia Association (Amvesindo) told The Jakarta Post on Aug. 19 that this was a result of the burst of the valuation bubble that formed before mid-2022 when there was “too much capital chasing too few winners”.
Back then, the market trusted heavily on this metric to gauge rising start-ups, but now many companies found themselves under intense pressure to justify their inflated valuations after the trend passed.
“For some others, this led to down-rounds, where additional funding was raised at lower valuations. Others, with less capital and shorter runways, struggled to secure follow-on funding, forcing them to either slash spending, merge or close down,” he said.
Funding for start-ups declined to just US$400 million from 100 deals in the first half of last year according to the annual e-Conomy Southeast Asia report published on Nov. 1, 2023, by tech giant Google, Singapore-based Temasek and the United States-based research firm Bain & Company. Previously, it was $3.3 billion from 302 deals in the same period of the previous year.
Venture builder Ecoxyztem CEO Jonathan Davy said on Aug. 20 that mergers and acquisitions (M&A) remains unproven with few local success stories.
This, in turn, had made it more difficult for start-ups to plan for exit strategies due to the lack of a clear model for successful ones.
The lack of follow-up funding and larger ticket sizes is pushing some early-stage start-ups to shut down amid a lack of clear direction as many start-ups now face a rapid pivot toward profitability.
“We even see early generation Indonesian unicorns that went public seeing their valuations plummet, as the market deemed them overvalued,” he highlighted.
GoTo, formed in 2021 through the merger of unicorns ride-hailing firm Gojek and e-commerce platform Tokopedia, once represented the largest corporate merger in Indonesian history.
Gojek became the country’s first unicorn in 2016 and reached decacorn status by 2019, joining the ranks of tech companies with a valuation of more than $10 billion.
At the time of its initial public offering (IPO), its valuation was projected at over Rp 400 trillion ($28 billion with exchange rate pegged in 2022), but that had steadily declined to around Rp 57 trillion as of Aug. 23, which technically stripped its decacorn status.
Last year, GoTo sold a 75 percent stake in Tokopedia to Chinese tech giant ByteDance’s video-sharing platform arm TikTok for $1.8 billion.
Meanwhile, Bukalapak was estimated to be valued $6 billion in 2021 when it became Indonesia’s first unicorn IPO. Now its market cap is squeezed to just over Rp 12 trillion as of Aug. 23, which using today’s exchange rate is below the threshold to become a unicorn.
The exception is PT Global Digital Niaga (Blibli), which initially boasted a valuation of $3.4 billion at the time of its IPO in 2022. Its market cap has instead increased to Rp 56 trillion as of Aug. 23.
Capital Asset Management investment analyst Martin Aditya told the Post on Aug. 21 that in the case of GoTo, investors had become wary over its low stock price and exit of original shareholders and founders despite the company having reported improved fundamentals the first half of this year.
“They should focus on the financial services unit,” he said. “It’s difficult to rely on their on-demand services and e-commerce arms.”
According to CB Insights, six new homegrown unicorns have joined the club between 2021 and 2022 as of this August, with four of them operating in the financial services sector.
In total, Indonesia may have over a dozen unicorns, if including former ones. Meanwhile, the country is estimated to have over 10,000 start-ups this year, but only around 646 of them have been funded, according to market research firm Tracxn’s report for Indonesia in the first half of this year.
Kopital Kenangan cofounder Fandy Chandrajaya told the Post on Aug. 21 that he remained bullish for the publicly listed tech firm, viewing it as a key example of Indonesia’s ability to foster multibillion-dollar tech companies.
“At the end of the day, [GoTo] is still a Rp 60-70 trillion company. It’s not a decacorn now, but it will go back to being one eventually,” said Fandy, emphasizing that the local tech industry was still in its maturation phase.
The recent market correction, while intense, was deemed healthy and ultimately beneficial for the industry, Fandy opined, especially with second-time funders now entering the space.
He acknowledged the limited exit opportunities for start-ups and lower exit valuations could scare businesses, but he emphasized, “The numbers never lie. A good company is a good company in any market.”