???? Jakarta | Studio first look

January began with a 3 day visit to Jakarta, Indonesia to explore the startup and venture ecosystem first hand. What I found is a welcoming community and equal opportunity for both upside and pain depending on where you chose to invest or build. Indonesia doesn’t need dental software. It needs dentists first.

Moving from US to Singapore in August of 2023 has been both a fulfilling and eyeopening experience in no small part to the cultural richness and opportunities here and in the surrounding ASEAN countries: Indonesia, Malaysia, Vietnam, and (by extension) India to name a few.

Over the coming months, I plan to explore more of the region and share observations and learning along the way. With only limited time on the ground in each of these areas, I consider these thoughts to be a perpetual work-in-progress. So…chime in if you have insight on the region, agree, disagree, or have a better way of framing these early musings!

Indonesia doesn’t need dental software. It needs dentists first. Having spent the last 12 years building vertical software companies in the US market ( RevenueWell and Club Automation ), naturally my mind first went to explore software opportunities in one of the world’s largest and fastest growing consumer markets. I was wrong.

In Indonesia:

?? The market is highly fragmented and logistically challenging.

• While 70% of the population lives on 2 islands (Java, Sumatra), the country has 17,000 islands. Even still, movement on and within the islands and cities is made difficult by narrow roads and extreme congestion. Core transportation infrastructure is receiving attention and resourcing, but does not have a quick path to improve here.
• GDP per capita and disposable incomes are low and highly asymmetric. Per capita GDP in Jakarta sits at $19K vs $4.5K all of Indonesia. This gives the average Indonesian < $50 / month in disposable income. That said, the middle class is continuing to emerge.

??Consumer Incentives dominated customer acquisition for B2C businesses.

• Increased interest in the region ~10 years ago funded new companies which acquired customers at significant incentive spend only to find their user economics completely up-side-down. Now money is drying up and, I suspect, will force many of these companies to shutter. Even with dominant players like Lazada, Grab, and others, even at market-leading scale the unit economics continue to prove challenging.

?? In-person and relationship motions are essential for both B2C and B2B businesses.

• Relationships are crucial in both social and business contexts in Indonesia. While this is true for most of the world, this is particularly pronounced in Indonesia. Getting to scale and having broad reach in Indonesia without partners is a difficult road.

?? A handful of family-owned conglomerates dominate major market segments and engage in coopetition.

• To name a few: Hartono, Widjaja, Salim, Raja Garuda Mas, and Astra families run some of Indonesia’s largest companies in Tobacco, Agriculture, Telecommunications, Electronics, Chemical, Real Estate, Energy, and many other industries.
• It is wise to seek ways to partner (deeply) with these established players when possible as both an inoculation to risk and accelerant to growth and access. Many of the things that may seem impossible or require a lengthy process (e.g. licenses and approvals) when attempted directly, rapidly become possible with the right partners.
• Informal back-channeling between these groups when evaluating ideas (especially ones that can be disruptive to status quo) is not uncommon and helps maintain a sense of consistency and harmony between them.

Areas of opportunity:

On one hand, opportunities to improve conditions, technology, outcomes, and access seemed endless in Indonesia. On the other, processing through “what would have to be true” as underlying conditions (e.g. being able to get from point A to B reliably and quickly, skilled labor, available consumer and business credit, disposable income, etc) revealed that conditions aren’t there (yet) for many of what, at first glance, looks like low hanging fruit.

Thematically, areas of opportunity appeared to be in:

• Creating reliable / resilient supply. Indonesian market has an abundance of areas where individually-unreliable supply and service points could be aggregated into comprehensive and reliable distribution or service networks.
• Goods & Services for middle class. While still in early stages, the emerging middle and upper-middle class is gaining awareness and is hungry for quality products and services that are often not yet unavailable locally.
• Retail and diagnostic healthcare. While the country has a national healthcare system (BPJS Kesehatan), both access, speed and quality of experience creates significant opportunity to up-level experience in primary, diagnostic, and retail healthcare segments. Awareness around preventive (vs reactive) care is rising.

Notably, topics of ESG, EV transition, and Agritech also receive a lot of attention.

Now, saying “Indonesia doesn’t need dental software. It needs dentists first.” is certainly tongue in cheek. I do not mean that software doesn’t have a place in Indonesia. I WOULD approach pure-play software ideas for this market with a skeptical eye. On the other hand, having a software or technology enabling layers to essential products and services that are consumed and monetized in ways other than SaaS or software licensing could be source of significant competitive advantage.

How this all came together

If you made it to the end, you should know that I benefited tremendously from the generosity and support of a few wonderful folks during my short and packed trip. Giacomo Ficari , you are a ?? rock star ?? - thank you for the unending support and connections you helped make before the wheels touched down.

And a huge thank you to the folks that were kind, open, and generous with their time and perspective during my short time on the ground: William Ongseputra , Carlson Lau , Arya Setiadharma , Mario Gaw , Ziv Ragowsky , Halim Perdana , Andrew Wangsanata , Karina Sulistyo , Dave Richards , William Tunggaldjaja , Peter Chen , Rishabh Singhi , Marshall Silver , Alfatih Timur , Fandy Cendrajaya , Mario Suntanu