The Next Silicon Valley

The tech industry here is well aware of the growing interest from investors and start-ups are emerging all over the country, particularly in the capital, Jakarta. SuitMedia is one such fledgling company. It started in 2009 and now has 17 staff members working for companies like Samsung. SuitMedia is now designing a new app for the iPad that they are hoping will be the next Angry Birds.

“We can’t tell you the idea, but let’s just say it’s targeted at kids and is educational,” said Fajrin Rasyid, a co-founder of SuitMedia.

“You can make a lot of money with a good app. Apple gives you 30 percent of what the app makes, and with millions of iPad and iPhone users, that can add up to a lot,” he said.

But for Indonesia to become the next Silicon Valley and compete with China and India, it will need to foster the same ecosystem the southern San Francisco Bay area developed in the ’50s: quality universities, an abundance of venture capital and an appetite for risk and innovation.

There are other hurdles as well.

Many start-ups have been hindered by a lack of options locally for online payment. Very few Indonesians have credit cards, particularly younger Indonesians who are more likely to purchase goods online, and PayPal services are only offered in U.S. dollars. A much-anticipated service similar to PayPal, created by doku.com, launched in mid-May.

The biggest risk is that the influx of venture capital could create a bubble like in 1999-2000, when speculative investment in anything ending with a dot-com caused a crash.

“Venture capitalists and angel investors are trying to keep valuations down. But from the start-ups’ side, it is quite the opposite,” Mamuaya said. “Crazy valuation is everywhere, with start-ups valuing themselves for millions of U.S. dollars without any proper business plan available.”

But Eto from East Ventures is not worried. There is enough of a market in Indonesia to justify the investment, he said, which remains far smaller than in other parts of the world.

“If you take Japan as an example, the GDP is 10 times that of Indonesia’s. The largest e-commerce site in Japan, Rakuten, is a public company with a market valuation of $12 billion. Based on that, the largest e-commerce site in Indonesia has the potential to become a $1 billion company.”

Mamuaya from DailySocial.com said Indonesia’s advantage is its spirit for innovation.

“The very definition of Silicon Valley is innovation. Indonesia has all the ingredients to be the next Silicon Valley, although it will take time,” Mamuaya said.

 

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