JAKARTA, INDONESIA (27 June 2023) — Development-oriented startups in Indonesia would benefit from improvements in the ecosystem to realize their potential and contribute to the country’s development, according to a new study by the Asian Development Bank (ADB) and The SMERU Research Institute.

While fintech and e-commerce dominate the digital ecosystem in Indonesia, startups focused on such areas as edtech, healthtech, agritech, and greentech are emerging more slowly, according to Indonesia’s Technology Startups: Voices From the Ecosystem, released today. Innovations by these startups can yield high development impacts such as improved health and well-being, employment, and climate solutions. However, they are often seen as risky by investors and traditional financial institutions.

According to the study, three areas can be focused on to improve Indonesia’s startup ecosystem: the quality of incubators and accelerators, financial access for early-stage startups, and talent development. Incubators and accelerators could benefit from improved staffing, especially employees with more business knowledge, and mentors with sector expertise and experience. Early-stage startups are finding it difficult to convince equity investors to provide funding, highlighting the urgency to find and develop alternative sources for capital and support. Finding good talent has also been a challenge because of short supply and competition from large companies in hiring. This is on top of the need for better geographic distribution of support.

“Key players and programs are concentrated in Java—particularly in Jakarta—and in Bali, while other areas are underserviced,” said The SMERU Research Institute Senior Researcher and lead author of the report Palmira Permata Bachtiar. “It can be useful to move away from thinking of one national ecosystem and instead consider multiple city and local ecosystems that service nearby startups.” 

The study team conducted interviews to obtain a diversity of perspectives. “The researchers talked to officials of line ministries, managers of incubators, and founders of startups, as well as financiers and others,” said ADB Principal Economist Paul Vandenberg, one of the report’s authors. “This effort generated insights that we would not have obtained otherwise.” 

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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