Indonesia — an archipelago of opportunities for Russian entrepreneurs

We meet with founders a lot and discuss how to think globally and move strategically. The answer is simple - internationally. It is fair that the competition will be tougher - well, no one promised it would be easy!

Hello, Oksana Pogodaeva is on the line, managing partner of the HR&ED-tech investment fund. A new reality has arrived for the venture industry. The main thing is to accept it and see it as a challenge. How to follow the new path of a venture hero if you decide to leave the country, we will analyze in a series of live broadcasts on our Telegram channel. Each relocation has its own brave pioneers.

The first stop is Indonesia, a popular country for vacation, downshifting, and wintering in Bali. It is rarely chosen for career development and relocation. And in vain! Why, we talked to the guest of our broadcast.

Vlad Ayukaev,
CEO of the venture studio PVG, which has been operating in Jakarta since 2020 and focuses on local fintech

Indonesia: myths and facts

Myth: Indonesia is far away

Indonesia is indeed located on the edge of the map, but only for the Western-centric world, where the main financial centers are New York and London. We must understand that in the 21st century, the center of the world is gradually shifting to the east. And traditional financial centers are now losing their primacy. Hong Kong, Singapore, Seoul, Bangkok, Sydney and Taipei successfully compete with them. Relative to these centers, Jakarta is in the very epicenter.

Fact: Indonesia is Muslim country

Indonesia is indeed a fairly religious Muslim country. However, Islam here is different, not like in the countries of the Persian Gulf, Maghreb or Pakistan. Indonesia is a secular state, where the law enshrines the right to freely practice all monotheistic religions (including Hinduism). The establishment includes representatives of different faiths, and the Indonesian archipelago also has islands with a Christian majority. Do not be afraid that Indonesia is a Muslim country. The local Muslim community respects other cultures and is very secular in its own way: there is no obvious gender segregation, alcohol is available in restaurants, Christmas is celebrated, and women and men dress casually.

At the same time, Indonesia has its own interesting niches for business related to Islam — Sharia banking, hawala, halal products, religious clothing, etc.

Myth: Indonesia is dangerous because there are no police and laws

Indonesia is a safe country to live and do business in. The chances of running into aggressive behavior or outright crime are lower than in the US, France or Spain. I have not had any trouble on the street in the last two years. Typical local problems are related to petty fraud, scams and extortion.

Legal institutions are still developing here, but this does not mean that the country has no laws. On the contrary, there are laws for everything. However, they are not always implemented or interpreted adequately, and are often crude or contradictory. Plus, the country has a high level of tolerance for corruption, so you need to be prepared to firmly defend your rights or look for a way to solve the problem in a “traditional” way. method, through nepotism.

Why is Indonesia the next Asian tiger?

A “tiger” is a country in Asia that has demonstrated outstanding economic growth in a relatively short period of time.

At various times, Taiwan, Singapore, Korea, and China have been Asian tigers.

Firstly, it is a fairly rapidly developing region with a high population density. Indonesia is home to more than 270 million people, and the country ranks 4th in the world in this indicator. Its population is growing by 1% per year. This is approximately 1.5-2 million new customers! Indonesia is also a very young country, where most of the citizens are of economically active age (Note: the average age in Russia is 39 years, in Indonesia it is 29 years).

Secondly, there is cheap labor. The country is actively industrializing, building new infrastructure. These factors provide a strong multiplier for economic growth. Over the past 50 years, Indonesia has been growing by an average of 5% year on year. In addition, the middle class is rapidly gaining strength in Indonesia; according to World Bank forecasts, its number will double by 2029 and will amount to about 100 million.

Thirdly, there is a financial center nearby, from which one can take an example: where one can store intellectual property, register transactions, open head offices of companies. For Indonesia, this is, of course, Singapore.

An important factor is cultural and historical. Indonesia has always been a capitalist country. Here, people think about entrepreneurship from school. There are no special social guarantees in the country, so citizens are used to relying on themselves and their families. There are 57 million (this is a huge number) small entrepreneurs in Indonesia. This means that in every family there is an entrepreneur, an analogue of a Russian individual entrepreneur or self-employed person.

Features of the Indonesian business culture

In Indonesia, time is NOT money. The concept of time here is greatly distorted compared to European culture. If you have not worked in the countries of Southeast Asia or the Middle East before, then at first it will be difficult for you to do business. Locals may be late or not show up for a meeting. And this is normal. Employees can easily say: "we can't handle the task (which takes a day) in a week, let's do it in a month." Here you need to set the terms x3 — x5 more than we are used to. Unfortunately, you just have to come to terms with this, otherwise the resistance of the local environment will be off the charts.

In Indonesia IT IS NOT important WHAT you know, but WHO you know. You can have the coolest skills, technologies, have top clients in your piggy bank, but this will not help you much. To conclude a contract with someone, you need to personally know this person, and he must trust you. In Indonesia, you need a wide network and a good reputation in the eyes of the opponent. Locals prefer to deal with friends, relatives, so you will have to make friends with them too.

Indonesian venture and high technology

The local VC market consists of banking conglomerates, family offices, Singaporean investors and global funds. Capital is here, and a variety of investors are closely watching this ecosystem. Now, by the feel of it, the local valuation is higher than the Russian one. In seed rounds they raise $5-7 million, in A rounds — $20-30 million. In Russia, they make an exit for such money.

In Indonesia, there are technology companies that effectively solve the problems of their country. Strong local niches — logistics (the archipelago consists of 18 thousand islands), finance, education, marketplaces. There is really a lot of fintech here, about 400 companies that are fighting for underbanked clients. Indonesia is actively rethinking payments and moving towards cashless, although it is at the bottom of the ratings for this parameter.

The indicator of the success of the local market is simple — over the past 10 years, Indonesia has grown its own unicorns. For example, GoTo (an ecosystem similar to Yandex, minus the search engine), which just went public, Traveloka (a local travel super app similar to Aviasales), JTE (a combo of Business Lines and Dostavista on steroids). All of these companies are worth well over $1 billion. In my opinion, the total volume of the Indonesian venture market is approaching $50-60 billion. This is a strong foundation for the future, because the exits of these companies in the coming years will provide an influx of new investments.

Unfortunately, the main suffering factor remains personnel. With techies (and with a liberal arts education) in this market, things are very bad. The density of qualified specialists is several times lower than in Russia. It is very important to understand this point and include it in your plans to conquer the Indonesian market.

In which sectors do Russian startups have a technological advantage?

First, in fintech. In general, Russian fintech is the coolest in the world! That's why we chose this segment for ourselves. Russia has a strong school of techies and fintech managers, and Indonesia has great potential. There is an opportunity to make an impact. Now the studio's portfolio includes a payment system (Klikoo), a mobile online cash register (Posy), and a crypto project is getting ready to launch. The guys are building services for Indonesian MSMEs (small and medium businesses) and see excellent growth in clients and metrics.

Secondly, EdTech, because things are still tough here, but there is a clear demand from the market for digital economy skills.

If you look at a more science-intensive and capital-intensive segment, then this is Sustainability. Indonesia is a continuous construction site, and in some places a garbage dump. A country where there is huge deforestation and pollution of the world's oceans. The electricity here is very "dirty" and the grid is inefficient. If you are into Green Energy and Sustainability, then you are definitely here.

Marine technology also has a future in Indonesia, as it is the largest archipelago state. Indirectly, TravelTech is also suitable.

MedTech is also shooting in Indonesia, because there are problems with affordable medicine, especially outside the main islands of Java and Bali.

If you are in a competitive niche of the Russian-speaking market, then Indonesia is an archipelago of opportunities for you, because there is a place in many markets. For example, Clockster, a time tracking system (a portfolio company of the HR&ED-tech fund), shows a product head and shoulders above local competitors.

HR-tech and EdTech in Indonesia

HR-tech is a relatively empty niche, so you can easily enter it. The country has many problems with this:

• Systemic personnel shortage, especially among techies;
• Fraud with diplomas and work experience;
• Lack of local resume databases, job sites, ATS;
• Redundant institute of credibility and recommendations;
• Inability to check a person/contractors in databases.

The situation with EdTech is even worse (or better, if you have a solution that you want to launch in this market). Of course, Indonesia has access to global projects, for example, Coursera. However, in many ways, high-quality education in the country depends on private teachers, schools and foreign graduates. As you understand, studying abroad is not available to many, so tutors in this country are a mass phenomenon due to the cheapness of labor. The main Indonesian EdTech startup is RuangGuru. Essentially, an analogue of the Russian SkyEng, but with a wider audience: schoolchildren who study various subjects from music to mathematics. The company has achieved some success and is soonicorn. However, the share of penetration of such products on the market is still relatively small. Digital transformation of education and creation of corresponding content within the country in the local language is just beginning to gain momentum.

Most of the talk about the development of local EdTech technologies rests on personnel. Personally, I witnessed a startup, an analogue of Yandex-practicum, which failed to cope with the task of writing a platform. As a result, the team went to open offline schools, invite tutor-programmers and teach adults "the old-fashioned way". As far as I know, they are still working successfully.

Successes of Russian-speaking entrepreneurs

You will be surprised, but in Indonesia there are Russian-speaking teams that have achieved success. You can take advantage of their experience.

One of the largest ride-hailing companies, Taxi Maxim, has been operating in Indonesia for several years. By the way, the company's roots are in Kurgan. According to my estimates, they have already captured 10-15% of the market here — this is a big victory. InDriver is also catching up and is becoming noticeable on the streets of Indonesia.

The financial holding company Finstar is developing the local credit market — they issue POS/PDL products. Plus, there are a dozen less technologically advanced companies that are engaged in import/export and work with government orders.

Pintar Ventura Group has been operating in Jakarta since 2020. During this time, we have grown a team of 70 people and are constantly expanding, looking at new hypotheses, conducting experiments with the transfer of experience from other countries, helping Russian-speaking founders launch in Indonesia. In 2021, the studio released two financial products for local MSMEs and reached a total turnover of over $1 million per month.

How to properly prepare for coming to Indonesia for the purpose of developing a business

I would start preparing for the move by adapting the Sales deck and Pitch deck for Indonesian realities, possibly in English. After that, I would spend about a month building connections on LinkedIn and Telegram with the local expat community and global-minded Indonesians.

It is easy to come to Indonesia. The most important thing that will be required at the first stage is the legality of your stay in the country. A business visa is issued to everyone and costs understandable money. You can start getting to know Indonesia from Bali, there is a large Russian community where you can find partners and like-minded people.

You can live on a business visa for about 6 months. Later, you will be able to change your business visa to a work visa for your already registered company.

You can open a company (PT, an analogue of LLC) with an Indonesian citizen, or you can do it yourself. In order for the company to be fully foreign-owned (PT PMA), that is, owned by a non-citizen, you will have to overpay a lot in authorized capital (about $690 thousand). Opening a legal entity in Indonesia is not a corruption scheme; companies are opened for everyone. The risks lie only in unscrupulous lawyers or nominees. Choose consultants carefully, do not work with unverified firms.

It is almost impossible to enter the market without local partners, so be patient. Arm yourself with LinkedIn. Look for professionals who relate to your niche. For example, these could be founders of Indonesian startups. You can always offer them to invest their time and connections in your business.

It is a little more difficult to find comfortable housing and arrange your life than it may seem. You need to spend time on this, because there are no services familiar to a Russian person. An important nuance is that Indonesia is not a cheap country. Expenses in Jakarta are now higher than in Moscow, they used to be 1:1. Be prepared for high prices for food, alcohol, housing, transportation and quality services.

It is better to live between Bali and Jakarta — the habitat of expats and Indonesian entrepreneurs.

Is relocation necessary for founders?

If you have a built model, tested in Southeast Asia, and you know how to process, then it is enough to find a business partner here and share the burden with him. Every Indonesian has 50 thousand acquaintances — this is the key to solving any problems in this country. Your adventures won't end there, but you'll be able to live somewhere else, only occasionally flying to Indonesia.

However, if you want to be a superstar in the Indonesian market and earn significant amounts here — then, of course, you need to move. No one will develop your business for you!