Problems when entering the Indonesian market and how to solve them

In the new reality, Russian startups aimed at international markets began to actively look at Southeast Asia — in particular, Indonesia. The share of the middle class is growing here, and GDP is slowly but steadily increasing.

However, there are factors that founders need to adapt to, or better yet — prepare before relocation. What difficulties can you encounter when entering the Indonesian market, and how to deal with them, said Kirill Solgalov, founder of the services marketplace in Indonesia Interaksi.me.

Two years ago, my team and I began testing the Southeast Asian market by launching an edtech project in the field of digital professions. The market was completely unknown, there was no expertise, network, tools or understanding of how to work on it, so the team spent a lot of money and time to figure out how to hire correctly, build processes in different departments, how to work with partnerships, fintech and with networking.

Only a year later we managed to cope with the task and ultimately sold courses worth $200 thousand. Now this project is closed due to unsuccessful fundraising. But the experience gained now helps me in the new Interaksi project to spend less time on building internal processes, networking and getting the first traction.

Mentality and population

Entrepreneurs who are accustomed to a fast pace of life and a busy work culture will find it difficult to adapt to Indonesia. There is a slow pace of life here, people with poor education — Only 6% of the population has higher education. Moreover, only 20% even have a high school diploma. And due to the climate zone and the large number of holidays, there are few motivated people who are really ready to work.

Cultural characteristics vary from island to island, and the principles of working with them. What is effective, for example, on the island of Java, where Jakarta is located, is not always suitable for another island.

Additional point — the entire main business network is located in Jakarta. Founders with serious intentions for the market and large projects need to aim there and count on 5 years of stable living in Jakarta.

At the same time — it is an uncomfortable city to live in: due to the level of pollution, problems with public transport and logistics in general. And you can only come to terms with this, as well as with the mentality of the population, and try to adapt the work of your business to the country.

Accepting payments

When we started the project in Indonesia, we wanted to open a company in Delaware and remotely, by connecting Stripe, launch the first traffic to Indonesia, receive the first payments, draw conclusions and then make a decision. However, it turned out that by default, cards issued by local Indonesian banks cannot be paid through Stripe, whose account is not opened in Indonesia.

To solve this problem, you need to register a legal entity in Indonesia, obtain an investor KITAS for the director of the company and open a bank account. Then you can connect payment systems, use local services for recruitment — all this is tied to an Indonesian legal entity. Or, at the start, you can use the services of companies that provide the opportunity to accept payments through them during tests and use recruitment platforms.

Hiring employees

One of the most complex and fundamental problems, partly arising from the first — mentality and cultural characteristics. The lack of motivated, qualified professionals makes hiring difficult. But there are solutions.

First, it’s worth finding local companies that train staff in the required competencies. For example, a good school for sales managers, product managers, and so on. And from there try to attract potential employees.

Secondly, you can hire one or two strong local employees into the company, who will bring other strong specialists to you. Indonesians have many micro-communities, so if they bring someone, they feel responsible and try to bring someone who will really perform their functions well.

And if you need to constantly hire a large number of people, you will need to create a full-fledged funnel. The most effective way that gave us results, — form a combination of strong Russian-speaking HR or recruiters and local recruiters subordinate to him.

Together they will draw up strict regulations, test tasks, assessment (competency assessment center), training programs with exams at the end. They also conduct specific checks for applicants related to the mentality of the population. For example, in Indonesian families, parents invest in the eldest child so that he can later provide for his family. Such employees — of the older children — are more likely to bring results because the whole family is betting on them.

Additional nuance: Indonesians have learned to sell their competencies well during interviews. But when they start working, it most often turns out that the declared competencies do not exist. To avoid this, we ourselves looked for managers of candidates for our vacancies in previous places, called, received all the necessary information on ability to work, consistency, and so on. And this was a good way to understand whether a person is lying during an interview.

Building workflows

We rebuilt the sales department three times because the efficiency of work processes, firstly, is affected by the recruitment problem already mentioned above and a lack of understanding of how to work with the local mentality. Secondly, the usual scheme for many founders, in which employees can make their own decisions and show creative initiative, does not work in Indonesia. This especially seems impossible in the sales department.

The best scheme — a strict regulated hierarchy, when there is control of every action, when every metric is digitized, it can be monitored. Internal regulations must be created and test weeks of training for each employee organized. Only this approach will yield results.

Employees can be taken from companies with a good training school, as mentioned above. Or you can focus on internal training: find motivated specialists and invest in them 1-2 months of team labor that will train these personnel. In the long run it is cheaper.

Partnership

This problem is especially relevant for b2b projects, but b2c and I have experienced it ourselves. A new company without a reputation will need partners — people who will help you make warm intros. Without this, building a business in Indonesia is extremely difficult. Therefore, you will have to invest time in building long-term relationships with locals — partners, founders, funds — through the network.

Look for expat communities — they are not very big, but there are enough of them. There are many different international communities and accelerators in Indonesia, including heg.ai, which has many people connected to the Indonesian market. Through them you can find different contacts along the chain. It is enough to reach out to 2-3 people, and they will already introduce you to others, and thus contact is established with a huge number of people from different verticals.

If you start early and invest this time at the start of entering the market, you will quickly be able to reach almost any potential partners through your network.

Fundraising

Getting money from a foreign company in Indonesia will be difficult, especially in the early stages. Not many funds are willing to invest money in a project with little traction and a low level of trust. Therefore, the project requires advisors — people who will be able to close places in which the founder is not competent enough. They can also help make intros for funds. Also, a local co-founder is important to attract money from Southeast Asia.

For successful fundraising, the issue of networking is also relevant. On average, you need to invest about a year, because you won’t be able to quickly find a local co-founder: you need to build relationships, understand what kind of person he is, whether he can be trusted, and wait for trust in return.

Network — combined with experience in hiring, building processes across different teams and partnering in previous projects in Indonesia — helped us enter the Indonesian market with fewer mistakes. Here we are developing a marketplace of services — like Urban Company in India or Profi.ru in Russia. Within two months after launch, we managed to attract 150 performers to the platform and conclude more than 100 deals. For now, the project is growing with its own money, but in October we are preparing to enter the active stage of pre-seed round fundraising.

Checklist: how to reduce risks when starting a business in Indonesia

• Study the cultural characteristics of Indonesians before relocation — you will have to come to terms with them and learn to work.
• Register a local legal entity — Without it, it will be impossible to receive payments or hire people through local HR services.
• Be strict when hiring and check the competencies of applicants — Indonesians know how to sell themselves, but what is promised does not always correspond to reality.
• Build a strict hierarchy in the company — digitize all metrics, write down clear regulations: freedom of creativity is not suitable for local specialists.
• Start investing time in networking from the first days in Indonesia — Without this, it will be difficult to conclude a partnership, get money, or find a co-founder.