For Indonesia to stay on its growth trajectory, it needs to navigate macro headwinds such as the ongoing US-China tensions, the upcoming 2024 elections, increased pressure on major tech players to achieve profitability, and the evolving regulatory landscape. The digital economy is on an upward trajectory, reaching a notable US$77 billion in 2022. Household consumption, a significant economic driver, accounted for 55.6% of the GDP. With a young and burgeoning middle class, Indonesia's GDP per capita grew by 4.6% in 2022. Further, the archipelago registered a 20% YoY increase in deal volumes in the same year.Īttractive macroeconomic fundamentals suggest that Indonesia remains a bright spot in the region and will provide a favorable climate for startups in the country. While the global VC deal value faced a decline of 20% to 40%, Indonesia maintained a stable VC deal value in 2022 on a year-over-year (YoY) basis at US$3.6 billion. One of the standout insights from the report is Indonesia's resilience against global trends. This is further evidenced by the declining conversion rates from seed to series A/B funding rounds. The report highlights a significant shift in investor priorities, emphasizing startups that showcase strong unit economics, leaner valuations, and clear paths to profitability. Following the surge in VC investments driven by rebounding investor confidence during 2020-2021, investors are now more measured and rational in their approaches. While the year has been difficult for the VC sector, the overall growth outlook is positive given that the Indonesian VC landscape is entering a more mature state overall. The funding pace in 2023 remained sluggish through Q3, standing at 0.3x compared to Q3 2022. While deal flow picked up quickly in 2021, increasing macroeconomic uncertainty drove caution in investing momentum and the spillover effect from H2 2022 saw a lower number of deals and decline in deal sizes.ĭespite a degree of cautious optimism at that time, projections for 2023 are now sobering with an anticipated 70% to 80% decline in deal value compared to the preceding year. The last 12 months witnessed a market recalibration driven largely by global macroeconomic headwinds. The VC sector in Indonesia has experienced a significant transformation in recent years. JAKARTA - NovemEarlier today, AC Ventures and Bain & Company released their highly anticipated joint report on the venture capital (VC) landscape in Indonesia, offering deep insights into the prevailing trends, challenges, and future outlook of the industry. Investors appear to shift focus toward new investment themes such as electric vehicles (EVs), energy transition, and healthcare.Early-stage deals, especially in electric mobility and healthcare, are poised for growth with the local digital economy projected to reach US$360 billion by 2030. Trade sales are overshadowed by a rising IPO trend, but post-2022 conditions may affect mega-IPOs.Major tech firms shift strategies, with investments leaning toward e-commerce, fintech, and direct-to-consumer (D2C) retail. Macro challenges include geopolitical tensions, a rise in interest rates, weaker consumer and business sentiment, and the 2024 elections.Indonesia maintained its 2022 VC deal value at US$3.6 billion against global declines and saw a 20% YoY increase in deal volumes, backed by positive economic indicators.After rapid growth during 2020-2021, the VC sector is progressing toward maturity as investors are favoring startups with strong unit economics and profitability.In their debut joint report, AC Ventures and Bain & Company detail Indonesia's VC landscape over the past year, with a 70% to 80% projected deal value decline in 2023.
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