Jakarta, INTI - The startup ecosystem in Indonesia has experienced significant changes in recent years, particularly in the way investors approach funding.Investors used to have a primary focus on pursuing unicorn-startups valued at more than US$1 billion.

But surprising fact was recently revealed in the Indonesian market, where investors are now prioritizing startups with sustainable business models and a clear path to profitability. This shift, which began in 2022, marks a new chapter in Indonesia's startup investment landscape.

The Rise and Fall of the Unicorn Obsession

In 2021, the global startup ecosystem experienced a valuation surge driven by excessive liquidity in the market. Indonesia is no exception. Startups, especially in the tech sector, are seeing valuations rise as investors pour funds into high-growth companies.

The lure of creating or investing in the next unicorn is becoming a dominant theme, with founders and investors alike chasing very high valuations.

However, in 2022, the market began to correct itself. Valuations begin to normalize, and investors become more cautious. Anthony Tjajadi, a partner at Trihill Capital, noted that what happened in 2021, which he considered irrational, gave way to a more rational approach.

“Valuations are now more rational, especially in Indonesia,” he said at the Investment Outlook 2025 event in Jakarta. This shift is a response to the realization that not all highly valued startups are built on sustainable foundations.

Anthony emphasized that the unicorn status is not the ultimate measure of success for a startup. "The reality is, there are very few unicorns in Indonesia. Founders should not build companies solely to chase this status," he said.

Many startups that achieved high valuations in a short period often ended up with unsustainable business models. Instead, Anthony advocates for a focus on realistic growth and long-term viability.

A Shift Toward Sustainable Business Models

Investors are now prioritizing startups with strong unit economics and clear paths to profitability. The emphasis has shifted from aggressive growth at all costs to building businesses that can generate sustainable revenue.

"Investors are looking for businesses with strong economic units and clearer routes to profitability," Anthony explained. This approach not only reduces risk but also increases the likelihood of earlier exits for investors.

Anthony highlighted that achieving a valuation of US$100 million (approximately Rp 1.6 trillion) is already a remarkable accomplishment for a startup. This perspective underscores the importance of setting realistic goals and focusing on building a solid foundation rather than chasing inflated valuations.

Patrick Yip, Founding Partner at Intudo and Endeavor Ambassador, echoed this sentiment. He noted that in the past, startup valuations were often based on metrics like Gross Merchandise Value (GMV).

However, investors are now paying closer attention to profitability, EBITDA, and other substantive financial metrics. This shift reflects a more mature and disciplined approach to investing.

Challenges in the Indonesian Startup Ecosystem

One of the significant challenges facing Indonesia's startup ecosystem is the declining presence of foreign investors. Anthony observed that fewer venture capital investors, particularly foreign ones, are active in the market.

Global and local events have made foreign investors more hesitant to invest in Indonesia, with many choosing to remain in their home markets or explore opportunities in neighboring countries.

While the decline in foreign investment poses challenges, it also creates opportunities for local investors. Anthony believes that this is a pivotal moment for domestic investors to step up and collectively build the ecosystem.

"Now, more than ever, we as local investors need to come together and support the growth of this ecosystem," he said.

Patrick Yip sees the current market correction as an opportunity for new and local investors to rise to prominence. "This environment creates opportunities for new players or investors who haven't yet become market leaders to step into the spotlight," he said.

The recalibration of valuations and investment priorities levels the playing field, allowing a broader range of investors to participate meaningfully.

The Future of Startup Investments in Indonesia

The shift in investment priorities signals a move toward long-term growth and sustainability. Startups that can demonstrate strong unit economics, profitability, and a clear vision for the future are more likely to attract funding. This trend is expected to continue as the market matures and investors become more discerning.

Collaboration among local investors, founders, and other stakeholders will be crucial in navigating the current challenges. By working together, the Indonesian startup ecosystem can build a more resilient and sustainable foundation for future growth.

Government support and favorable policies will also play a critical role in shaping the future of startups in Indonesia. Initiatives that encourage innovation, provide funding opportunities, and create a conducive business environment can help sustain the momentum of the ecosystem.

Conclusion

The Indonesian startup ecosystem is entering a new era characterized by rational valuations, sustainable business models, and a focus on long-term growth. While challenges remain, particularly in attracting foreign investment, the current environment presents opportunities for local investors and new players to make their mark. By prioritizing profitability and sustainability, startups and investors alike can build a stronger and resilient ecosystem that thrives in the years to come.

As Anthony Tjajadi aptly put it, "It's better to focus on realistic growth and build businesses that can stand the test of time." This philosophy will undoubtedly guide the next generation of Indonesian startups and the investors who support them.