Do We Still Need Foreign VCs?

It’s not a secret that many tech industry practitioners wish for a conducive ecosystem under the newly established government. All this time, the trend of foreign investors’ (VC) expansion in Indonesia has failed to effectively draw the government’s attention, while their presence here keeps growing stronger.

Some, and I mean local players, might start to feel inconvenient with this situation. Basically, Indonesian entrepreneurs don’t mind to whom they deal with, local or global players. Unfortunately, only a few local players are there for them, compared to foreign players, and it’s way easier to convince those foreigners, though convincing local investors is not impossible.

Internet business is no child’s play. Low barrier-to-entry makes the competition a helish playground for players. If we're not fast enough, we’ll fall. That’s why the internet business is regarded to be one of most risky businesses on earth. Hence, investors are the key to grow, and, in some cases, ensure that local players possess enough resources to compete with foreign players that enter the local market.

Donald Wihardja, Convergence-Accel’s investor, suggested, “We need a vibrant market, so it’s not possible to be over-protective. There must be clear and rational regulation to let both local and foreign players competing fairly.” To turn internet into industry, we need to have local giants which successfully compete in regional and global market. Money may hold an important role within startup’s growth, but control, according to him, is way more fundamental.

William Tanuwijaya, Tokopedia’s CEO, also voiced his concern about this local vs foreign-issue. He, who has convinced seven foreign titans to invest at his Tokopedia so far, does expect that government would pay more attention to creating a conducive ecosystem rather than focusing on local vs foreign investors. “Let’s take China for example. Even though the government there is highly restrictive towards the access to foreign products, they encourage foreign investment to come to improve the competitiveness”, Tanuwijaya stated as he referred to Alibaba which got supported by Yahoo (the U.S) and Softbank (Japan) since its early phase.

“When you opt to start an online business,” he continued, “ever since the very first day, we had been ready to compete globally. Every single regulation which hampers local companies’ competitiveness to go global kills Indonesian dream of having a world-class local company.” However, he also emphasized on the limited access towards funding which, later on, will put startups in a difficult situation. “It’s all about demand and supply,” he ended.

Tanuwijaya perceived that nationalism is about how we, local entrepreneurs, design products which are able to compete at global scale. The problems that Indonesian entrepreneurs face is not only the lack of access towards funding, but also the lack of access towards know-how and global network as well as not competitive human resources. The best solution to those might well be the entry of foreign investors who don’t bring their capital and knowledge along.

So, do we still need foreign investors? Absolutely. This has been such critical period where we need to be assisted to seal the capital and know-how, and if government is able to accommodate us on this, then foreign VCs might be the only solution to accelerate the industry more effectively.