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Opinion

Startups with Tangible Founder and Business are Incorporated enough

Amir Karimuddin - 26 October 2015

A couple of days ago, an article posted in Tempo triggered countless debates. The article contains a statement by a member of Committee on Improving the Use of Local Production at Kadin Handito Joewono, the article creates controversies among tech startups. In our opinion, some points in the article indeed need further elaboration.

“Unincorporated Startup”

First, Joewono didn’t mention “unincorporated” term even once, at least that’s what is stated in the article. Therefore, we’d like to question whether Joewono really spit that term out or it’s the journalist’s mistake for not having the basic understanding on startup’s business model, which is build-to-sell.

As far as we know, the term is fair for businesses that can’t be responsible to their investor. In case of tech startup, investors really understand about a startup’s business line and model, the risks, the  founders, and and business goals.

If a startups fails to survive, which is just normal as 9 out of 10 actually hold that label since the very beginning, the risks will only be wielded by the founder and its investors (that come during closed funding round). There has yet been any startup, as long as I know, which has gone IPO and reduced the possibilities of wider public loss.

What about the startup’s employees, then? First, startup is not a factory, where hundreds of employees with no specific skill gather.If the company is shut, startups employees tend to find a new job easily. Second, they already know the risks of working at startups. That’s why startups usually offer early employees a portion of their shares, so that they may be more encouraged to build the startup together.

High growth is not similar to no “real value”

Joewono stated:

“There are two common points to decide whether it generates economic growth or not. First, the very vast growth especially in member recruitment or number of users. Second, the business model doesn’t result real money. Only recruiting members without tangible revenue. Investors take more role, but they’re limited to some points. This is dangerous, it looks big, the transaction seems unimportant, and the company gets finally sold.”

With all respect, we think that there’s nothing wrong with startup’s build-to-sell business objective. This practice is common in the U.S, especially in tech, and has resulted many serial entrepreneurs. They are actually economic catalysts, as high profile merger and acquisition show market’s trust towards a country’s economic condition.

Build-to-sell entrepreneurs are those who are determined to build something but don’t want to involve themselves in the business for too long once the business has been well-established. They tend to find new challenges to keep sharpening their business institution.

Tokopedia or Go-Jek, for instance, still rely on investors for their operational costs since they are still based on subsidy. But isn’t there any real economic value once they get bigger? From partnering drivers to SME entrepreneurs and advertising agencies get indirect effect from the services. They’re all real for economy.

We believe that worries are normal, given the fact that some unicorn startups in the U.S are declining due to their inability to find additional funding and generate more profit and more innovation as well as lie about their product quality. But that doesn’t justify any limitation towards infant local services.

Instead of growing their company and services, e-commerce and other startups get too busy with binding regulation. It’s normal to have 90% of startups dead. Do we still need to be suspicious towards the rest 10%?

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