Why Foreign Startups Fail In Indonesia

In my 10 years in Indonesia, I have seen enough foreign-owned startups fail both in traditional and tech businesses to make any expatriate entrepreneur swear off the idea for good.

It is a commonly accepted fact that startups have the advantage to be leaner than their corporate counterpart, but unless you are backed up by a significant amount of knowledge about the local market, culture and work ethics, you are running the risk of not just creating a lot of unnecessary hurdles, but of simply failing before even getting a definitive name for your product.

Thinking of Indonesia as an easy ride might be your first and potentially last mistake. If Jakarta, Bandung and Bali offers seemingly endless possibilities (enough for Bloomberg TV to evoke the “Indonesian dream”), many fail to realize that, while opportunities might be there for the taking, even the proverbial low-hanging fruits are difficult to pick.

Coming to Indonesia with pre-existing business strategy and applying it directly because “It worked at home” is a very risky move for 3 main reasons :

A. Misunderstanding The Job Market

To start with, unless you’re not planning on scaling-up within your first two years of business, be ready to face solid challenges when it comes to recruiting. Skill sets availability will differ from a city to another, and you can expect a turn-up rate below 15 percent for all your scheduled interviews, as well as a plethora of early resignations.

This situation is the result of a high demand for qualified IT specialists, which gives available candidates the possibility to chose an environment they like, being even leaner than their potential employers.

In effect, talents are here, but they will be met via networking and communities rather than job vacancies – a serious factor to consider, knowing speed is vital to a Startup.

Takeaway: Network, network, network.

B. Overlooking Local Market Behavior

Why is Uber Indonesia experiencing growth difficulties while GrabTaxi isn’t? Why is Kaskus so popular when eBay never really took off?

Both have made the mistake of not diving into the local market long enough to be aware of important, not-so-subtle consumer behaviors: Uber neglected that credit card and online payment are still of minimal use (they are now actually implementing cash solutions…. in India) and eBay ignored the fact that, in Indonesia, community based and peer-to-peer trust will trump auction every single time.

Another major aspect of the Indonesian market is its sensibility to do good PR and marketing, starting with face-to-face interaction with community influencer, and ending with serious and creative social media and campaigns. This is another reason why Zalora and Lazada have seen far more success that Blanja.com, eBay’s attempt at online shopping in Indonesia.

But with eBay and Uber, they can both afford a mistake or two before aligning their strategy.

On a ‘startup budget’ though, a lack of thorough local customer development can be lethal.

Takeaway: probe, research, experiment, and validate.

C. Misunderstanding cultural adaptation

“Even between Asian countries, views on commitment, discipline, or even phone call etiquette widely vary. Not being aware of these facts can often lead to friction”
~Pandu Sastrowardoyo, ASEAN Technical Solution Manager, IBM.

Culture might be a blanket term for many things, but it’s the precise reason why local DOs and DON’Ts require special attention. Creating a company culture on the top of an existing one is impossible if you don’t understand the basics, but cultural disconnect will hinder your progress to a full stop if you take the wrong approach.

Of course you have to “stay humble and open minded” and “mingle”, but rather than just mimicking local behavior, the key to prevent failure is to know how your startup’s culture will complement local behaviors to achieve the best possible outcome (that is, long lasting, productive work relationships).

Indonesia is a country where communities are hubs for social interaction, and where performance is generally linked to your team’s sense of belonging. Too many times have I seen structure which didn’t even go past early stages because their CEOs behaved “like a boss” and didn’t bother connecting, empowering or even hinting at a career path for their team or employees.

On the flip side, other failed projects are the result of keeping their management too informal. IT work in Indonesia is indeed subject to a certain level of improvisation, but in an industry which is as promising as it is young, establishing solid SOPs based on knowledge sharing and openness is probably the one thing that will let your venture leave its runway without taking a nosedive.

Takeaway: Stay friendly and structured.


The most frustrating part of writing about startup failures is that, generally, said startups do not last long enough to leave a memorable imprint.

Nonetheless, after several successful projects as a consultant in both Jakarta and Bali, I have moved to Singapore to attend Startupbootcamp, co-found DeBuNe.org and launch OTDocs. Even if the particulars are different between Indonesia and Singapore, I have witnessed a startup culture where founders actively avoid the above caveats with amazing result. They are, to my mind, ready to take a look into the Indonesian market.

Are you?

Writer : Jean-Daniel Gauthier
About author: After having worked and consulted in Indonesia for various sector of the local IT industry, this Frenchman has moved to Singapore as the co-founder of DeBuNe and COO of 25Mod (OTDocs).



SMART Legal Consulting has extensive experience in assisting Foreign Investors to establish FDI Company in Indonesia. If you need immediate assistance, please contact the SMART Help Desk at:
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H: +62821-1234-1235

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