An interview with Natali Ardianto, one of the founders of a web entrepreneurs grassroots movement in Indonesia called #StartupLokal. In creating a critical mass in Indonesia’s still-young startup industry, I think Natali is on a verge of something huge. For this, the interview is a must-read. There’s also one topic in which I’d like to go deeper.
Q: Is there a tendency to develop localised services and apps as opposed to something more universal?
Natali: Yes, most Indonesian startups believe that we might have a fighting chance against those global players if we focus on local market first. After all, we understand our own local market like the back of our hand, right? But that’s not the case with how investors think.
Some of the investors are looking for #local startups that have plans to go global and world-wide. When I asked them why do they look for that kind of startups in Indonesia, they answered this: “If you go global and your startups didn’t work too well, then at least you have grabbed some of the regional market or your own country’s market. But if you just target your own country and your startups didn’t work too well, then you have nothing.”
We local startups must contemplate on this way of thinking, and start to widen our horizon and perspective. Of course some of you might disagree, but investors do look for profit, not just blindly invest and think you are still doing well if your cashflow is bleeding for years.
It’s important to realize that Natali was voicing the investors’ opinion. By definition, investors are looking for as much profit as possible from the money they invest. If an investor invests $50,000 on an Indonesian startup (a small seed fund in Silicon Valley, but a very big amount to start a business Indonesia), and the company gets valued at, say, $5 million a few years later, that’s a really nice return. What kind of Indonesian internet companies get valued at $5 million? Likely one with with a global reach because the local internet market is still relatively small. This is the reason why investors are telling Indonesian startups to go global.
For entrepreneurs, however, it’s important to realize that there are many ways for a startup to make money. Here are my thoughts:
- A startup is first and foremost a business. Yes, you need a combination of team and market to be successful. However, a global market is not necessarily better. Coming out of Indonesia, do you want to compete with Twitter in micro-blogging world right now? It’s not a good idea. It’s much better to use your strengths (whatever that is) to find a local or global market niche that you can own and crush.
- There’s an expression in the VC/startup community to “bet on the jockey, not the horse.” in other words, the skill and character of the entrepreneur (the jockey) is more important than the startup’s product itself (the horse). This is the reason why seasoned entrepreneurs are able to get funding even before the product gets traction (see Square). On the other hand, the Indonesian internet industry is still very young. There’s not a lot of jockeys who have run a horse race, let alone win one. Despite what the investors told Natali, it remains to be seen how much money they are willing to bet on an unproven Indonesian entrepreneur.
- An overseas Venture Capital coming to Indonesia is looking to make a big return on his investment. It only makes sense if they are looking for startups with big vision. But what if you’re not interested in global domination? Can you still be a successful Internet entrepreneur without having valuation in the millions of dollars? Of course. Ultimately a successful business needs to make profits, not number of users. You don’t need to be huge to make a profit.
- As a business owner, getting money from investors is always an option if and when the business needs it. “Option” is the key word here. You also have the option of choosing the type of investors. Your mom could probably be an investor for you, and she likely will trust you 100% and won’t fill up your calendar with meetings.
The truth is you won’t find a lot of TechCruch stories about small and profitable startups because those stories aren’t sexy. On the other hand you often read about ambitious startup projects no matter how they turn out (see Cuil). If this type of stories is all you’ve been reading, then you need to find different news sources (one good source is the “Bootstrapped, Profitable and Proud” articles from the folks at 37 Signals). After all, are you starting a company to earn money or to get profiled at TechCrunch?
Startup entrepreneurs and investors, I’d love to hear your thoughts in the comments section below.
written by Andre P. Siregar. see more.