Indonesia: Harder than it looks
I was at a dinner party a few weeks ago and was asked what my favorite city I’ve traveled to was. I have a few, but one of them is undoubtedly Jakarta. The food, the people, even the torrential rainstorms that come out of nowhere and flood a street to mid-shin levels of rain. There’s something about Jakarta I’ve always loved.
This person was shocked. This person had named all of his kids after cities he’d never been to (yep, just like the Modest Mouse song) and had wanted to name his daughter “Jakarta.” But he was told by relatives who’d spent time there it was a “shit hole.”
This time I was shocked. Ok, the traffic is horrible. And I admit when most people daydream about Indonesia, they probably think about Bali first. But whether you agree with me or this person’s relatives, one thing is for sure: Jakarta is steadily becoming one of the most important cities in the world for international businesses to grapple with.
Yesterday, TechCrunch reported that another Rocket Internet company, foodpanda, was so anxious to exit Indonesia that it’s willing to sell its entire operation for less than $1 million -- and the offer doesn’t even have to be all cash.
This isn’t the first Rocket Internet company to leave Indonesia or South East Asia. Global Fashion Group did the same amid a tough fundraising climate and Rocket’s ridesharing entrant pulled out after competing with Grab, as we discussed in our recent interview with Grab’s CEO Anthony Tan.
There are a few things at play here. One is a tightening investment climate. Late stage mega deals are still happening, but they are harder to come by. Another may be the sterile, inauthentic methodology of how Rocket starts companies. From a Journal write up a few weeks ago:
On the top floor of its seven-story headquarters, employees monitor tech startups world-wide for businesses to copy. When an idea is approved, Rocket assigns marketers, engineers and managers.
As the business develops, it moves down floor-by-floor, eventually making it to the ground level, where managers start to look for offices outside the building.
If it were that easy to build the next Facebook, MBAs would just be leasing buildings and churning them out.
But in these particular cases, part of the lesson here might just be how hard Indonesia in particular is to crack.
I spent a lot of time in Indonesia five or six years ago doing research on my book for emerging markets, doing four or five trips there over several months time and traveling to most of the major cities and seven or so islands.
It’s one of the most fascinating countries I’ve been to, in part because it’s so huge. It’s the fourth largest population in the world, and the largest Muslim country in the world, and hence of great interest to everyone in global politics. But it’s an country made up of thousands of islands, which weren’t even granted the sovereign water rights between them until the last forty years or so.
Like China and India, Indonesia will be a huge market for tech at some point, and I chronicled some interesting stories of local entrepreneurship in my book. But if you thought China and India were tricky-- with distinct advantages to locals who understand how things work-- Indonesia is even harder for Westerners to swan in and crack. Even the very geography doesn’t to conform to how we think of a “country.”
Many have simply not tried. Indonesians were huge early adopters of social media, and at the time I was there one of the largest Facebook and Foursquare countries in the world. (Second largest for Facebook, in fact.) And yet executives from neither company had even set foot on Indonesian soil.
It seems Google has made a huge about face, as BuzzFeed wrote last week. And Uber is reportedly still trying to slog it out against Grab. But it’s worth noting the Rocket companies that are pulling out, because for everything bad you can say about Rocket, it has at least been in South East Asia funding and trying to build companies for a while now. It may have learned what is only now dawning on Uber and others: How unique this place is.
I always feel mixed when I see big Silicon Valley giants setting up shop in Indonesia. I have a lot of fondness for the country and sympathy for how overlooked it’s been on a global scale. More money and even jobs -- not to mention tech goods and services-- flowing into the country must on balance be a good thing. But I also still hope that a surge of local entrepreneurs who understand their fragmented but important nation better than Travis Kalanick and better even even the Samwers will be the ones to become rich off that huge population and growing middle class.
After all, Indonesia had one of the roughest and longest colonial rules in the world-- some 350 years passed between the Dutch and the Japanese, envied for their indigenous spices and other natural resources. Now that Indonesia’s natural resource is its size, this time it would be nice if the Indonesians benefitted most.