Earlier this year, a major player in e-commerce industry in Indonesia, JD.ID, declared that their operation would be permanently closed starting 31 March 2023. This closure is a continuation of its downsizing efforts in December 2022 that impacted 30 percent of its employees, or 200 people. Similarly, Tokotalk, an e-commerce enabler platform, also officially ended their operational services on 28 October 2022. This rendition of news has added to the list of startups that close down their operations since 2020. Until recently, approximately 22 local startups in Indonesia were forced to close their business operations. Some of them closed down due to the market changes as the result of Covid-19 pandemic.
The pandemic, which in turn, resulted in the economic downturn, has made many startups and technology companies unable to generate positive returns for their investors. The three main factors of the failed startups trend are, the inability to gain new source of funds, lack of market demand, and competitive environment. Additionally, some investors pursue "wrong opportunities" by investing in technology companies that are not capable of making profitable income, resulting in the unfortunate closures of these companies. Although not significant, the technology sector players in Southeast Asia ("SEA") are highly affected by the condition depending on different levels of the countries' economic developments, as well as the public accessibility of these companies.
Through this article, we assess the current trend of startup closures and the reasons behind them. We also provide a brief elaboration on the things that an investor needs to look out for when investing into startups or technology companies during the current economic situation, and alternative ways for startups and technology companies to raise funds and maintain profitability.
The current trend of startup closures & efficiency in various technology companies Across SEA, the highest percentage of startup closures occurred in the Philippines and Singapore with, respectively, 15.85% and 14.27% companies in these countries went out of their businesses.
Furthermore, the record shows that most of these startups are small companies with 2 to 10 employees in their seed funding stage.
The sectors impacted are 21.62% startups in the travel industry, while only 8.99% of those in the Software as a Service industry ("SaaS") sector suffered the impact.
In Indonesia, at least 102 startups (including those that closed down prior to Covid-19 Pandemic) closed down their businesses for good. The number could be larger because there were lesser-known tech startups. Around 33% of the companies closed down within 12 to 20 months since their establishments. Some 67% of the startups succeeded in passing the initial period of 2 years, before closing down their business operations in the subsequent years.
To maintain their survivability, many of the larger players have commenced an efficiency measure contradictory to the aggressive expansion that was the main strategy in the earlier startup boom in SEA. Startups and technology companies in various sectors in Indonesia, including GOTO, LINE, LinkAja, Sayurbox, Ruangguru, SiCepat, Sirclo, Koinworks, Molandin, Shopee, and many others have to substantially lay off their employees. One of the reasons of the layoffs is their initial "over-hiring" that bloated their organizations. To create a more efficient and effective working environment to reach profitability, these companies needed to slim down their organizations.
We also see that some of these technology companies closed down some of their unprofitable operational arms. This includes the closure of GRAB Kitchen in Indonesia by GRAB and LINE TODAY by LINE. Other companies have also made similar strategic decisions, to be able to focus on more profitable business activities.
Many industry observers see the development as the end of "money burning" era, which is, infamously, closely associated with the emergence of these startups and technology companies.
List of Closed Down Start Ups and Technology Companies in Indonesia
From publicly accessible sources, we gathered the information on closed down startups and technology companies in Indonesia, click link below to view:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.