The Reality Behind Indonesia’s Startup Boom and Its Challenges

The word “startup” has been a hot topic & popping up everywhere in business conversations, but not everyone’s catching what it really means.

According to Collins Dictionary, a startup is the process of launching a new business or product. But that definition only scratches the surface. A study published in the Taylor and Francis Journal (2021) offers a more specific explanation, defining a startup company as a project-based organization that commercializes new business models by leveraging advanced technology to operate in uncertain environments.

The main difference between startups and regular small businesses is how they’re set up. Startups are designed to grow fast and reach a lot of people, even all over the world. They’re not just about serving local markets. Small businesses or SMEs usually grow slowly and focus on making a profit at first. Startups, on the other hand, usually raise money from investors first and focus on getting a big market share before focusing on net profits.

Three Main Characteristics of Startups

Innovation
Startups come up with new products, services, or business models, usually using the latest technologies.
Scalability
Startup business models are designed to expand rapidly without increasing costs proportionally.
Growth Orientation
Startups pursue rapid market penetration with the goal of achieving dominance, not merely survival.

Indonesian Startup Growth After Tech Winter

With over 3,000 startups in 2025, Indonesia ranks sixth worldwide in terms of the number of startup companies, according to data from the Coordinating Ministry for Economic Affairs. At the regional level, Asia is home to the world’s second-largest startup ecosystem, accounting for 23% of total global venture capital investment between 2021 and 2023, according to the OECD.

However, large numbers do not come without challenges. RISE by DailySocial data shows that total startup funding in Indonesia reached USD 355.7 million across 91 deals in 2025, far below its 2021 peak of USD 6.9 billion. This is often called the “tech winter,” which is when investment activity cools down after a period of massive growth.

Even so, there are signs of resilience. New Retail led the numbers with USD 130.9 million across 15 deals, followed by Fintech at USD 77.2 million and E-Commerce at USD 35.8 million. Most deals happened at the early stage, 62 transactions or 67% of the total, though the bulk of startup capital still landed at Series A to C, which took in 80% of total funding.

Climatetech and agritech, at USD 10.6 million and USD 11.7 million respectively, kept growing quietly in the background. Both sit close to something much larger: Indonesia’s USD 145 billion climate financing gap that the country is working to close by 2030.

The Missing Pieces in Indonesia’s Startup Ecosystem

Research by the SMERU Research Institute and Asian Development Bank shows that tech startups need a support ecosystem that’s different from what conventional small businesses need. This includes government policies, access to financing, incubator and accelerator programs, and talent development.

In Indonesia, most of these ecosystem components have only started to develop in the last five years. But there are still three big challenges that need to be addressed, like the quality of incubators and accelerators, access to capital for early-stage startups, and the availability of skilled talent. Geographic inequality is still a problem, since most of the ecosystem is still in Java and Bali.

These three challenges are concrete entry points for anyone looking to build or scale a startup in Indonesia on a strong foundation, and this is where ecosystem enablers become increasingly relevant.

Building Startups With Better Support

Successful startups rarely grow on their own. Behind the innovation and scalability often associated with startups lies a support ecosystem operating across multiple layers, from access to capital and strategic development to long-term impact creation.

Building a startup isn’t always easy, and it doesn’t have to be done alone. Whether you’re figuring out your direction, looking for investors, or considering the impact you want to create, Angin Dampak Jaya is here for all of it, from the beginning of your journey.

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