Struggling Indonesian Unicorns GoTo and Bukalapak Face Sharp Valuation Drop in 2024 amid Intense Foreign Competition

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Indonesian tech startups struggle to compete for funding and innovation – ExBulletin

JAKARTA – The valuations of Indonesia’s biggest unicorns, GoTo and Bukalapak, are expected to fall sharply in 2024 as Indonesian startups struggle to compete with well-funded foreign rivals. Investment in local startups has also fallen by about two-thirds from about US$3.5 billion in the full year of 2020 and 2021, according to a joint report by venture fund AC Ventures and management consultancy Bain & Company published in November 2023. Analysts say this is putting more pressure on local companies to innovate, stop burning cash, and boost profits.

Shares in GoTo, which was formed in 2021 through the merger of ride-hailing firm Gojek and e-commerce giant Tokopedia, have fallen 55% since the start of the year and now have a market capitalization of 60 trillion rupiah on the Indonesia Stock Exchange. Meanwhile, e-commerce unicorn Bukalapak fell 33 percent to a market capitalization of Rp 14 trillion. Both companies have significantly underperformed on the exchange’s composite index, which has fallen about 4% in 2024. Experts say the main reasons for this are stiff competition from larger regional rivals and slow innovation.

Major competitors such as Sea Limited, Shopee, and Grab have access to a wider pool of capital, geographic reach, and more aggressive tactics. Sea is listed on the New York Stock Exchange and has a market capitalization of $43.6 billion, while Grab is valued at $14 billion on the Nasdaq. A U.S. listing would make it easier to raise $1 billion, a small figure compared with the overall U.S. market capitalization, but that’s on the upper end for GoTo, which is listed on the Indonesia Stock Exchange, said Henry Pranoto, a senior equity analyst.

These rivals could also use cash from other profitable businesses to grab market share in Indonesia. Shopees parent Sea has said it will tap into its global gaming subsidiary Garena to fund a cash-burning strategy for Indonesia’s key e-commerce market. Meanwhile, Grab has carved out a share of Indonesia’s go-to ride-hailing sector, using backed-up cash from markets outside Indonesia such as Singapore where it is already profitable. Analysts say the need for continuous innovation is also key – Bukalapak, for example, has raised questions from investors after sitting on Rp20 trillion in cash rather than using it to acquire new e-commerce customers.

An analyst at Jakarta-based investment bank BNI Sekuritas said the inability to redirect funds to businesses indicates a lag in technology and innovation. There have been missteps: In January 2022, Bukalapak bought an 11.5% stake in Jakarta-based digital bank Arobank for $81 million, but the initial boost to profits turned into unrealized losses a year later. An attempt in 2020 to get thousands of Indonesian mom-and-pop merchants to use Bukalapak’s app for business processes also fizzled. But being innovative is no guarantee of profit, as GoTo has learned: In 2015, the company introduced GoSend, which connected ride-hailing drivers with Tokopedia’s e-commerce customers looking for immediate delivery of their orders. Gojek was the first ride-hailing company in the world to cater to e-commerce customers, said Leontinus Alpha Edison, a Jakarta-based hedge fund investor.

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Shreya Gupta
Shreya Gupta
Shreya Gupta is an insightful author at The Reportify who dives into the realm of business. With a keen understanding of industry trends, market developments, and entrepreneurship, Shreya brings you the latest news and analysis in the Business She can be reached at shreya@thereportify.com for any inquiries or further information.

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