Local investors reluctant; foreigners are more daring to fund startups.

The startup ecosystem in Indonesia is growing rapidly. However, the phenomenon that has attracted attention is the tendency of local investors who are still hesitant to inject capital into domestic startups. Conversely, foreign investors are actually more willing to inject large amounts of capital into Indonesian startups. The question of why this happened opens up a lengthy discussion about the character, regulations, and business strategies that surround it.

This phenomenon is inseparable from the conservative mindset that still persists among a majority of local investors. Meanwhile, foreign investors come with a long track record of financing startups in various countries. This difference in perspective is what makes them seem more aggressive in spotting opportunities in Indonesia's digital market.

Differences in Investor Character and Its Impact

Local investors in Indonesia are more inclined to adhere to the principle of prudence. They tend to assess a business in terms of short-term profitability, not its long-term growth potential. This is different from foreign investors who are accustomed to investment patterns based on valuation and future projections.

In addition, cultural factors also play a major role. Many local investors still view startups as high-risk ventures, even akin to speculation. Meanwhile abroad, risk is viewed as a normal part of the dynamics of modern business.

Conservatism and preference for safe assets

Local investors are accustomed to allocating capital to traditional assets such as property, gold, or commodities. This option is considered safer because it has a real and stable value. As a result, a lot of domestic capital did not enter the digital startup sector even though its prospects were promising.

On the other hand, foreign investors such as those from the United States, Singapore, and Japan have global portfolios. They are more accustomed to facing startup failures while also enjoying large profits when a single company successfully grows into a unicorn.

Impact on the Indonesian startup ecosystem.

Local investors' conservatism slows domestic support for early-stage startups. As a result, many startup founders have to seek funding abroad. This makes the Indonesian investment ecosystem dependent on foreign players, both in terms of funding and international networks.

Experts assess that this condition can create an imbalance. If too many Indonesian startups rely on foreign funding, the direction of their business could align with global interests rather than focusing on the needs of the local market.

A stronger global network and foreign capital

Foreign investors usually come not only with funds, but also with a global network. They have access to international markets, experienced mentors, as well as other strategic resources that can accelerate startup growth.

The large capital owned by foreign venture capital firms gives them more leeway to diversify. With this strategy, the losses of one startup can be offset by the profits of another startup.

The role of international venture capital

Big names such as SoftBank, Sequoia Capital, and GGV Capital have long invested capital in Indonesia. They see the domestic market potential of more than 270 million inhabitants as a golden opportunity. In addition, the growth of the middle class and high internet penetration have become the main attractions.

The presence of this foreign capital also provides validation for local startups. Only after obtaining funding from foreign investors do local investors usually start to be interested in participating. This phenomenon is known as the wait-and-see effect.

Unicorn Case Study in Indonesia

Gojek, Tokopedia, and Traveloka are real-world examples of startups that were initially more heavily supported by foreign investors. Only after they gained international recognition did local investors begin to show interest. This pattern keeps repeating, showing the dominance of foreign capital in shaping Indonesia's digital ecosystem.

Regulations, Legal Certainty, and the Wait-and-See Phenomenon

The regulatory environment in Indonesia is often considered not yet fully friendly to startups. Changes to tax regulations, digital business licenses, and even foreign investment policies are creating uncertainty for domestic investors.

However, foreign investors are already accustomed to facing regulatory risks in various countries. They take this into account as part of a global strategy.

The Influence of Regulation on Investor Decisions

Some local investors believe that legal certainty in Indonesia remains weak. For example, regulations regarding digital taxes that frequently change can affect profit projections. Investors who are accustomed to traditional businesses will become more hesitant to place capital in sectors considered risky.

On the other hand, foreign investors usually have strong legal counsel and a strong research team. They are able to navigate regulatory changes better than local investors.

Organizational Culture and Psychological Factors

Personal factors also influence decisions. Local investors often judge a business based on personal experience, prestige, or social perception. If one startup fails, the reputation can be considered damaged. Foreign investors tend to be more objective, evaluating based on data and market potential.

As a result, local investors prefer to wait until startups have proven themselves successful, both in terms of users and international funding, before getting involved. This phenomenon makes their role more passive than foreign investors.

The phenomenon of local investors who are reluctant to fund startups, while foreign investors are more daring, indicates gaps in mindset, capital, and networks. If this trend continues, the Indonesian startup ecosystem will become increasingly dependent on foreign capital.

Indonesia needs a larger role for domestic investors so that the growth of the digital economy can be more balanced and sovereign. Going forward, educational measures, clear regulations, and support from local financial institutions are very important. In this way, local investors can be more confident in supporting homegrown startups.