How Indonesia's Tech Boom Poster Child Proved His Doubters Wrongby
Tokopedia CEO envisions building nation's Google or Alibaba
Startup broke record for Indonesian startup financing in 2014
William Tanuwijaya was helping small companies build websites when he began shopping an idea for Indonesia’s first Internet shopping hub. It took 11 pitches to get funding, but his startup is now verging on becoming the nation’s first unicorn.
The son of a factory worker created Tokopedia in 2009 just as the economy and Internet usage mushroomed in the world’s fourth-most populous country. A then-record $100 million funding round that included SoftBank Group Corp. and Sequoia Capital in 2014 announced the nation’s coming-of-age as a bona fide destination for technology investment.
Tanuwijaya is the poster child for Indonesia’s online boom, a 34-year-old entrepreneur who started without family money or credentials and now hobnobs with government officials. With his company taking its name from the Indonesian word for store, he wants Tokopedia to become a local answer to Alibaba.com, and he credits that drive to some dismissive advice he received from a potential investor in 2008.
“‘William, don’t waste your time,”’ Tanuwijaya, his voice quavering, recalled the man saying. “‘The guys who started Amazon, Facebook and Google, they are special people. Unfortunately, you are not.”’
He continued, “I decided right then that I will never give up on myself.” Tanuwijaya declined to identify the Indonesian businessman -- out of respect, he said.
Tokopedia now employs 400 people and fields 24,000 job applications a month, he said. Tanuwijaya wouldn’t discuss the startup’s valuation or revenue, and he said he has no plans to take the business public this year.
Tanuwijaya is capitalizing on one of Asia’s youngest populations -- where the median age is 28-- and one of its most mobile-centric with more connections than people. About three-quarters of Tokopedia’s traffic comes from mobile devices.
That may propel the startup past $1 billion in valuation -- territory inhabited by so-called “unicorns.” There are currently only three in Southeast Asia -- two in Singapore and one in Thailand, according to CB Insights.
“I can see Tokopedia being Indonesia’s first unicorn in 2016,” said Vinnie Lauria, managing partner at Golden Gate Ventures, a Singapore-based venture capital firm that has invested in 12 Indonesian companies. “Tokopedia has very little cost without warehousing or logistics. So they have the ability to scale very, very quickly over time.”
The business model is similar to that of Alibaba Group Holding Ltd.’s online emporium, matching customers with merchants instead of selling products from its own shelves. Tokopedia offers electronics, clothing and health-care items, and has sites for buying train tickets and topping up mobile-phone plans.
Indonesia is Southeast Asia’s largest economy, with 256 million people. Gross domestic product growth is expected to accelerate to 5.1 percent this year, compared with 4.8 percent last year, according to data compiled by Bloomberg. The stock market is Asia’s best performing major index.
Google’s parent, Alphabet Inc., signed a deal with three Indonesian telecommunications companies in October to test Internet-beaming balloons across the archipelago.
When an Indonesian delegation went to Silicon Valley last year, it included five entrepreneurs: Tanuwijaya, the chairman of competitor MatahariMall and the founders of motorcycle-taxi service GO-JEK, travel site Traveloka and online community Kaskus.
“I’m very confident that we will see a unicorn this year,” said Indonesia Communications and Information Technology Minister Rudiantara, who went on the trip and, like many Indonesians, uses one name. “I can tell you that it will be one of them.”
Yet Tanuwijaya gets most animated when describing an hour-long meeting in 2014 with SoftBank’s billionaire founder, Masayoshi Son, in Tokyo.
“The people who rejected me only asked me about my past, which I couldn’t change," Tanuwijaya said in an interview during the Kauffman Fellows’ Southeast Asia Venture Capital Summit in Singapore. "But Masayoshi Son was there, asking me what I thought of the future. He didn’t care about my past."
That story started in a rural Sumatra village. Tanuwijaya’s father wanted him to have a better life, so he gave his teenage son whatever cash he had and a one-way boat ticket to Jakarta.
To help pay for college, Tanuwijaya worked 12-hour night shifts at an Internet cafe for three years, using access to the Web he couldn’t afford at home to explore the world outside Indonesia.
That undistinguished pedigree was a hindrance in a society where connections rule and scions of family empires bankroll startups. Lippo Group, controlled by the Riady family, has backed MatahariMall while the Salim Group, run by billionaire Anthoni Salim, is expanding in e-commerce.
MatahariMall, spearheaded by U.S. educated John Riady, presents formidable competition to Tanuwijaya’s business by targeting the same young and technologically-savvy consumers. It also functions as an online-to-offline site, allowing customers to buy on the Web and pick up items from Lippo’s department stores.
Competition in e-commerce comes as Southeast Asia’s $6 billion online shopping market faces an inflection point, with Bain & Co. predicting growth this year may exceed 20 percent.
It’ll take time for Indonesia to build a culture of risk-taking and train engineers in an industry that’s just getting started, Shailendra Singh, a partner at Sequoia Capital India who works with Tanuwijaya, said at a Singapore venture-capital conference.
“There is a bit of mismatch in Indonesia,” Singh said.
Tanuwijaya said the buzz created by his SoftBank and Sequoia deal is helping him attract talent from overseas. He was still looking, though -- at the Singapore forum in January he asked the audience if they knew any good candidates for his chief financial officer vacancy.
For now, the company’s business plan focuses on staying home rather than going abroad. To counter Jakarta’s notorious traffic snarls, he tied up with GO-JEK, which is also backed by Sequoia.
Tokopedia customers living in the same city as merchants can order and get some items delivered by GO-JEK motorcyclists on the same day.
While that partnership is being tested in specific cities, it will seek to expand in areas where both companies have operations, Tanuwijaya said.
Tokopedia also wants to diversify into financial and payments technology to capitalize on rising incomes and growing mobile-phone usage.
“In the future, we will have different business verticals,” he said. “Ultimately, we want to become the Google or Alibaba of Indonesia.”