Economist: Domestic funding provides support for local startups

Jakarta (ANTARA) - Nailul Huda, Director of Digital Economy at the Center of Economic and Law Studies (Celios), believes that domestic funding can provide more sustainable support for local digital technology startups.

“I hope there will be funding from within the country capable of meeting the demand of local digital startups. So far, only around a dozen per cent of funding has come from domestic sources. I hope domestic venture capital firms can provide full support,” Huda said when contacted in Jakarta on Monday.

He made the remarks following the ‘talent restructuring’ carried out by digital companies in Indonesia, including TikTok-Tokopedia, some time ago.

Huda assessed that acquisitions without efficiency measures or workforce streamlining are difficult to avoid.

“In every acquisition, there will certainly be similar work units and costs that should be made more efficient. So layoffs become the easiest option for the acquiring company. That is why I say these layoffs are the fruit of the merger,” he said.

In addition, Huda noted that another factor behind digital companies streamlining their organisations is the company’s financial condition.

“This is especially true for global companies with high cost burdens. When profitability becomes a requirement, what they do is reduce costs. They also need to improve their balance sheets to look good in the eyes of investors,” Huda said.

“Investors today look not only at valuations but also at track records of profits or the potential for future profits,” he added.

He cited the example of how holding companies such as ByteDance, which oversees TikTok, want to conduct an initial public offering (IPO).

This means the parent company will choose to pursue efficiency, so national interests have less influence over the strategy of the companies they acquire, such as Tokopedia.

“That is why I hope what has happened at Tokopedia does not happen to other digital startups,” Huda said.

Beyond encouraging sustainable domestic funding for local digital companies, he also hopes the government can ensure the rights of laid-off workers are protected.

“The government must also ensure that the rights of laid-off workers are paid in full by the company. Workers who are laid off must not suffer any losses. The government must make sure severance pay and so on are paid by the company,” Huda said.