Start-ups struggle to aim for profit as visibility, scale come first

11-Dec-2019 Intellasia | JakartaPost | 6:02 AM Print This Post

As investors start to demand profitability for start-ups, some are struggling to achieve their profit targets as they focus on making sure consumers and investors are aware of their presence and value then, afterward, scale up.

Achmad Dwiputra, synergy manager at Mandiri Capital Indonesia the venture capital arm of Indonesian giant lender Bank Mandiri told a workshop participated in by representatives of start-ups that to attract potential investors, they had to ensure clear pathways to profitability.

“[Mandiri Capital Indonesia] has less appetite to invest in a start-up that keeps on burning money. We also look at the start-up’s path to profitability [to consider an investment],” he told the workshop, organised by Go Startup Indonesia in Central Jakarta on Monday.

Venture capitalists around the world have been holding off investing in start-ups as they want to ensure profitability in their investment targets. Funding in Indonesia’s internet economy reached $1.8 billion in the first half of this year, unchanged from the same period last year, according to the e-Conomy SEA 2019 report by Google, Temasek and Bain & Company.

Blood donation technology start-up Darah Kita chief executive officer Zulkarnaim has expressed that in terms of his company’s revenue, Darah Kita has not monetised its platform yet as it is prioritising reaching out to as many people as it can rather than focusing on profit.

Darah Kita, which focuses on bridging blood donators and seekers in partnership with the Indonesian Red Cross (PMI), acknowledges that the company’s business focus might not be commercially attractive, but Zulkarnaim aims to net potential investors that share the same “social responsibilities”.

“As a social start-up, [Darah Kita] focuses on the sustainability of our businesses rather than its profit”, Zulkaraim told The Jakarta Post on Monday, adding that the company relies on self-funding and donations for its operational funds.

As part of Darah Kita’s growth, it aims to educate or change the behavior of users or blood donors, he added.

“We try to make donating blood a lifestyle,” Zulkarnaim said, adding that most of the blood donors now fell under the age group of 35 to 40 years old and that awareness among the youths toward donating blood needed to be improved.

OKE Garden, a digital platform that connects decorative plant cultivators with garden planners, also expressed that it had not prioritised its profitability due to challenges in shifting the behavior of their potential users.

“[Our challenge] is to educate small garden planners to adhere to good work standards. Most of the established garden planners were also not willing to cooperate because they already have their own market,” OKE Garden CEO and founder Hadid Fathur Alam told the Post

However, medical checkup platform startup CekLab has been profitable since a year after its establishment in late 2017. Ceklab reported a profit of Rp 200 million (US$ 14,215) in 2018 and Rp 1.5 billion in 2019, with plans to triple the profit by next year.

“We ensure that our users see the value of our product so that they are willing to pay for it, adding that with ‘lean’ company management, thank God CekLab can be profitable.” CekLab chief technology officer and cofounder Ivan Sinarso told the Post in a text message.

Darah Kita, OKE Garden and CekLab were among the 10 winners of the GoStartupIndonesia (GSI) road show start-up competition that was held in several cities, namely Yogyakarta; Medan, North Sumatra; Makassar, South Sulawesi; Bandung, West Java; Surabaya, East Java; and Jakarta.

The 10 start-ups, along with five winners from last year’s competition, will be showcased at the International Innovation Forum 2019 at the Ritz Carlton hotel in South Jakarta on December 11. The forum invites creative industry stakeholders, including start-ups, to discuss the development and advancement of the nation’s creative industry. Representatives from many ministries will also be present. (mfp)


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