Changes in Direction of Start-up Business

KOMPAS/FAJAR RAMADHAN

A Gojek employee adjusts special delivery bags for drivers on Thursday (8/8/2019) during the launch of the GoGreener service in Jakarta.

The honeymoon period between investors and start-ups seems to have come to an end. Investors have changed their investment strategy and invest only in businesses with good prospects. Signs of the end of the honeymoon period can be seen from their more cautious approach to a start-up.

One example is the cancellation of the initial public offering of United States-based start-up WeWork as it was estimated that the results would not be as good as the initial prediction. Meanwhile, start-up Oyo was reported to have laid off 2,000 workers in India partly because its fundamentals were not as strong as initially thought.

Start-ups in general are newly built businesses and in their development, they can find the right business model. The term start-up is popular as it is associated with the use of internet and digital technology as a means of running a business.

With the use of the internet and digital technology, the start-ups can solve problems or answer the needs of consumers faster and better. More importantly, they can also reach out to more consumers.

Indonesia has a lot of digital technology-based start-ups. A number of them have successfully grown into large-scale companies thanks to their innovations in answering the needs of consumers. Gojek, Tokopedia and Traveloka are among of them.

An important phenomenon related to start-ups is that many people established start-ups in order to attract investments from large investors.

KOMPAS/LASTI KURNIA

Okegadgets employees manage e-commerce services on 26 March 2019 from a shop in Roxy Square, Jakarta. Okegadgets sells electronic products through several online platforms, including Tokopedia, Bukalapak, Akulaku, Shopee and Elevenia.

The fact that many investors have injected a large amount of money, sometimes without considering the returns, they will receive such as in conventional business has raised a question related to their investment sustainability. The other outstanding phenomenon of start-ups is that they grow very fast.

However, the most phenomenal trend of the start-up business is that their valuation is based on their business prospects. The valuation does not necessarily relate to their physical assets and their income, which are used in calculating the value of a conventional company.

However, the changes in investment strategy of investors, that have put more attention on start-ups with quality business projections, have not discourage them. Smart start-ups, which can find solutions and are able to meet the needs of many people, will continue to grow rapidly and at the same time, generate income. Such start-ups certainly still attract investors.

For consumers, the presence of a start-up business can be a solution for the people to meet their daily needs, transportation services for people and goods, food delivery, payment and crowd funding for productive activities.

No doubt the presence of digital start-ups has contributed to economic growth, partly due to their close links to the real sector. Nationally, we must take advantage of this opportunity and make the leap by building information infrastructure through the latest information technology and digital networks to remote areas. Connectivity is needed in establishing strong social cohesion.