Indonesia 2021 outlook: VCs "cautiously optimistic" on Southeast Asia's largest country

Investors expect Indonesian startups to regain their growth opportunities when the economy reopens with the Covid-19 vaccine rollout, even as some online living and working habits have stuck

The Covid-19 pandemic dealt a heavy blow to Indonesian startups last year as the country, one of the worst hit in Southeast Asia, plunged into its first recession since 1999. Overall funding dropped, both in deal flows and transaction size, and most companies had to turn to belt-tightening and cuts, although some sectors – mainly edtech, e-commerce, healthtech and enterprise SaaS – benefited from the shift to online living and remote working.

VC investors polled by CompassList say Indonesia remains an attractive market in the longer term, citing its large, fast-growing and youthful middle class, and the newly passed pro-business Job Creation Law. But they warn that local business activity is unlikely to recover strongly yet in 2021, despite hopes for a shot in the arm from the global Covid-19 vaccine rollout. Indonesia also faces rising competition from other ecosystems in the region, especially Vietnam and Singapore, which have been more successful in managing the pandemic so far.

"Vietnam really benefited from their good handling of the

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