Money Burning by Startup is Difficult to Avoid
Burning money by startup to raise high valuations through various big promos is hard to avoid. That’s according to the previous Minister of Trade, Enggartiasto Lukita. Companies usually take action through promos, whether it’s discounts or cashback benefits.
Burning money is a necessity that cannot be avoided by companies. Countries like Indonesia cannot easily say, waiting to learn first, and then other countries do it. According to Lukita, the existence of this money-wasting action could be positive too.
In this case, this can add to the positive side of increasing sales demand. In the end, it will support Indonesia’s economic growth. If the purchasing power of people and consumers who speak increases, it will help economic growth. That’s a simple formula.
He further explained that with the increasing number of users, companies will have greater user data to be able to improve their services. Regarding burning company money, Enggar suggested that they could be used to encourage local products to host their own country.
Companies Encourage People to Use Local Products
Meanwhile, foreign investment in the country has shown an upward trend. Then, what’s interesting to note is the change in direction of investment targets, especially investors from Japan. Funding from the Land of the Rising Sun began to target companies.
Softbank, for example, channeled capital through Grab. The two giant companies dared to release their shares up to trillions of rupiah. Reportedly Softbank and Mitsubishi are more tempted to finance the company because the appeal of the automotive sector lately has faded a little.
Financing companies can be likened to burning money, but investors from this country believe that companies in Indonesia have great potential. The fact shows that this country of 265 million people has five unicorn companies up to now.
The government hopes that domestic and international investors are so great at developing this country. The government is fully aware that the funds from the state budget are not enough to make the wheels of economic growth spin fast.
The Act of Money Burning by Companies Does Not Always Run Well
Indonesia has many technology companies that are increasingly developing by providing various facilities. Although the money burning action does not always go well, here are some companies that have burned money, including:
Companies that provide a variety of services, including services to deliver goods to a place, order food and deliver to home, cleaning services, and so forth.
The company is engaged in fin-tech, with the application of OVO, the community will be facilitated to make a transaction at an outlet or outlet, this is done to reduce the use of cash.
Tokopedia is a company that provides goods from a market or seller, so people who will buy their daily necessities do not need to come directly to the market or supermarket. With the existence of such companies bargaining activities will be conducted less and less.
On the other hand, actions by companies to waste money do not always run smoothly. Some large technology companies around the world have to experience business downsizing amid a rapidly developing digital economy. Zomato is one example. This restaurant’s aggregator company from India to reduce employees.
Furthermore, another company that has an IPO on the New York Stock Exchange, Uber, also took the same step. There is also a fall that befell the WeWork company which has the same pattern. It has a very high valuation value but it is not clear when to make a profit.
Bukalapak does employee reductions so that the company’s business can continue and be able to achieve BEP (Break-Even Point). Bukalapak’s ambition is to become the first unicorn startup to get a break-even point of investment after repeatedly receiving millions of dollars in funds from investors.