Regulation Becomes a Block for Indonesian Startups to Get Funding
CB Insights noted, funding for health startups (healthtech) globally broke a record US $ 2.8 billion in the third quarter. However, in Indonesia, no one has yet received fresh funds during the corona pandemic, even though this sector is considered high.
There were 162 agreements for healthtech startups in the third quarter, up 73% on a quarterly basis (quarter to quarter / qtq). In Asia, it has even increased almost three times. Meanwhile in Indonesia, the health-related sector that received fresh funds was Nusantics, which is engaged in genomics and microbiome research.
They focus on helping industry and consumers consider the impact of every decision on the health and sustainability of nature. BRI Ventures CEO Nicko Widjaja said that the rules in the health sector are very rigid.
“It is more rigid than financial,” he said in a virtual media gathering event of the Indonesian Venture Capital Association for Startups (Amvesindo) entitled “Exploring the Dynamics and Trends of Startup Funding 2020-2021”, Monday (2/11).
This is because health data is very sensitive. “If the regulations do not change, then how about it?” said Nicko. “It is very difficult for a health startup to scale (business). There may need to be a sandbox,” he continued. A sandbox is an incubation center or container for testing business models, products, services and technology startups.
No Health Startup Has Received an Injection of Funds since the Beginning of This Year
Last September, he also stated that based on published funding data (publicly available), no health startup had received a capital injection since the beginning of this year. Even though the use of its services has increased during this coronavirus pandemic. He considered that the Covid-19 pandemic was the most appropriate time to serve sub-segments because mobility was restricted.
“Why hasn’t it stood out for other sub-segments? Maybe there are many factors such as product readiness, cooperation between public and private parties, and others,” said Nicko, last September (24/9). In addition, the valuation of startup companies tends to be corrected this year, including unicorns.
Of course, startups are increasingly careful in evaluating their performance. “To determine whether to start funding now, investors are increasingly careful in assessing each startup,” he said.
Meanwhile, BRI Ventures Investment Director William Gozali said that health startups in Indonesia are more focused on health and personal care (consumer healthcare) or different from the ecosystem in Singapore.
Regulation is the Biggest Challenge for Health Startups in Indonesia
In addition, he agreed that the biggest challenge was regulation. “If you buy goods in e-commerce and are wrong, you can replace them. But if the health product is wrong, that’s terrible too,” said William. Even so, there are still a few players in the health sector so that the business is considered potential.
“There are problems that have not been answered,” he said. Based on data from Frost and Sullivan, the value of the health industry in Indonesia was estimated at US$ 21 trillion last year, up from US$ 7 trillion in 2014.
Meanwhile, ProSehat Founder and Chairman of the Indonesian Healthtech Association, Gregorius Bimantoro, said that there are many health startups that are raising funding. In addition, the use of services such as virtual health consultations has increased during the coronavirus pandemic.
“But the utilization is not as big as expected, because not all Indonesian people have turned to virtual consultation,” said the man who is familiarly called Bimo. In addition, “Covid-19 financing from the government does not go to healthtech, but offline services.” These regulations and community habits are a challenge for Indonesian health startups to obtain funding.
Meanwhile, other similar players in Asia have actually been flooded with funding during the corona pandemic. Based on CB Insights data, funding to private companies, including healthcare provider startups in Asia fell in the first quarter. In the second quarter, the deal started to increase.