What did Gojek get wrong about Southeast Asia?

Southeast Asia is often seen as the next growth frontier for technology startups, but billing the region as the next China or India is misguided.

Former Gojek co-founder Kevin Aluwi discusses the tech major's miscalculations in the world's fastest-growing large internet market:

1. Gojek's greatest miscalculation was its assumption that as long as you win Indonesia, you win everything. Aluwi calls this a huge mistake, and concedes that it was way too premature to make that assumption. It might be true in 10 years but very, very wrong back then and today. While Gojek's decision to first focus on its home market was correct, what it should have done immediately after launching its car-hailing services was to expand to affluent regional urban centres. Instead, Gojek "waited two more years before entering Vietnam, Thailand, and Singapore". Gojek's confidence that Indonesian cities outside Jakarta would "grow quickly in their take-up of consumer services" was also misplaced. Instead, "most Indonesian tech companies… relied on Jakarta as their biggest revenue contributor". This over-concentration of its resources on developing the Indonesian market would cost Gojek dearly.

2. Gojek's second misstep was its failure to recognise that Singapore, not Indonesia, is SEA's most important market. "People often view the city-state as a small market and believe Singapore companies have to go global from the start to be successful". In contrast, Many Indonesian companies believe they can do well by focusing solely on the domestic market. We have actually seen over the last few years that's not true. Singapore is the metropolitan area with the highest GDP in the region. As such, while Singapore's accounts for less than 1% of SEA's population, residents of the city-state have significantly higher purchasing power. As a case in point, regional rival Grab derived 23% of its 2023 revenue from Singapore, and 29% from Indonesia. If you were a consumer tech founder and you had to choose which market to win today, you should win the six million people in Singapore.

3. The third, and possibly most critical miscalculation, is that SEA's demographics are fundamentally different from those of China and India. Despite the region's large population, consumer tech firms require large urban centres and a thriving middle class with spending power. This is something China and India have at a much greater scale than SEA.

So will funding ever return to the SEA tech industry? Aluwi thinks so, but only when founders build companies that deliver profitable customer cohorts at scale, the middle class grows meaningfully, and investors have a good sense of what kind of companies can be sustainably built in this region.

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