Digital Startup Layoffs Not Indication of Bubble Burst, Says Rudiantara

TEMPO.CO, Jakarta - Chairman of the Indonesian Fintech Association Supervisory Board Rudiantara on Thursday said that he believes the multiple reports of workforce layoff committed by edutech Zenius and SOEs-backed digital wallet LinkAja do not depict a digital startup bubble burst. 

“The proper term would likely be a startup surge of failures, but is surely not a bubble burst,” said Rudiantara to Tempo on May 26.

Recent headlines are filled with startups announcing layoffs such as Zenius which recently let go 200 of its employees, which were mostly from the production and content divisions. LinkAja also announced that it has slimmed down its workforce. 

He argued that it was in the industry’s nature to see 10 percent of digital startups fail to survive their first year and 90 percent crumble over a five-year period. Despite the percentage of the resistance, he said this was an improvement compared to five years prior. 

The former Communications and Informatics Minister believes this is caused by a shift in focus from investors that used to rely on traction, or the number of people downloading the digital apps and transactions to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or focusing more on profitability.

This drove investors to implement a more selective strategy but Rudiantara argues that the current phenomenon does not repel investors from the digital startup industry, and rather shows a shift in investment criteria. 

“This is a lesson for digital startups that the essence of a business will come back to EBITDA,” he said.

TEMPO.CO | FRANSISCA CHRISTY ROSANA

Click here to get the latest news updates from Tempo on Google News