Jakarta. Indonesia’s startup funding fell sharply in 2025, totaling $355.7 million (Rp 6 trillion) across 91 deals, a steep decline from the peak of roughly $6.9 billion recorded in 2021, according to a new industry report.

Despite the drop, analysts say the contraction reflects a global shift toward more disciplined investment rather than a weakening of Indonesia’s digital economy.

The Indonesia Startup Report 2026, published by DiscoveryShift and supported by the GarudaSpark Innovation Hub under the Ministry of Communication and Digital Affairs, found that Indonesia ranked third in Southeast Asia for startup funding last year, behind Singapore with $4.2 billion and Vietnam with $366 million.

The report attributes the slowdown primarily to tighter global liquidity and higher US interest rates, which have reduced the flow of venture capital worldwide.

“If read in isolation, the numbers may look like a setback. They are not,” Andy Zain, chairman of Foundry Collective, said in the report released Tuesday. “This is a recalibration. Indonesia remains the largest market in Southeast Asia, home to nearly 280 million people, with a growing middle class and a digital economy that is difficult to reverse.”

Zain said the country’s fundamentals remain intact, but the threshold for funding has changed as investors become more cautious.

While total funding declined significantly compared with the 2020–2022 period, late-stage investment proved relatively resilient. Several large Series B and Series C deals absorbed much of the available capital.

Early-stage deals accounted for about 67% of all transactions in 2025, but only around 15% of seed-stage startups succeeded in advancing to Series A funding, indicating intensifying competition and stricter investor screening.

By sector, new retail, fintech and e-commerce attracted the largest share of investment during the year.

DiscoveryShift founder and managing partner Rama Mamuaya said the ecosystem is undergoing a transition rather than a downturn.

“Fintech and new retail continue to attract substantial capital, while artificial intelligence is emerging not as a standalone thesis but as an operational layer embedded in products that already show product-market fit,” Rama said.

The report also highlighted structural challenges in Indonesia’s venture capital landscape. Nailul Huda, director of the digital economy at Celios, said only about 10% of venture capital in Indonesia’s digital economy currently comes from domestic sources, reflecting a heavy reliance on foreign investors.

“If tight funding conditions persist, startups may face binary outcomes—consolidation or forced shutdown,” Nailul said. “But this recalibration could ultimately push the ecosystem toward more sustainable and innovation-driven digital productivity.”

He urged policymakers to strengthen domestic venture capital participation, streamline regulations for technology investment and channel more capital toward climate-aligned and green technologies.

Government officials also see opportunities to improve the ecosystem. Sonny Hendra Sudaryana, director of digital ecosystem development at the Comunications Ministry, said Indonesia needs stronger founder governance, more locally rooted innovation and broader development of digital talent beyond major urban centers.

Through programs such as GarudaSpark and Hub.id, the ministry aims to support startups at various stages while encouraging more coordinated national innovation efforts.