The Role of Business Incubators in Developing Local Digital Startups in Indonesia

The development of the internet causes the flow of information to move quickly without knowing geographical boundaries. Likewise with the development of the digital industry, although the condition of the digital industry in Indonesia is still in its early stages, where infrastructure and ecosystem support is still very minimal, the optimism of digital industry players in Indonesia is very strong, both from the startup side and from investors. Problems arise when both local and foreign investors want to invest in local digital startups in Indonesia, namely the unpreparedness of local startups to receive relatively large funds for business development. This raises doubts for investors whether the startup can manage the funds raised and generate future profits for investors. Therefore, an initiative was born from investors and stakeholders in the digital technology industry to activate business incubators, with the aim of preparing local startups to be able to develop more optimally. This study uses an interpretivism approach and exploratory research which aims to find out what activities have been carried out during the business incubation process and what are the benefits and added values that support a startup's business after participating in business incubation activities. The results of this study reveal a variety of tangible benefits received by local startups to increase their capacity.


INTRODUCTION
As time goes by, most of the local startups that have been busy since 2011 have started to fall. The reason for the downfall of Calyptra: University of Surabaya Student Scientific Journal Vol. 4 No.1 (2015) These 3 local startups did not have adequate funding sources, both from income and from external funding, to continue their operations [1]. This has made stakeholders in the Indonesian digital industry aware that it takes more than brilliant business concepts and ideas to bring a startup into a stable company level, and can even compete in the international, even global arena [2]. To help local startups not wither before they develop, several digital industry stakeholders such as telecommunications operators and investors (both individuals and venture capitalists) agreed to work together and build various incubation and acceleration activities [3]. The hope of this incubation and acceleration activity is to develop the capacity of local startup founders so that they have the modern business and management understanding needed to establish and develop a startup [4].
Thus, the Indonesian digital industry ecosystem will be filled with entrepreneurs and founders who are not only creative in thinking about business ideas, but understand business execution so that their startups are able to survive the increasingly fierce competition [5]. If we look further, the development of the digital industry in Indonesia also has a positive impact on the national economy [6].

Figure 1. Siklus Feedback Loop Lean Startup
The digital industry is one of the sub-sectors of the creative industry which is increasingly showing significant growth as a contributor to the national economy [7]. Therefore, if the digital industry can develop well and be able to become the basis for innovation in other industries [8], then the national economy will also experience extraordinary growth in the end [9].

LITERATURE REVIEW
Several previous studies have provided a definition for the incubator business, namely: • Is a term that describes all organizations that provide access to affordable office space for startups and provide shared administrative services. (Allen and McCluskey, 1990). • A place that is used as a shared office with various facilities that seek to provide a value-added system, strategic additions and business support, with the aim of facilitating development of a new business. The data collection process was carried out through interviews and direct observations in the field. To minimize bias, triangulation of methods was carried out where the authors compared the two methods used at the time of data collection.

RESULTS AND DISCUSSION
The following are the results of the discussion of the data obtained during the author conducting this research. Risks and Constraints faced by local digital startups. Due to the high level of innovation, startups are very attached to risks that must be faced during their operations.
Based on interviews from resource persons, there are four risks that must be faced by startups, namely: 1. Business model risks. This risk arises when a startup company tries to introduce a business model that has never existed before [13]. Therefore, the level of acceptance of potential customers towards the business model cannot be known in the initial phase and must go through a series of trial-and-error to gain an understanding of the customer. 2. Calyptra technology risks: University of Surabaya Student Scientific Journal Vol. 4 No.1 (2015) ) 12 This risk arises when a startup company uses new technology that has never been implemented before.
3. Business execution risk This risk arises when a startup company enters the execution stage, such as marketing products, making sales, etc. The reason for this risk is that the startup does not have experience executing similar business ideas, so it cannot benchmark. 4. Market risk This risk arises because the market which is assumed to need the product/service does not exist.
In addition to the risks above, there are several obstacles that have been clearly felt by local startup actors in Indonesia, namely: 1. Regulation and protection from the government The information technology industry in Indonesia can still be said to be very young, especially for internetbased creative industries that are just emerging 3-last 4 years. Therefore, the government has not yet fully prepared regulations that can properly regulate the digital creative industry, one of which is the internet-based creative industry. Let alone talking about regulations, the government still seems confused, who should be responsible for protecting the digital creative industry. Apart from regulatory issues, what the Indonesian government feels is lacking is protection against the entry of foreign startups that are eyeing the huge Indonesian market. With the support of larger investors and experience in their home country, foreign startups feel so free to operate in Indonesia. AZ said that this is quite worrying because local Indonesian star2watups will not be able to compete to host in their own country if foreign startups are not given a barrier by the government. For example, the major e-commerce players in Indonesia are currently dominated by foreign startups, either by Calyptra: Universitas Surabaya Student Scientific Journal Vol.4 No.1 (2015) 13 opening direct branches in Indonesia or acquiring local startups that already have traction. good in the eyes of the customer [14]. 2. Characteristics of the Indonesian Market for Digital Products As a developing country, consumers of digital products in Indonesia have unique characteristics and have the potential to hinder the development of commercial startups in Indonesia. The characteristic is that most consumers always feel that various digital creative products are cheap goods, even if they can always be free. They seem less appreciative of intangible products because they feel that there is no physical form that costs money to make. This is what some of the startup sources of this research found. 3. Access to the market Access to the market will determine the survival of a startup company. No matter how good the products and services produced, if they cannot be delivered or are affordable by the market, then the startup will not be able to earn sufficient income to become a sustainable company. This obstacle seems to be an obstacle that almost all local startups in Indonesia experience [15]. Access to the market becomes difficult when bootstrapped local startups have to compete with established companies, even foreign startups that have strong capital support to compete for market attention. Therefore, support from incubators who already have access is a major concern for startups who want to participate in the incubation program.
Platforms are another problem in efforts to distribute digital products in Indonesia, as stated by one of the sources [16]. At first, the startup considered its product to be included in two mobile app platforms, namely Google Play and Apple Store as a paid product. However, when it comes to launching its products, there is an obstacle that at that time Google Play had not issued a license for Indonesian developers to publish paid applications, while the Apple Store was able to. In Calyptra: University of Surabaya Student Scientific Journal Vol.4 No.1 (2015) 14 Indonesia, this is a problem because users of Google's Android operating system are far more dominant than Apple's iOS operating system. The next problem in terms of market access is the lack of market access. use of credit cards in Indonesia. In fact, credit cards are the most efficient payment media for digital products. As a result, customers are too lazy to buy digital products because they don't have a credit card. Until now, the number of credit card users in Indonesia has only reached 2% of the funds to support its operational activities. However, the options for startups are more limited because the risks they face are relatively higher than conventional businesses [18]. Especially for digital startups, the more complicated problem is that startups often do not have tangible assets that can be used as collateral to apply for conventional funding, both to banks and other credit institutions [19]. The main aspect that has high value in digital startups is intangible, namely their business concepts and ideas. This makes funding options from conventional institutions such as banks relatively very difficult to obtain. The first option that startups can and usually takes is to use their own costs to meet their initial operational needs before finding investors [20]. The next option for startups is to look for investors who are specifically invested in high-risk companies such as startups. It is possible that the business incubator will also provide funding in the early stages so that the founder can focus more on developing his ideas and business. Furthermore, this study finds facts about the different characters of startups that fund independently with those that obtain funding from external parties (incubators) [21]. The self-funded startup Calyptra: University of Surabaya Student Scientific Journal Vol.4 No.1 (2015) 15 will tend to be more careful in every expenditure, but also causes expansion measures to often have to collide with funding problems . On the other hand, investor-funded startups have the flexibility to use the funds for startup development more optimally [22]. However, as said by BK, the negative impact is that startups become more aggressive and tend to dare to take higher risks in using these funds, so that they do not provide an optimal impact for startups [23]. 5. General business understanding In any business field, business understanding is an absolute must for business people. However, unfortunately, in Indonesia, this is still felt to be lacking by local business people. In the context of the digital industry [24], one of the interviewees felt that entrepreneurs in this field still do not have enough entrepreneurial spirit to build a sustainable business. In the early days of the proliferation of local startups, it was said that the founders did not understand how a good business model was for their startup and how to innovate well. At that time, the founders seemed to be competing to create unique and creative ideas, but had not thought about the business side and the sustainability of their business in the future [25]. Their mindset in forming a startup was to be included in various races to further gain instant publicity and popularity, get funding from investors, but there was never any continuation. In fact, the business understanding in question is things like determining and validating customer problems to be solved, talking directly to customers to get feedback, then starting to make products according to valid ideas to the transaction process. These things escape the attention of founders who focus more on the innovation side, without paying attention to the business side. As a result, startups will often fail to develop in the middle of the road [26]. 6. Building a team with one vision Building a startup company to become an established company is quite difficult and has high risk. Without the support of the team and adequate personnel who oversee the startup in its execution process, any good ideas and concepts will not help [27]. One of the interviewees admitted that one of the obstacles he encountered was forming a team with one vision with a strong commitment to jointly develop a startup. In contrast to companies that are mature and have a clear business model, startups (especially those that are independently funded) often have various limitations, including in terms of the benefits that can be offered to potential team members. Not all startups are able to offer high salaries, while they also have a need for superior human resources in order to be able to continue to grow and compete [28]. Therefore, the role of the founder in convincing team members is very important 7. Lack of focus on startup development It must be admitted that very few startups in Indonesia start out as permanent jobs or full-time jobs. Most startups in Indonesia start from hobbies or products developed to fulfill the ideals of their founders [29]. By not working on startups as their main job, local startups experience delays in their development because the founders are not focused on developing further. This is quite acceptable because it is very rare for startups to be able to achieve revenue in the early days of their establishment, while it is undeniable that every team member who works at the startup still has a financial burden that must be met [30].

CONCLUSION
From the research that has been done, the authors found several important findings including the risks and obstacles that must be faced by local Indonesian digital startups, as well as the benefits of incubation activities for startups. The risks that must be faced include business model risk, technology risk, execution risk, and market risk. For the obstacles faced, in general startups will face external and internal obstacles. In connection with the condition of Indonesia's digital industry which is still developing, some of these external and internal constraints are also quite unique and rarely found in a country with a mature digital industry, such as in the United States. To overcome the various obstacles above and minimize the risks faced by startups, incubation activities can be one of the paths taken by local startups. Several functions of incubation activities described by Bergek and Norman (2008) are infrastructure support, business support, mediation and networking, and support when startups have graduated from incubation. In Indonesia, there are several additional benefits provided by several incubators, such as support for very broad market access (due to collaboration with telecommunication operators), funding from incubators in the early stage phase, as well as improving the company's image in the eyes of investors and customers. In addition to the theoretical implications above, the researcher also suggests several practical recommendations to stakeholders involved in the Indonesian digital industry. First, the government can play a more active role by forming a special work unit involving various ministries related to the creative industry to jointly support the creative industry. Second, the process of educating the Indonesian people to increase appreciation for creative products. Third, increase the quality and quantity of business incubators in Indonesia. Lastly, to encourage the role of the telecommunications industry as a distribution channel for creative products.