Signs indicate that Southeast Asia is becoming a hotbed for growth among startups and opportunities are plentiful in the region, Kenneth Tan, Vice-president of Gobi Partners, told a packed house at TechNode’s ORIGIN conference, held during Malaysia Tech Week 2019.
“A lot of startups in Southeast Asia are growing positively and this is very encouraging because it shows that the whole ecosystem is progressing,” he said during a panel discussion moderated by Navin Danapal, the SEA Director of accelerator venture capital SOSV.
As Southeast Asia’s digital economy is forecasted to triple in size to reach RMB 1.2 trillion ($240 billion) by 2025, according to TechCrunch, it has become a highly scrutinised and favoured region among both investors and businesses considering expansions. The panel discussion took off with a focus on the tech landscape synergies between China and SEA.
“Firstly, there is a need to understand the reason why companies in China will consider SEA,” said Tan, adding that the situation is very much like that of China many years ago. With a young population, increasing GDP per capita and rising internet penetration rate, this region is very attractive, said Tan.
However, for Chinese companies that are planning to expand their operations down south, Tan emphasized the importance of localization and a change of mentality towards running a business in this region.
“SEA has ten countries, each with different policies and regulations and are at different market stages,” said Tan. He stresses that due to these differences, it is vital for foreign companies to pay ample attention to understanding the local market that they intend to expand into – i.e user behaviour and income levels across different markets. Tan also shared that companies must understand that strategies that have worked back home may not work in SEA.
Key to SEA Success
“At the end of the day, it is all about how much effort and energy you put into listening and understanding the consumer’s problem statement,” said Sai Kit Ng, Chief Executive of multi-stage technology and venture capital firm Captii Ventures. Emphasising the importance of understanding the needs of the market, Ng advises companies to always analyse the problem statement and be prepared to redesign their product to suit the customers. “Focus on the customers who are willing to pay you, this will provide you with a lot more opportunities to improve,” said Ng.
However, Ng also encourages businesses to look beyond the ASEAN market at times because through his observations, he realised that businesses from the region do produce solutions that attract a significant amount of consumers in other countries such as the US.
Ultimately, Ng encourages founders to strive to improve and to benchmark themselves against industry giants.
Local focus needed for startups
“The speed of growth of the markets, the capital investment in this region, the pace of business and the number of startups are all growing tremendously,” said Tan. However, Ng also shared an ironic observation with our audience that local startups find it easier to sell their product to a foreign market than to their own. Hence, Ng urges firms to give more opportunities to local players for them to prove themselves.
Ng shares that trends are often set in China and the US. Currently, he says, artificial intelligence is on top. “I think what is next will depend on who is able to come in and identify the key problems in the different markets and solve them,” he said.
“The short answer is the industries that the unicorns are in,” said Tan. He elaborates that given the rigour needed to start a business, for them to be able to reach the unicorn or even decacorn stage, it would signal good business operations, strong potential, market opportunities in the region and ultimately exit opportunity for investors to make money.