In the past year, consumers and businesses in Southeast Asia have quickly adopted digital technologies widely used in other parts of the world, especially with the acceleration caused by the pandemic.
This movement creates a fertile ground for many regional startups to catapult to stardom with their unicorn status, primarily in the fintech, e-commerce, and logistics verticals. The question here is: what’s next in 2022?
While artificial intelligence, machine learning, Big Data, virtual reality/augmented reality, and blockchain continue to play vital roles in forming these tech solutions, cryptocurrencies, non-fungible tokens (NFTs), and Web3 have significantly set their foot in every sector. Though their use cases outside the financial world still need more time to be proved, this heralds a moment for the next generation of regional startups to blaze a path in the global tech battlefield.
Following the exciting pace of the region’s startup ecosystem in the past year, combined with what VCs tell us about their upcoming investments, here are a few important trends within key tech verticals that you should look out for in 2022.
1. Climate-tech
Climate change remains one of the hottest topics as global temperatures kept going up with each passing month in most of 2021. Bill Gates — the author of How To Avoid A Climate Disaster — believes that funding green innovations is the only way to address the imminent crisis. Larry Fink, CEO of the world’s largest asset manager Blackrock, echoed this viewpoint as he said that the next 1,000 unicorns would be involved in climate technology.
For the record, climate-tech investment is not immune to the overall mounting capital poured into the region, as the domain attracted a whopping US$30.8 billion in the first three quarters of 2021 — already more than the amount recorded in the previous full year, according to the PitchBook data. The launches of new climate tech-dedicated funds in the region last year, including Wavemaker Impact, Investible, and Circulate Capital, will keep the hype in this sector for years to come.
Also read: How debt financing, crypto, SPACs keep the climate-tech funding momentum in SEA
2. Edutech
2020 and 2022 welcomed a crop of edutech startups unlocking business opportunities during the pandemic-induced lockdowns. Last year, personalised e-learning became a buzzword as almost every edutech startup integrated this feature in their business models or product roadmap using AI and ML technologies.
In a nutshell, this helps make visible and behind-the-scenes data-driven judgments, driving tailored content for each student based on their abilities, chosen methods, or learning experience.
The “study-to-earn” concept — a system that combines cryptocurrencies and education to raise engagement rate — also received recognition from global tech veterans, including Binance founder “CZ” Changpeng Zhao (see the tweet he posted last November). This comes as a part of the gamification trend in edutech in recent years.
According to a BlueWeave Consulting study, the global education gamification market was valued at US$697.26 million in 2020, growing at a CAGR of 29 per cent during 2021-2027.
Moreover, immersive learning is becoming increasingly popular worldwide, with VR transforming spectators into active participants in events that may engage with the educational setting. The metaverse world will have a place for educational purposes, stated Facebook (now Meta) CBO Marne Levine.
The AR/VR technology industry is expected to hit US$18.8 billion this year (a 3x growth over the previous five years), with a large percentage of solutions aimed at education. VR-based corporate training, a subset of VR-powered education, is slated to reach US$6.3 billion by 2022, according to ABI Research.
Also read: Edutech is surging, but here are the 3 issues it is facing
3. Fintech
Payments and digital lending attract the most funding in the fintech space, with Momo and Mynt bagging sizeable amounts last year to become unicorns. However, VCs keep a close eye on emerging areas like wealth-tech and insurtech.
In 2021, global wealth-tech funding exceeded US$20 billion, with the advent and advancements of robo-advisors, digital brokering, online banking, robo-retirements, new investing tools, and, most recently, NFTs.
Investors expect this space to go along with vast trade democratisation, enabling more young users to adopt these tech solutions in 2022.
While insurers suffered from a loss of around US$55 billion due to COVID-19, global investors still funded insurtech firms to the tune of US$7.5 billion in 2020 and were expected to accelerate in the Southeast Asia market as the pandemic continues to concern people on health and asset. Vietnam’s Medici, Indonesia’s Fuse and Lifepal, Thailand’s Fairdee and Singapore’s Bolttech are some prominent insurtech startups that have received funding in 2021.
Besides, as most crypto owners would utilise their banks to invest in cryptocurrencies, we expect to see more “cryptofication” of banks in a bid to catch the wave. As a result, blockchain’s rising popularity as a means of creating a secure digital record cannot be overlooked.
Buy-now-pay-later (BNPL) is also gaining momentum in the region as it is “faster, easier and free for consumers”. This solution has long been going places globally but has only picked up pace in Southeast Asia in recent years, with some successful cases such as PayLater (Indonesia), Atome and Hoolah across Hongkong, Singapore and Malaysia. As the pandemic shows no sign of subsiding, the BNPL model is ripe for an explosion as it can assist consumers in their shift to online shopping.
4. Entertainment
Gaming is the largest and most expansive industry globally in the entertainment vertical. As of 2021, it had a staggering three billion game players, which is equivalent to nearly 40 per cent of the world population.
With the support of blockchain technology and the cryptocurrency community, gaming has returned to its prime time with the new concept of “GameFi”, a combination of “game” and “finance”.
As per crypto data tracker DappRadar, crypto play-to-earn apps surpassed decentralised finance (DeFi) in user popularity in 2021. The success of Sky Mavis, which owned the popular NFT-based game Axie Infinity, has led the charge for various followers, dragging along many concerns over scams and market bubbles within the space.
It is, however, still a burgeoning market to follow as more incumbent players of the traditional game world are looking to compete.
This gaming development trajectory aligns with the nascent metaverse frenzy that shook up the tech world last year. Although it is still in the early days of growth, metaverse fosters the development of a creator economy. Not just gamers but artists are also taking advantage of the decentralised blockchain ledger and NFTs in metaverse to ensure their ownership of digital products — ranging from pictures and photos to music videos and songs, allowing them to be traded globally.
Also read: Metaverse is around the corner and you should play a role in it
Another business line that emerged in 2021 was audio-based content. Based on eMarketer 2019 data on digital audio listenership and voice assistant usage, the digital audio listener base exceeds 300 million across countries, including Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.
Last year, we witnessed a handful of startups joining the game, including NOICE, Podcast Network Asia, OnMic, and Fonos, which are creating their own platforms and generating new business models for audio content.
E-sport also garnered attention as the lockdown blues drove more people to turn to digital platforms and watch live game streams. By 2022, the e-sports ecosystem is expected to generate US$1.8 billion in income, opening windows for more startups to seize opportunities.
5. Cybersecurity
Cybercriminals exploited the accelerated digital adoption and work-from-home measures during the COVID-19 crisis to tap on the vulnerabilities in the computer networks of individuals and institutions, be it local businesses or global organisations.
The year 2021 witnessed data breach costs rise from US$3.38 million to US$4.24 million per breach, the highest average total cost reported in the last 17 years, a report by IBM shows. Notably, Southeast Asian countries are being used as hotbeds for cyberattacks, according to a report by AT Kearney. Major cyber threats include business email compromise, e-commerce data interception, and crypto-jacking.
The region is urging more startups to address the latest challenges in cybersecurity, including risk and compliance, data security, cloud security, and identity and access management.
While Singapore stands at the forefront of cybersecurity tech development in the region, other countries’ startups are looking to gain more traction in 2022 as demand for cybersecurity solutions continue to deepen during the pandemic.
Also read: Why Malaysia is quickly becoming a cybersecurity hub for the rest of the world
6. Healthtech
With the higher healthcare costs, an ageing demographic, a mounting number of chronic diseases, and growing discerning customers over health issues, the healthcare market in Asia Pacific is slated to climb at a CAGR of 8.8 per cent to US$157 billion by 2022, APACMed estimates.
This has created an influx of healthtech startups, unlocking faster and more effective medical intervention for healthcare providers, complementing clinical practices and improving healthcare results.
In Southeast Asia, telehealth and on-demand care, predictive analytics, healthcare management software are among the most well-funded sub-sectors of healthtech during 2020-H1 2021, as per the Global Private Capital Association (GPCA) report.
Moreover, according to Deloitte predictions, 320 million consumer health and wearable wellness gadgets will ship worldwide in 2022, with 440 million units shipping by 2024. In the backdrop of this exponential growth, new products and solutions are being introduced to the market, and more health care practitioners are growing familiar with them. If physicians believe in their utility and individuals trust their data security, the influence of healthtech will set to grow even more.
Also read: [Updated] These 4 medtech startups will help you bust health myths during COVID-19 crisis
7. Foodtech
As COVID-19 affected food security, private capital investment in foodtech sector spiked from US$20 million in 2019 to US$148 million in 2020, GPCA data shows, expecting this trend to keep its momentum this year.
Startups for alternative protein, such as plant-based meat and dairy alternatives, have been gaining traction since 2019, accounting for around 75 per cent of capital pouring into the sector.
In addition, tech and tech-driven business models have enormous potential to reduce food waste across the value chain, London-based Aquaa Partners stated. They have gained attention among VCs, who have invested US$1.4 billion into food waste startups during 2018-21 globally.
Also read: Fixing food waste problem means less hungry people and a great economy
8. HRtech
The pandemic and rising adoption of digital technologies worldwide have placed enormous pressure on the world’s human resources.
According to US Labor statistics, as of December 2020, the global talent shortage amounted to 40 million developers worldwide and is expected to reach 85.2 million by 2030.
Companies around the world risk losing US$8.4 trillion in revenue because of this lack of skilled talent, opening up room for innovative solutions in HRtech.
So far, we have seen HRtech as largely focused on five categories: talent management, talent acquisition, workforce management, HR and admin, and collaboration & productivity. HR departments are increasingly employing AI and automation to seek and hire the proper personnel while reducing workloads.
Notably, payroll fintech startups are on the radar of various global investors. Salary advances, real-time payments, and crypto payments are just a few use cases of utilising payroll software.
For instance, earned wage access (EWA) startups enable employees to receive salaries ahead of their payday almost instantly via a mobile app integrated with the company’s payroll system, helping them deal with unexpected financial expenses.
Also read: How to retain local talent as global demand for remote tech workers surges
Last year, we covered VC investments into Vietnam’s GIMO, Indonesia’s wagely and GajiGesa; these firms are doubling down on improving financial stability for workers through EWA.
Dailypay, a leading US-based EWA provider, raised US$500 million last year and reached unicorn status. The US-based Payactiv also counts over two million users and has processed more than US$5 billion in EWA. This highlight the tremendous potential of space in Southeast Asia in the coming years.
—
Ready to meet new startups to invest in? We have more than hundreds of startups ready to connect with potential investors on our platform. Create or claim your Investor profile today and turn on e27 Connect to receive requests and fundraising information from them.
Image Credit: 123rf
The post These 8 tech verticals are ripe for explosion in Southeast Asia in 2022 appeared first on e27.