Southeast Asia is home to multi-million dollar businesses that have managed to attract eyes from around the world. As per a report by Cento Ventures, the Southeast Asian startups drew a record number of investments in the first half of 2021.
However, the value of these deals declined, as seen in the graph below. There are other challenges and pitfalls that the companies of this region have to overcome.
To understand the current Southeast Asia venture market, it’s essential to understand the scope, market growth, and challenges it’s experiencing.
Image Source: Bloomberg
Ventures that are booming in the Southeast Asia market
The Southeast Asian market is giving importance to several startups varied across different services. Some of the significant ventures that have stood out from the competition are:
- Grab: Grab is hailed as the biggest high-tech startup in Southeast Asia. The venture is a preeminent name when it comes to taxi booking and ride-sharing companies in Singapore. Headquartered in Singapore, and Indonesia, the company has scaled up its services to grocery, food, mobile payments, and more. Currently, Grab serves in 8 different countries, 400 cities with 214-million-plus app downloads.
- Tokopedia: The startup was founded in 2009 and enables small businesses and big corporations to sell to consumers directly. An Indonesian E-Commerce giant, Tokopedia has over 100 million active users with 9.7 million merchants on the platform. Tokopedia also managed to strike a chord with pop music fans with BTS and Blackpink as their brand ambassadors.
- Gojek: Starting as a call centre, today, Gojek is billed as the biggest on-demand multi-service platform in Southeast Asia. Hailing from Jakarta, the company is financially supported by names like PayPal, Google, Facebook, Mitsubishi, amongst many others.
- Momo: Momo is the biggest e-wallet company in Vietnam that has a customer base of millions. The company app aids users to transfer money digitally which includes nationwide transfers, purchase services, recharge, bills, etc. This business has partnerships with 24 domestic banks and foreign networks that include Visa, JCB, and Master Card.
- PropertyGuru: This business is the largest property platform in Singapore that caters to 37 million property seekers a month. Recently the company decided to go public backed by billionaires with an equity value of 1.78 billion dollars.
Also read: Sustainability starts at home: How I aim to tackle climate change as PropertyGuru CEO
Hence, the startup market of Southeast Asia is expanding, and it isn’t what it used to be. Even though the market is big, it lacks innovation with up-and-coming technologies as some western nations. This makes the business scene fierce in terms of competition.
The curious case of Vietnam and its rise in the Southeast Asia startup scene
Vietnam has made great strides to become a competitive name in the Southeast Asia startup ecosystem. As per a report by Golden Gate Ventures, “Vietnam will become the third-largest startup ecosystem in Southeast Asia”.
The report further states that the nation will focus on early-stage investments and that the IPO in Vietnam will cross 300 by 2030.
An exponential rise in funding of media startups can also be observed as per this report by Golden Gate Ventures. This is due to the global interest in Asian content as the sector recorded 100 million USD funding in 2020.
However, Vietnam also faces specific challenges, especially in the field of AI. President of Vietnam recently signed the National Strategy on R&D and Application Of Artificial Intelligence. It’s a complete roadmap for this decade that wishes to make AI ubiquitous across Industries in Vietnam.
While at first, it seems ambitious, there are a few roadblocks the document fails to cover. As analysed by Nga Than, a doctoral candidate at the City University of New York, and Khoa Lam, contributor for humanity, the document requires more emphasis on security, the responsibilities of humans, and privacy.
There’s no in-depth explanation of AI ethos that can lead to more harm than good. Appending these points can solidify this document, making it beneficial for the economy and serving society.
With the current pace, Vietnam is well on its way to becoming a hotspot for technology in Southeast Asia. It’s also predicted by DBS Bank professionals that Vietnam’s GDP will cross Singapore’s by 2030.
However, there are specific challenges the nation has to overcome. They have to clearly define and understand the shortcomings of the process and work on it as a whole. Being ambitious from collective directions is likely to help Vietnam with its vision.
The flourishing startups of Southeast Asia: The rise and their challenges
With the increase in the business of the wild east, some intriguing observations are coming to light. These inspections demystify the startup market of Southeast Asia to any outsider. Further, this aids them in understanding the ground reality of the startup ecosystem in Southeast Asia.
There’s market interest in this region.
It’s no secret that Southeast Asia’s potential and enthusiasm is the catalyst behind their market success. Major Chinese companies have invested a large chunk of their money into these innovative firms.
Investors from the USA have also accounted for 25 per cent of investment since 2015, as reported by Kroll and Mergermarket.
This makes the market competitive, and investors have to be smart with their investments. Business founders should take advantage of this trust and investment and lead to innovative solutions that benefit society.
The market conditions are ideal for a startup boom
As stated before, the potential that Southeast Asia possesses encourages growth and investment. This region has a tech-savvy youth, and 90 per cent of this population has internet access that knows how to build technology.
The 2018 Bloomberg Innovation Index puts Singapore in the 3rd spot. Significant investments in R&D and STEM education prove that Southeast Asia is the future of startups.
However, these markets need to retain the talent that they possess. It’s essential to cater to workers’ needs if these organisations expect the best from their employees.
The companies that will identify and utilise the young talent will flourish, and all else will perish.
Lack of global support and growth barriers
World funding for businesses is boosting at a rampant rate in this region. However, there’s scope for improvement as there’s a vast gap between early and late-stage funding.
Focus is still laid on significant companies and not on early-stage companies. Investors need to focus on early startups as they shape the next generation of businesses in the region.
The regional restriction is another barrier that hinders the growth of this region. Major companies from the US fail to establish a strong foothold in this region.
Amazon is failing to compete with e-commerce locals such as Lazada and Shoppee. The homegrown success story is familiar in these regions as the ventures of Southeast Asia understand the local consumer behaviour.
Also read: Why Vertex Holdings CEO is optimistic about the VC industry in SEA
Southeast Asia is a highly divided region with small fragments forming a specific area. Some cultures are large enough and can be considered as one. However, some are small enough not even to sustain a business. A nation in Southeast Asia consists of various small cultures, each having its behaviour and habits. Southeast Asia is not a homogenous society marked by splits and divides, making it hard to do business.
Apart from Singapore, almost every region nation has failed to establish a friendly business policy with foreign countries. Due to its restrictive nature, Southeast Asia has faced significant barriers with investments and upscaling.
A cut in investments has led to an extreme but less innovative startup scenario in Southeast Asia. Common man also lacks general technical knowledge making it harder for them to use the cutting edge technology. These factors curb the innovation in Southeast Asia, making the region less innovative than western nations.
On the contrary, easing business processes and implementing global friendly regulations can help the businesses in this region.
With the right balance of the local and international, these startups can go global and acquire valuable foreign investments. However, it’s crucial to have a local mindset that understands consumer behaviour to succeed in Southeast Asia.
It’s interesting to see the rampant growth of businesses in Southeast Asia. The market has infinite potential for companies that can expand and do better for society. However, the Southeast business market faces challenges with foreign investments and cultural barriers required to overcome.
Conquering these challenges can lead to innovative solutions that can benefit society at large. As stated by Kevin Aluwi, CEO of Gojek, “What’s unique and great about Indonesia and Southeast Asia is there’s a deep alignment between what’s good for business and also what’s good for society”.
With the prospects looking bright and investments more than ever, it’s important to tap on this market’s potential. However, with time, we’ll see the precise direction that the Southeast Asia business market takes.
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