Whenever you think about startups and entrepreneurs working together at a place on something exciting, what’s the first place that comes into your mind? Silicon Valley, right?
Silicon Valley is the global hub for startups which every other emerging startup ecosphere is trying to replicate. However, over the past few years, Southeast Asian (SEA) countries have topped the growth charts in terms of startups.
With a population of over 650 million people and 330 million monthly active users, SEA provides a great avenue for investors and startups. Moreover, the increasing pipeline of customers as well as the revenue act as a motivation for entrepreneurs to expand their businesses there.
However, just because the region provided entrepreneurs with troves of opportunities, it doesn’t mean that it’s easy to start over there. Several challenges make the process troublesome.
Some giants companies have found it difficult to gain a foothold over there and so chose to either acquire, invest, collaborate with a local business or simply quit the market completely.
To understand the present scenario for startups on the SEA market, several companies have put millions in research, analysis, and surveys and have gathered a considerable amount of data. In this article, we will be sharing a few most important insights from the gathered data. To start with, let’s check out the challenges in detail first.
The challenges with investing in Southeast Asia’s startup ecosphere
SEA’s internet economy touched 50 billion USD in 2017 which outpaced the previous expectations by 35 per cent and it is expected that by 2025, it will reach 200 billion USD.
Yet to start a business in the SEA region, investors, as well as entrepreneurs, should be aware of the major hurdles that the region possesses.
Understanding the local market scenario and competitors
How will you beat the competitors who already exist in the market? Your start may have a great user base in the USA or Australia but that won’t help you to gain users in Singapore or Thailand, right?
Researching the present competitors in the market and understanding the workings as well as the target audience helps you to determine if it’s worthwhile endeavour to start a startup in the market and the resources needed to establish your business to provide the desired output and gain sufficient market share.
For this, companies need to research everything itself because such an in-depth analysis can’t be copied or outsourced.
Diversity of cultures
Startups that are trying to set up their base in Southeast Asia might find it strenuous to replicate their business because of cultural and language barriers.
The SEA region constitutes around 11 countries and every country has its own language, culture, a form of government, economic system, population age, and technical expertise. In addition to it, as per a report by McKinsey Global Institute, the per capita income may also differ up to 50x in the neighbouring countries.
Because of the diversity in cultures and languages, the market seems too fragmented and complicated for startups. There are no one-size-fits-all strategies that can be applied here.
Timing
Is it the right time to expand your business in SEA?
Is your product ready to serve a need? Is there any market need for your product? It’s common in the startup ecosystem to have a thriving business in their region, yet you might struggle to thrive in a foreign market with the same product.
You need to understand whether it is the right time to start your business in SEA or not. In this case, you’ll need to check the product available in the market and survey if there’s any market need for your product or not.
Financial situation
To determine the financial status of your business is crucial before stepping in the SEA region. Unless you invested a substantial amount of dollars for building a business reputation in the international market, your brand equity overseas is trivial.
There should be a proper strategy along with considerable resources to set up a new business, boost brand awareness and create a business process that can help to backup new business contracts internationally.
A useful idea here is to collaborate with local investors and entrepreneurs for understanding and even cutting off some direct market entry costs as well as associated risk.
A clear and measurable strategy
Before making the leap, do you have a roadmap for success? It’s crucial to have a measurable roadmap. However, it isn’t possible to predict market dynamics in its aggregate, learning from other company’s successes and failures can help in the planning.
This will help you to anticipate possible market risks and checking their mitigation measures can boost your decision-making process.
These were the challenges of starting up in the SEA region and now it’s time to reflect some findings of the SEA market.
Growth stage investments are on the horizon
One of the common indicators of the ecosystem maturity is the enhancement in the growth stage capital when funding is needed for scaling the business instead of validating the idea or understanding the market scenario.
As VC investment money is shifting from seed funding to the later rounds, this landscape is showing that organizations are thriving.
The region has witnessed some massive deals in the past few months including Grab’s USD$2B series G and Tokopedia’s USD$1.1B Series F and now is home to 8 tech unicorns.
Singapore is the right place to start a business
Singapore has been listed as the most favoured place for starting a startup followed by Kuala Lumpur and Jakarta. The main reason behind this is the strong public infrastructure and the quality of life there.
However, according to the survey, access to capital and the ease of starting and operating a business in Singapore is the reason why entrepreneurs prefer the place. Moreover, Singapore owns several VCs and a supportive government that is ready to invest significantly in small to medium-sized businesses.
Gender diversity
As an important topic that has been discussed in Silicon Valley as well, gender diversity is a critical issue with a scope of improvement. In SEA, a report found that 40% of the respondents were working in all-male employees company.
Additionally, when asked if gender should be considered while choosing an investment opportunity for a startup, the result was highly negative.
Founders had a strong opinion on this and the results were split by gender lines: While 35 per cent of female founders supported to consider the gender, just 2 per cent of male founders supported the same.
Conclusion
As the number of startups, investors and entrepreneurs are rapidly increasing in the SEA region, the place has started to have the startup fever.
As the startup ecosphere continues to mature, the future too can be expected to have a bright view and there are also chances that SEA may outshine the other startup ecosystems in the world very soon.
So if you’re planning to startup in SEA or expand your business over there, this time is the best one because of the exploding opportunities and available rooms for new ventures.
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Image Credit: Vitaly Sacred
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