With the end of 2019 fast approaching, we take a look back at how the Southeast Asia startup scene has changed in the past year. In recent years, the region has been a hotbed of startup activity, outpacing the traditional incubator of Silicon Valley. This is in part due to the fact that the area has a population of over 650 million people with approximately half being very active online. This young, tech-savvy audience is ever ready for new products and innovations.
Tech startups in Southeast Asia are all too willing to satisfy this youthful enthusiasm and they are springing up all over the place. With this eager audience already in place, the governments in the region are offering support and providing an ecosystem that is conducive to growth and entrepreneurship, helping to fan the flames of this already hot marketplace. Programmes such as Thailand 4.0, Malaysia’s active wooing of tech entrepreneurs and the Indonesian government-supported Unicorn search, the political leaders of the region have grasped the importance of creating a developmental ecosystem to nurture the future and help develop their economies.
But it is not all fun and games (although gaming startups are amongst the industries thriving in the region) as there are still some barriers to success and finding investors to kickstart an idea can be challenging. Venture Capital firms and Angel Investors have only recently begun taking Southeast Asia seriously in terms of development and are still a little cautious. Add in the failure to launch by coworking giants WeWork despite such excitement and a high valuation, and you can see why investors may be a little jittery.
So against a global backdrop of doubt and instability, how did Southeast Asia manage to weather the storm and still have a phenomenal year for startups? Let us investigate this further.
For many years, the focus of investors in Southeast Asia has been firmly on early-stage startups. While these are still hot tickets, the ecosystem has matured somewhat in 2019, with many of the green shoots starting to bloom and moving on to seeking capital for growth.
As these companies evolve and plan for their exit strategies, some are reaching Unicorn status — startup companies who have reached the holy grail of valuation over $1 billion USD. As a continent, Asia has some of the world’s most successful startups with China’s Artificial Intelligence company Toutiao topping the global list of Unicorns with another Chinese company, DiDi ranking 2nd. The Southeastern region’s high achievers haven’t yet broken into the top ten of the Unicorn ranks, but Singapore’s Grab is knocking on the door at the 11th place. Indonesian rival Go-Jek, the Philippines’ prefabricated homes company Revolution Precrafted, and Vietnam’s online gaming and ecommerce firm VNG join Grab and others to make up a list of 11 Southeast Asian Unicorns.
They say that a rising tide lifts all boats, and this seems to be true of the startup ecosystem in the region. According to research by Google, Temasek and Bain & Company, the area’s internet economy is now worth a whopping $100 billion USD, tripling in value over the past four years. This growth is expected to continue with predictions placing the 2025 value at $300 billion USD.
With some of the big players moving from requiring seed money to later rounds of funding, the VC investors are sitting up and taking even more notice of how the tech economy is blossoming. As these startups scale-up, some are reinvesting in the ecosystem that birthed them. Ride-hailing superstars Grab and Go-Jek have both setup programmes to facilitate further growth in Singapore and Indonesia.
Best cities for startups
For several years now, Singapore has been the standout city when it comes to innovation and entrepreneurship. The city nation has taken the wealth built through their banking and industrial prowess and created a tech hub to rival all others. Their next-door neighbour, Malaysia, has made moves to emulate Singapore’s success in their capital Kuala Lumpur, while Jakarta flies the flag for Indonesia as it and other cities in the region carve out a niche for themselves amongst the places where startups thrive. Investments in good infrastructure by their governments—both digitally and physically—have seen them all develop at a lightning pace—perfect for tech growth.
So what is next for Southeast Asia’s startup ecosystem? Well, with a strong commitment to growing and nurturing tech startups, the SEA region is attracting more attention and investors. According to Ernst & Young’s Private Equity Briefing released earlier this year, 2018 was a bumper year for VC investment. Over 300 deals with a value of $5.2 billion USD were completed last year, with this year’s figures likely to make that look like child’s play.
To say the future is bright in the Southeast Asian tech hubs is an understatement. This region has big plans for 2020, and after the success of 2019, my money is on them continuing to grow.