Some of the startup trends 2023 has witnessed thus far may have left many wondering what the future holds for the region’s economic ecosystem. With the news from DealStreetAsia that startup funding fell to a four-month low of USD 445 million in June, many people may be worried that new businesses will be limited or find it challenging to operate in the current climate.
The state of the startup landscape in the Association of Southeast Asian Nations (ASEAN) has not been ideal in recent years. Companies have faced unprecedented times, with everything seeming to fall apart collectively. For example, venture capital (VC) firms and investors have held onto their funds because of the global economic crisis.
Tech startups in Southeast Asia raised USD 10.4 billion in 2022 despite global slowdown
Moreover, interest rates and energy prices are high, and manufacturing and production costs have increased. These factors, plus the market inflationary pressure, are lowering consumer demand, making it challenging for novel businesses to generate adequate and much-needed revenue. The trade war between the United States and China is still ongoing, and the fighting in Ukraine is causing supply chain disruptions.
Finally, mass layoffs were prevalent last year, with companies culling their inflated staffing to streamline their operations. The talent crunch in the region remains, but employers are trying to adapt and care for their workers by offering counselling, wellness programmes, work-life balance, hybrid work, and more.
While all of these problems appear overwhelming, there are many positive startup trends in Southeast Asia this year that bode well for the future:
Positive trends for ASEAN startups this year
For several years now, ASEAN has been digitalising its governments, industries, and startup ecosystem to tap into the potential of a digital economy. This approach has provided tremendous benefits, with many innovative solutions emerging. For example, professional services firm PriceWaterhouseCoopers (PWC) stated that ASEAN is switching to cashless payments, enabling startups to earn money from multiple sources and a customer base expected to be 623 million citizens by 2030.
Financial technology (fintech) is making its mark by enhancing accessibility, inclusivity, and convenience through digital payments. Southeast Asia is known for having many unbanked citizens, especially in rural areas, and fintech makes it easier to democratise access to all. Fintech is also helpful for eCommerce startups who can embed financial infrastructure into their apps and services to make payments seamless for customers.
Startup founders are uncovering alternative sources of funding for their businesses as innovative solutions emerge in fintech. Aside from using their money, borrowing from banks, seeking funding from the government, or crowdsourcing, founders can sign up for blockchain-powered games like Axie Infinity that enable them to earn money in-game.
According to Statista Research, smartphone use is on the rise in ASEAN, and the smartphone market will have a volume growth of 0.6% in 2024. As more people can afford to buy these high-tech devices, they will be able to access and transact on the Internet. Furthermore, startups can introduce new payment approaches–such as Buy Now, Pay Later (BNPL)—where customers can use smartphones to acquire products and use their mobile wallets to pay for them in instalments over some time.
Other positive trends involve innovation in different sectors, with blockchain, cryptocurrency, Web3, Generative AI like ChatGPT, and metaverse development continuing. The electric vehicles market is also making a mark in places like Indonesia, which has a large deposit of nickel, a raw chip material. The development of 5G technology will likewise change how people communicate and transact online, with faster speeds and better data transfer solutions.
Finally, ASEAN is addressing food insecurity in the region by adopting various technological practices. For example, Singapore is dealing with its limited land available for farming by using techniques like vertical farming.
What does the future look like?
The positive startup trends 2023 show can only be prolonged with the alignment of governments, citizens, and stakeholders for sustaining the startup ecosystem. The good news is that there is a consensus on boosting ASEAN startups to reap their benefits.
First, the inadequate level of digitisation in rural areas presents an opportunity for founders to establish startups in these untapped markets. Urban areas drive the economy while neglecting or denying rural citizens access to vital tech solutions. Therefore, governments must upgrade the tech infrastructure in their countries to level the playing field.
Governments should also cushion the economy from global headwinds, provide subsidies to startups, reduce regulatory constraints, and assist businesses in educating the public on the importance of adopting technology.
With Southeast Asia’s digital economy expected to produce 20MT of carbon emissions by 2030, it is vital to ensure significant investments in greentech businesses, improvement in waste management, and the development of sustainable products. If they can implement all these ideas, the startup trends in Southeast Asia can remain positive as the region builds momentum heading into 2024.