This article first appeared on EDB.
Christopher Quek, Managing Partner of TRIVE Ventures, an early-stage startup venture fund that invests in deep technology startups targeting Southeast Asia, shares about the growing tech scene in Southeast Asia and why Singapore is the place to be to tap these opportunities.
Silicon Valley is the headquarters and birthplace of many prominent tech startups. Tech giants like Google, Facebook, Uber, Apple, Airbnb, and Netflix had their humble beginnings here, and the products they launched have since become ubiquitous in daily life all around the globe.
So it surprised me that in my most recent trip to Silicon Valley earlier this year, the people I spoke to painted quite a different picture of its prospects.
The first was a gentleman in charge of US corporate sales for an edutech company with a global reach. He told me how his domestic market growth was noticeably slowing. At the same time, the data reported from his research team show a gradual shift in demand towards Asia in general, and he was interested to understand how his company could build deeper Asian partnerships to tap the opportunities there.
A lady who’s been in the US for the past 30 years and now works for an incubator space in San Francisco spoke about the rising business and living costs for companies and their employees. Businesses were looking farther afield to other US cities like Boulder, Colorado and Austin, Texas for more business-sustainable alternatives.
A general partner in a global VC with over US$500 million (S$680 million) investment worldwide spoke of a general sense of saturation in the US startup landscape, where it has become increasingly challenging for VCs to access top-grade deal flow, something that she saw more of in other developing markets.
A saturated valley
Despite these anecdotes I hear, Silicon Valley remains the top global startup ecosystem and driver of global innovation, with a strong record of success. Its openness to global talent is unparalleled — 50 per cent of startups are run by foreigners — and it remains the place of opportunity for would-be entrepreneurs.
But if one scratches beneath the surface, one would notice that this picture is slowly changing. The 2019 Startup Genome Ecosystem Report describes the “Next 30” vibrant ecosystems that are enjoying rapid growth — just over half of these are dispersed across Asia Pacific and Europe rather than in North America. At the same time, the same report ranked Beijing within the top three ecosystems in the world for the first time, alongside New York City and Silicon Valley.
This begets the question: How much longer can we bank on Silicon Valley to be the engine of global startup growth?
A rising Southeast Asia
In the past decade, I have been a startup ecosystem evangelist based in Singapore and Southeast Asia, running TRIVE Ventures, an early-stage venture fund which invests in Southeast Asian startups. TRIVE also manages ecosystem assets: a blockchain accelerator, coding schools in Singapore and Vietnam, and a pay-it-forward incubator.
I travel regularly around the region for this work, and my interactions with the various startup ecosystems has me really excited about Southeast Asia’s future. There is a vibrancy in the regional startup scene that portend great things to come.
It’s an open secret that Southeast Asia is home to a population of about 640 million people, which translates to a market size larger than North America or the European Union. What’s more, it is a young population, with 50 per cent under the age of 30!
The level of digital infrastructure in the region is now a far cry from what it used to be. Unreliable internet access is a thing of the past. Internet and mobile penetration are increasing at an explosive pace. Online ticketing, e-payments, and ride-hailing are just some examples of the digital services that have taken off across major cities in Southeast Asia. The region’s e-commerce is slated to reach US$108b by 2025, according to the Temasek-Google report.
But what has me really optimistic about Southeast Asia is the people congregating here. I’ve seen the proliferation of co-working spaces across Southeast Asia, where entrepreneurs — from small two-people teams to businesses with dozens of employees — come together to work on tech solutions for local and regional pain points.
Just five years ago, these entrepreneurs would largely be indigenous to the area. But now I see plenty of international talent plugging into the region: Russians and Ukrainians in Thailand; Central Asians, Canadians, and Americans in Malaysia; and Koreans and Chinese in Vietnam. Indonesia welcomes Singaporeans and Malaysian entrepreneurs. In Singapore, you have a truly global mix, as many entrepreneurs were first based in the country as staff of multi-national corporations.
It has been a privilege to witness this diverse and talented mix of people sharing business ideas in competitions and fundraising pitches, and the passion they bring to meeting local and regional needs is evident. In the last few years, no fewer than 10 unicorns have emerged from the startup ecosystem in Southeast Asia, and I believe that this is just the beginning.
Starting from Singapore
Southeast Asia as a whole might be a huge market, but it comprises ten very different countries with diverse cultural, religious, and historical traditions. Even something as straightforward as microbusinesses (which form the bulk of the Southeast Asian economies) comes in a variety of guises: Indonesia’s warungs, the Philippines’ sari-sari, Vietnam’s hem communities, Malaysia’s mamak street stalls, and Thailand’s convenience stores. Languages, working styles and government policies all shape business and consumer behaviour to varying degrees.
But I usually tell people who are new to Southeast Asia not to feel daunted. There is an easier way to access the region’s growth potential — via Singapore. Think about it. The first Southeast Asian decacorn, Grab, built its regional headquarters in Singapore even though it began in Malaysia as MyTeksi. Why?
One key reason is that it’s really easy to do business in Singapore. The World Bank ranks Singapore second in the world(and top in Asia) for the ease of doing business.
For example, some VCs and PEs I’ve spoken to have found the policies around investment holding structures to be clear and straightforward. Changing or adding clauses for their investments involves simple processes that can be completed in little over a day. As a result, they prefer to invest in a Singapore investment holding entity that holds regional operating entities as subsidiaries. It is no wonder that Singapore dominates the regional scene in VC/PE fundraising, responsible for over 78 per cent of deal-making.
Another key reason is that Singapore offers excellent talent capabilities. Patrick Collison, CEO of Stripe, recently gave a fireside chat at the Singapore Tech Forum in San Francisco, where he referenced the fact that Singapore is one of three countries with a net inflow of patent-producing people — a feat due, of course, to the openness to foreign talent the country has. The 2019 Startup Genome Ecosystem Report also scored Singapore highly for its ecosystem’s quality and cost of tech talent, as well as its access to tech talent.
A friend of mine from Bangalore, who runs an AI Fintech company, chose to set up his company’s headquarters in Singapore instead of in his hometown. He told me that even though there are more tech workers available in India, Singapore’s talent pool boasts a higher number of quality senior developers with a global mindset, attracted by the country’s good remuneration and quality of life.
In my own assessment of the region, Singapore has the most advanced talent pool when it comes to frontier technologies and skills, and many are familiar with leading deep technologies and programming languages. One would need a base in Singapore to access these talents.
From Singapore to Southeast Asia
Once you’re set up in Singapore, the country also offers ideal conditions for you to testbed your business and technology adoption before expanding into the region.
Singapore’s Smart Nation government initiative offers plenty of opportunities for startups to test and validate their products via sandboxing. Test laboratories on the island help startups commercialise their products, and companies are free to access the nation’s database of intellectual property ready for commercialisation under IPI Singapore, a government body that helps grow businesses through technology and innovation. Startups can also leverage over 50 open and corporate accelerators and incubators, with a variety of industry-specific to market-driven programmes available to assist them in entering the regional market.
The regional connectivity is also excellent, with major cities like Ho Chi Minh City, Jakarta, Kuala Lumpur and Bangkok all within 2.5 hours of the island. I often take advantage of the connectivity to take 1- to 2-day trips to regional centres for business, and it is very easy to make last-minute flight bookings to and from Singapore.
One other advantage in connectivity that is sometimes overlooked is the ease of travel within the city of Singapore itself. It is entirely realistic to schedule and make six to seven meetings a day with the excellent transport network available, unlike other regional cities that struggle with congestion. All these factors make Singapore the ideal location from which to begin your regional expansion plans.
Venturing beyond the valley
In the past decade of advising over a thousand startups in the region, I have become intimately familiar with Singapore and Southeast Asia. I can attest to the fact that there are many intelligent, driven, and dynamic people here, alongside a youthful and digitally-savvy consumer base that’s hungry for the positive disruption that tech will bring — the perfect combination for entrepreneurs who are ready to venture beyond the valley.
To the many tech entrepreneurs with their eyes fixed on Silicon Valley: cast your gaze farther. Build a strong presence in Southeast Asia, not just by sending your sales and marketing people but your product teams as well, bringing them closer to growing markets and helping them see what customers really need. Leading companies like Facebook and Stripe all have their product teams based in Singapore. Google has not one, but four.
An emerging region of 640 million people are awaiting new products. See you soon in Singapore.
This article first appeared on EDB.