3 Factors Contributing to the Rise of Southeast Asian Entrepreneurs and Startups
With Asia’s strong emerging markets, it is expected that the region’s GDP will grow at an average of 6.2% annually between 2017 – 21. Beyond political changes in the region, countries in the region are enjoying strong domestic demand. With advanced economies like Japan, South Korea, and Singapore leading in terms of startup trends in the region; and investments flowing into China and India to help grow startup ecosystems, it can be expected that Asia will continue gaining momentum in entrepreneurship and startups. With an impressive portfolio of well-funded startups, it can be said that there are a few factors that have influenced the rise of entrepreneurs and startups in the region. It goes without saying that governments are becoming more supportive of startups, along with an increase in consumer spending, and ease of doing business in several countries. However, beyond the obvious, underlying contributing factors also include the Millennial demographic, smartphones and the rapidly expanding “online” culture, and an influx on venture capital investments into the region.
The Millennial Demographic
It is estimated that around 58% of global Millennials live in Asia. Of course with the region also holding the largest populations this is not surprising. What’s important to note though is that this demographic (ages between 19 – 35) are in their young adulthood and represent an important economic reality where they have significant influence on consumer spending growth, labor market fluctuations, and other economic prospects. Even more, a 2014 survey revealed that Millennials are more supportive of free markets than their previous generations with emerging markets like Vietnam and the Philippines coming out at the top. In another survey, this trend was also evident with a significant number of Millennials believing that business is a force for a positive change for society and their countries. A demographic defined by the need to pursue their passions, supporting smaller business initiatives, and a greater need of independence, it is no wonder why the region has been witnessing an increase in the number of young entrepreneurs and startups.
Smartphones and “Online” Culture
Smartphone usage and online connectivity is also on a rapid rise in the region. Coupled with the rise in access to smartphones and the Internet, Southeast Asia is also witnessing growing social media penetration rates. Countries that come out at the top include the Philippines (58%), Thailand (67%), Malaysia (71%), Singapore (77%), and Brunei (86%). While this essentially means that people in the region are more connected and online now than ever before, it also has significant implications to growing trends in entrepreneurship and startups. For one, access to information, services, and support needed to start a business is much easier today for young hopeful entrepreneurs. Also, with governments working toward strengthening their countries’ digital infrastructures, young entrepreneurs can also enjoy an increased ease of doing business and ability to digitize significant portions of their businesses. This helps them better manage their costs.
Influx of Investments
And of course with the region’s emerging markets and promising talent, countries in Southeast Asia have also enjoyed an increase in venture capital investments in their startup ecosystems. While countries like Singapore, South Korea, and Japan still lead the way in the startup scene, governments in countries like Malaysia, Indonesia, the Philippines, and Cambodia have been making strides in creating conditions for their own startup ecosystems. Over the past years, the region has witnessed an increase in government investment in startup ecosystems, improved educational facilities, and investments in technology. This has allowed the growth of industries outside the traditional agriculture and service sectors. E-commerce is a very good example. With venture capital investments surging in the region between 2012 – 16, this is a good indication that countries in Southeast Asia are attracting investments for their business ideas and potential to be the global leader in the startup scene.
Admittedly, despite the region’s economic progress and advancements in its startup scene, there are still countries that are catching up. It will be important for governments in these countries to create the right business environments that support the growth of their startup ecosystems. These include investing in digital infrastructures, support/services for young entrepreneurs, and international ties with advanced economies that can bring in investments. Even more, it would be beneficial to look at the success of other countries and build their internal capacity to support rapid growth and expansion to ensure that their startup ecosystems are competitive.