I came across a puzzling assertion by Tech in Asia’s Anh-Minh Do a few months ago that “Asia still has at least 10 years before it leads the tech world“. More recently, the Wall Street Journal provided a mixed, mildly positive, assessment of Singapore’s technology start-up landscape — while illustrating its case with a photograph of web giant Google’s Singapore office, irony unintended. We are intimately familiar with unfulfilled past promises and the various obstacles faced by tech start-ups but are puzzled by the sense of relative despondency conveyed by these observers and some others.
So what do we think the future holds? We are extremely optimistic here at Unicorn. Minh listed several reasons for believing that Asia — and he seemed not to include China and developed Asia in this — will continue to lag other parts of the world in the tech world. Several of these reasons are backward-looking. Our view however is that one can’t see what’s coming up by looking in the rear-view mirror :-)
There are many constraints to overcome, consisting not only of problems such as logistics, payments and others highlighted by Minh, but also of relatively small amounts of capital available to start-ups, no long history of exits to point to, lack of sufficient risk-taking mindset and so on. However, progress is not linear. It never has been. There are lots of reasons for realistic optimism and when several of these come together, as we believe they have, unstoppable momentum builds and results can cascade in non-linear, almost step-function fashion. Here are some of those reasons:
On the supply side:
Rapidly falling cost of starting up
This is a well-documented phenomenon. Want to found an Internet or mobile start-up? You don’t need to max out your credit cards or pester that rich uncle just to get started like you might have done ten years ago. Cloud computing platforms offer resources we couldn’t dream of ten years ago along with limitless scalability and rapidly falling prices, among several other benefits.
This isn’t to say that every start-up that sees initial traction can get to huge scale without ever raising money. In fact, when a start-up eventually heads to the market, it may find that investors’ expectations are now higher than they used to be.
However, the broader point still stands: the fact that resources for getting started are plentifully and cheaply available means that starting up has been democratized. More start-ups can be founded with smaller amounts of initial capital than ever before.
Rapid increase in connectivity to the rest of the world
This is a theme that I’m sure doesn’t need much explanation. Small companies are today able to reach customers around the world easily and at low cost. Innovations such as cloud-based customer support, collaboration software for programmers, email marketing services and many other similar services that are available to start-ups in Silicon Valley are just as easily available to start-ups in Singapore, Bangalore, Manila and elsewhere to use and build on.
All new technologies don’t come from the Valley!
It’s been historically taken for granted that truly ground-breaking technology doesn’t originate in this region and this may still be broadly true today – however, there are definitely companies present here who can boast brand new innovation. Here are just a few examples:
This apart, India in particular has been a powerhouse of R&D innovation for major Western multinationals for some years now. Cisco, Google, Microsoft, GE, SAP and several other household names have big India R&D centres and not just in IT but also in pharmaceuticals, defence, medical devices, retail, aerospace, telecom… Now of course none of these companies is a start-up. We mention them here because they show that talent is present in this region to create world-leading innovation — such as GE’s MAC400 ECG machine — as well as because these companies spawn innumerable start-ups back in their home markets and we see the same trend taking shape here too.
Start-up innovation ≠ technology alone
Even if one thinks that true technology innovation will never be as common here as it is in other parts of the world, most B2C and many B2B services aren’t about technology as much as they are about understanding customer needs, creating a good user experience and moving fast. None of this is unique to Western markets, let alone Silicon Valley. There’s really no technical barrier to creating an IFTTT or a Pocket (two of my favourite services) anywhere in the world and many of the companies now coming up here are indistinguishable (from the customer’s point of view) from any other globally-oriented business.
On the demand side:
It’s not sufficient to have entrepreneurs starting new tech companies if there isn’t demand for their products. Globally-oriented businesses don’t need to prove that a market exists for their products. What of companies focused on regional markets in emerging Asia? Let’s look at some stats.
GDP per capita will have grown 60% in dollar terms (PPP-adjusted) between 2005 and 2015 for South-East Asia plus India. There are anywhere between 400 and 600 million affluent consumers spread across these countries.
The population’s median age in these countries is a mere 26. Contrast this with 36 and 37 for China and the US respectively.
Falling costs of consumption
Just as the cost of starting up a new company has fallen, the cost of consuming new products and services has fallen rapidly too. So not only are incomes up as we mention above, but customers also get much more bang for each buck and therefore are able to access more products and services than ever before.
This is partly a consequence of falling input costs — $40 Android phones being a case in point — but substantially also because of innovative new business models.
For example, where a mobile phone subscriber would previously have expected to pay each time he sent an SMS message, that same subscriber now has the option of using one of several messaging apps, which offer unlimited messaging at a relatively low data cost or may even have been zero-rated by the operator. Moreover, these apps also offer many innovative new features unavailable in plain old SMS. All this sounds almost obvious in today’s age but we have to remember this world didn’t exist as recently as four or five years ago.
High digital usage isn’t far away in the future — it’s here
Rising incomes and falling prices are of no use if actual consumption doesn’t pick up as a result — and it has.
And all this is even though broadband penetration is nowhere near 100% and there is a paucity of services truly localized for these countries.
And finally: Outcomes
Ok, so it’s clear that there is a good amount of tech innovation in Asia. There’s also huge actual and latent demand. Have any start-ups actually harnessed these trends and grown big? Yes, we’ve come across several in recent years and across a broad range of sub-sectors within tech.
We even know of or have worked with ones that have breached the $1 billion valuation mark, and several more that have achieved valuations well in excess of $100 million. About half of these originate in India and the remainder across South-East Asia.
One could point to very little such data just a few years ago so it’s not surprising that some observers remain sceptical. However, our strong belief is that entrepreneurship is less about looking at the past and more about imagining and then building the future.
One last point: it may be that claims that Asian countries cannot lead in tech have a parallel in the story of the blind men and the elephant.
The terms “tech” and, more to the point, “leadership” in tech are defined differently by different people. Are Silicon Valley start-ups today’s undisputed world leaders of innovation in automotive technology, home appliances, cell phone design or materials science? Most people wouldn’t say so. But is all this “tech”? Definitely.
Don’t sweat the definitions. Get out there and get things done.
This post first appeared on Ask(your)VC. The views expressed here are of the author, and e27 may not necessarily subscribe to them
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