A company trying to start up in Asia may be intrigued by vibrant Vietnam, or may want to cash-in on a potential Indonesian gold mine or an expansive mobile market in the Philippines.
Those certainly sound like attractive adventures, but at the end of the day, if the goal is to make money Seoul and Beijing are the two best startup ecosystems in Asia, according to SparkLabs Global Ventures‘ annual Global Technology Trends & Startup Hubs report.
Despite that, the Silicon Valley-based seed investment firm has a global reach.
Bernard Moon, SparkLabs Co-founder and Partner, told e27, “[The report] shows where the real centres of startup activity are. From creation to exit. Whether you are an entrepreneur or investor, that’s what you really have to consider; ‘If I start a company in Malaysia, am I actually going to get bought?’” (Sic)
The report takes eight categories and ranks each city accordingly. The sections are:
- Engineering talent
- Startup culture
- Technical infrastructure
- Founding ecosystem and exits
- Legal and policy infrastructure
- Economic foundation
- Government policies and programmes
The only Asian cities on the report are Beijing at seven and Seoul at number eight.
Why Beijing and Seoul?
Beijing and Seoul excel in their ability to produce unicorns. According to the report, Beijing has nine unicorns, while Seoul has six. That puts Beijing at fourth place behind Silicon Valley (69), New York City (16) and London (10). Seoul is tied with Stockholm for the fifth slot.
“We know and track exits globally, from the unicorns to exits of about US$50 million, US$100 million and US$500 million. And that is what investors also look for. In terms of how robust the startup ecosystem is we always ask, ‘Hey, who could buy this company?’” said Moon.
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He added, “From the 90s have there been companies like NHN (the Korean company Naver). Nexon was peak US$8 to US$9 billion (sic) (has since moved HQ to Tokyo). Even exits in the mid-2000s such as Gmarket that got bought by eBay for US$1.2 billion. So I mean there is this consistent track record from the first boom until now to justify it in Korea.”
For China, the number of successful fundraising rounds fell during the first half of 2015, but the deals were large, buoying the funding total above US$2 billion for the third-straight quarter. SparkLabs Global Ventures expects funding in China to keep growing.
“[China] is sort of like Silicon Valley four to five years ago where so many people wanted to do angel investing. Because of declining real estate, people with disposable incomes are putting money in other places like tech and early-stage investments like startups,” Moon said, before adding one note of caution. “But with the current market fluctuations, we could also see investors become more conservative.”
When asked if there were cities outside the list he sees as trending in a positive direction, Moon said he would include Shanghai.
Doubts about Singapore
The company says Singapore does not have a robust history of significant exits, a theory backed by data presented in another report by 500 Startups’ Director of Special Projects Arnaud Bonzom. According to the Bonzom report, Singaporean exits since 2006 totalled US$529.3 million with Viki being particularly expensive at US$200 million.
But those numbers are paltry when compared with the Korean backdoor IPO takeover of Daum by Kakao last October that was at the time worth US$3.3 billion in equity.
“We know that from looking at a lot of Singaporean deals that 1) There is a lack of Series A investors, and 2) There is definitely a lack of historical exists. We would never put Singapore in our top 10, maybe even top 20,” said Moon.
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Still optimistic on Asia
On the whole, the firm is still bullish on the Asian market, despite the dominance of American tech ecosystems — especially Silicon Valley — and an appreciation for the Tel Aviv startup scene.
It cites growing innovations from China, excellent hardware engineers in Seoul and Taipei, and a market in Indonesia that has been catching the eyes of investors for awhile now.
SparksLabs’ list of top 10 global startup hubs is as follows:
1. Silicon Valley
2. New York City
6. Tel Aviv
9. Los Angeles
Image Credit: Chong Wa Dae/Wikimedia