3 Reasons Why Southeast Asia Is A Hot Market For Tech Startups

As the US market becomes more expensive and valuations become less and less linked to fundamentals, local venture capitalists are actively looking for new growth markets. Many people are watching Southeast Asian countries. This is a diverse but very promising market with a focus on Vietnam, Thailand, Indonesia, Malaysia, Singapore, Pakistan, and the Philippines.

The region's digital and technology industries have exploded in recent years. The combined valuation of Southeast Asian tech startups in 2020 was $340 billion, according to Jungle Ventures, and this is expected to triple by 2025.

This market is highly complex. Many entrepreneurs are hampered by cultural differences and a lack of understanding of conducting business in that country. However, consider the following three compelling arguments.

1. A large population that is increasingly growing and joining the internet.

Southeast Asian countries have a large population - more than 655 million people - accounting for approximately 8.5% of the world's population. The Philippines has a population of approximately 109 million people, with Indonesia, Vietnam, and Pakistan close behind at approximately 273 million and 97 million people 230 million people, respectively. And these figures are rapidly rising, with Southeast Asia's population growth outpacing that of both America and Europe.

Each country is at a different stage of development, but they all have a wide range of opportunities for establishing new technologies and proven business models in common. A rapidly growing middle class is reflected in the quality of consumption and is now dictating market conditions. McKinsey predicts that 163 million solvent households will emerge in Southeast Asia.

Only a decade ago, four out of every five Southeast Asian countries were disconnected from the internet. 90% of internet users in the region now access it primarily through mobile phones. It is a mobile-first market that has jumped many technological waves and now employs the most up-to-date open-source software and app development stacks. As a result, these countries are undergoing digital transformations in all areas of business.

2. The economies of these countries are booming.

It's a good time to jump in and ride the current growth wave. Many markets are still in their infancy, and technological disruptors have a bright future. Because of its massive GDP, it is the second most interesting market after the United States.

The GDP of the Association of Southeast Asian Nations' five largest members—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—will grow by 5.1% in 2022. The Philippines' 2022 GDP growth forecast was recently revised from 6.6% to 7.1%, while Thailand's was revised from 3.4% to 3.7%.

Over the last 30 years, these countries have made a remarkable leap to a high level of economic development, outpacing the leading developed countries in terms of real GDP per capita growth. In Vietnam, for example, GDP per capita was nearly $918 in 1990, $1,987 in 2000, and $8,651 in 2020 in purchasing power parity.

3. The startup ecosystem is growing by leaps and bounds.

A solid foundation for innovation is providing a significant boost to startup development. Government policies that encourage the development of new tech startups are another factor. Thailand's Thailand 4.0 program, for example, provides visa and tax exemptions to tech companies.

It's no surprise that international tech titans are establishing offices and regional hubs in Southeast Asia. Here are a few of the most well-known examples of successful startup cases in this region:

Grab is a Southeast Asian "Uber-killer." Since its inception in 2012, it has provided rides, food delivery, hotel reservations, and financial services. In 2018, it drove Uber out of South East Asia. It is now the most valuable Southeast Asian tech unicorn, having gone public in New York in 2021 after a $39.6 billion merger with a blank check company.

Finally, there is Shopee, a multinational technology company based in Singapore. The platform began as a marketplace for consumers. The platform had 200 million downloads as of 2019. With 343 million monthly visitors as of 2021, it is considered the largest e-commerce platform in Southeast Asia.

Aside from these, there are many more startups in the region that are attracting investment and achieving success. According to Cento Ventures, VCs made 393 investments in Southeast Asian startups in the first half of 2021, which is 18 more than the previous record in the region. Golden Gate Ventures predicts that startup funding in the region will exceed $14 billion by 2023.

To summarise

All of this suggests that there is no denying the region's importance or the world's growing interest in it. The potential of Southeast Asian markets should only grow with the growth of the middle class, macroeconomic indicators, and the support of local players. So don't wait: If you want to invest in an exciting market with a lot of room for growth and opportunity, look into Southeast Asia's tech ecosystem.

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