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5 Reasons Why There Is No Southeast Asia Kool Aid

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So it seems we got us a little debate here on the topic of startups in Southeast Asia, so I’d like to add some fuel to the flame.

Oliver Segovia, founder and CEO of AVA Online, makes the point that there is way too much hype around startups attacking Southeast Asia, and that VCs are pushing the strategy too hard. But going for the regional play is just a reality that we have to deal with, whether it’s defending yourself from foreign players coming in or entering foreign markets. Ignore it at your own peril, enlighten yourself on it, because it’s the present and it’s the future.

Here’s my 5 key reasons why there is no Kool Aid, Southeast Asia is a reality, and not just some new fashion that will die out.

1. It’s not just VCs that are going regional

Let’s just get this out of the way first: venture capitalists (VCs) are not the only ones who are supposedly perpetrating the “Southeast Asian strategy”. Attacking the Southeast Asian market as a whole is not something new and it is actually a trend that we are witnessing (just take a look at our Southeast Asia tag). Why do I say this? Look at all the big companies that are actually thinking and operating regionally: Google, Yahoo, Facebook, Line, KakaoTalk, Rakuten, Evernote, WeChat, Alibaba, Rocket Internet’s many properties, Zomato, Twitter, Airbnb, Opera, UCWeb; and I could go on. The point is, going regional is something most big companies are already thinking about and doing because the opportunities are real and tangible.

And the fact of the matter is, these big companies are not anomalies. Southeast Asian (and Asian) companies are now growing and scaling, ever so slowly, and they are not only feeling the limitations of their own markets. They also don’t want to be the second mover. Once Southeast Asian companies have near or equal budgets to megaliths like Twitter to tackle the region, a so-called Southeast Asian strategy cannot be ignored.

All of this has little to do with the influence of VCs, or VCs pushing startups. It all comes down to whether you’re ready and your business model fits into a scalable business that can go regional and possibly global. In fact, many startups already want to go regional and global, and some VCs offer that opportunity. And anyway, no one said you need to accept VC money to become successful. Plenty haven’t and have grown to multi-million dollar businesses. Just stop drinking the VC Kool Aid first, in general.

2. It’s not just about going regional, it’s actually about going global

A problem that some startups face across the region – and across the world – is an inability to think globally about their products. It’s one of those eternal questions: should I be building for the immediate concerns of my local users or build a product or new behavior that everybody across the world wants/needs? But look at all the winners and competitors of both Startup Asia and Echelon for 2013 – they are mostly startups that are competing in global and regional markets. Why? It’s because the globe is exciting, it has huge potential, and there’s money there, etc.

Competing across Southeast Asia is just a stepping stone to going global. Just based on logistics alone, it’s easier to set up shop in a neighboring country than leapfrogging to Europe or the States. The only ones that do that get nice series A packages of funding. And the thing is, some of these companies, like Builk from Thailand, winner of Echelon in 2012, aren’t going regional, they’re just hitting a few markets like Indonesia. Appota, from Vietnam is the same; they’re only tackling Indonesia and Thailand. Ultimately, it’s about choosing your bets wisely and thinking long-term once you’ve got a proven model.

And all of this makes sense because the rate of growth for some startups is faster than the markets they grew up in. Once some founders and CEOs see their market threshold, they realize they can’t grow unless they look beyond their own borders. That’s just natural.

3. Not everyone wants to do it, and that’s okay

The reason why I wrote this article is because I identified a growing sentiment that some startups do want to look outside their own borders for whatever their own personal motives are. But not all startups do. When I pressed VNG, one of Vietnam’s strongest and biggest tech companies which pulls in over $90 million in annual revenue, why they didn’t want to take messaging app Zalo out of the country to take on KakaoTalk and Line , VNG said they want to focus completely on the domestic market. A big company like VNG doesn’t want to go regional? That’s totally okay, and it makes sense for them. There are plenty of companies and startups that also have that mentality. Sanook, Thailand’s Yahoo, is also in the same exact boat. They don’t need to drink any kool aid.

The point is no one is forcing your hand to go global or regional. In fact, there’s likely huge potential at home already. But if you do venture forth, do your research. That should be obvious.

4. Tech startups don’t sell bars of soapsoap-bar-startups-southeast-asia-1

Retail and tech are completely different beasts with different business models, operating costs, logistics, human resources, etc. When we’re talking about tech startups scaling across the Southeast Asian region, we should be looking at tech companies that have been successful, not at retail examples. If I want to start a search engine, I don’t study how G&E ran their business, I study Google or Baidu.

A trend that we’re seeing lately is an increase in Silicon Valley companies like Spotify, Evernote, Airbnb, Twitter, along with huge Chinese, Korean, and Japanese companies like Tencent, Line, KakaoTalk, Rakuten, Baidu, etc., all attacking Southeast Asia. These are the companies we should be looking at in terms of strategies to emulate as well as an example of companies that are now actively thinking about a “Southeast Asian strategy”.

Time will tell if their regional roll-out is successful, but don’t look at bars of soap for a clue.

5. Just because the region is new, doesn’t mean it isn’t a region

Sure, the term for Southeast Asia was coined just in the 1920’s, but that doesn’t mean it isn’t a viable region. But let’s be real about what Southeast Asia really is. It’s a collection of 11 countries wherein only about five to six countries are actually really markets worth attacking. Countries like Brunei are just way too small to even bother with and countries like Myanmar are way too fresh for most to tackle. And yet, these five to six countries, which include Thailand, Vietnam, the Philippines, Indonesia, Malaysia, and Singapore are very ripe for first movers. And as the rest of the region speeds up and infrastructure evens out across the region, it will be increasingly easy and worthy to enter these markets one by one or as a group. There may be some severe differences between the countries, like Indonesia is one of the largest Muslim countries in the world and the Philippines is one of the largest Catholic countries in the world, but there is something to be said for proximity and contiguous economics.

Southeast Asian countries, despite their differences, have some very similar socio-economic circumstances, which allows startups, which grow in similar circumstances to launch in neighborly territory. In other words, since my startup grew under similar circumstances, my model will fit well in your circumstances. These circumstances include: young population, developing economies, growing infrastructure, a penchant for new social media (a worldwide phenomenon), rapid urbanization, etc.

And don’t even get me started on all the events that are happening across the region that are Southeast Asian centered. People are connecting the dots regionally. It’s imperative that we think regionally in order to grow as a region.

Don’t drink any Kool Aid, don’t listen to me, and do what’s right for you

At the end of the day, the decisions that you make for your startup or your portfolio company or tech company are your decisions. And those decisions will make you as a company. Take all of this stuff with a grain of salt. It’s your baby, so you have to evaluate your own product and your own market. Every startup operates under very different circumstances with very different models that work in one case but don’t work in others. There is no one size fits all. So if you want to go regional, and it has that potential, go regional. If you want to stay local, stay local. If you want to go global, go global. Just make sure you’re solving problems of real users, creating long-lasting product-market fits, and executing the hell out of everyone around you. Or you don’t even have to do that – you figure it out.

(Editing by Steven Millward)



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