The total population of Asia is 4.3 billion people. 1.7 billion people in Asia live on $2 a day. That’s about 40 percent of the population of Asia. 80 to 90 percent of poor people in the region live in rural areas. In other words, poverty is big, and poverty is rural.
At the same time, most of the economic activity, resources, growth, and innovation is happening in the cities across the world. The global top 600 cities are projected to generate 60 percent of the worldwide GDP by 2025. And it’s for this obvious reason that startup ecosystems are growing in the hearts of cities and not the countrysides of Asia. The cities pack all the venture capitalist money and tech founders and employees all into one place. This is great for Europe and Northern America where cities can be the engines that develop products and services for a large middle class outside of the cities. However, Asia, Africa, South America, and the rest of the world are different.
The stark numbers in Asia
If you take a quick look at the startups category, you’ll find a host of unique startups. Even in our watch list for last week, we’ve got over 31 startups ranging from A/B testing analytics to news reading to financial literacy to Yelp-like clones. But do any of these startups sound like they’re building products for people who live on $2 a day? The short answer is no.
This underlines one of those peculiarities of Asian startups in Asian markets. They have to wait for the market around them to grow in order for their product to prosper. If you do shoes e-commerce in Thailand, for example, you have a small minority at your disposal. Not only is it a mainly middle class market but it also requires that these people are internet savvy, and furthermore that they are willing to buy online. That’s a fraction of a fraction of a fraction. And even if 84 percent of APAC users are still interested in shopping online, the average internet penetration in Asia is at an average of 27 percent. 84 percent of 27 percent is roughly 975 million people. That’s about half of the 1.9 billion person population of Asia’s cities.
Building for city markets, not countryside markets
The endpoint of all these numbers is simple. Asian startups are profoundly disassociated with the problems of the rural world. Startups don’t build products for the poor, because they can’t make money off of the poor. Since startups must build on top of paying internet-savvy markets, they’re fundamentally elitist.
Startups that do build for the countryside
So, I lied. There are actually a few startups out there that do seem to be reaching products into the 99 percent. Singapore-based 8villages, which just grabbed a humble $150,000 round of funding, focuses on connecting farmers and agribusinesses with information, the One Cent Movement gets consumers to skim off a few cents off their online purchases to go to donations, and Smart Txtbks in the Philippines scrunches textbooks into SIM cards for rural school kids.
Unfortunately, these social tech enterprises aren’t so sexy. And I think that’s a huge missed opportunity. Don’t underestimate that 1.7 billion people out there living on $2 a day. It’s still a long time before that number will go below one billion.
Full disclosure: 8villages is funded by IMJ Fenox, which is connected to Fenox VC, which funded Tech In Asia. That makes us indirectly related. To get a peek into our Code of Ethics and disclosure practices, please click here.
(Editing by Terence Lee)