TIA Insights

Sign up and have the pulse of tech & startups in Asia at your fingertips.


Yes, I care

There is No Glamour in an Asia Startup

Mikaal Abdulla
Mikaal Abdulla
11:08 am on Mar 8, 2013

After 15 years of working for someone else Mikaal Abdulla finally got smart and started his own company. He is the co-founder and CEO of 8 Securities and his journey has taken him through Silicon Valley, New York, London, Dubai, Mumbai, Singapore and now Hong Kong.


awful time in asia startups

Having spent the past 2 years building a company in Hong Kong, I can testify that it is f**king hard. In the beginning, ignorance is bliss. You allow your sexy PowerPoint slides to seduce you into believing your big idea is flawless. Your projections are up and to the right and you feel invincible. You sleep great at night and have the energy and ego to believe you will change the world.

It’s not until you quit your job, realize you have no health insurance, absorb the fact that VCs don’t respond to your emails and that you only have $2,000 left in the bank when reality sets in. You have been totally unaware of how misguided and flawed your plan really is. You are not sleeping quite so well…but you are resilient. You put your head down and execute. There is nothing glamorous about losing track of day & night, writing code, structuring a company, lawyers, tax law or fundraising. But you persevere.

To this point, I could be describing the challenging journey of any startup entrepreneur from Palo Alto to Beijing. Here is where things get much harder for the startups in Asia.

First, the startup ecosystem is young and trying to find its footing. There is minimal structure that keeps entrepreneurs, investors, professional services and higher education in sync. Silicon Valley is the output of the perfect storm that has brought these pillars together as the foundation of a nurturing home for anyone with true entrepreneurial spirit and drive. This structure also plays an important role in vetting the good ideas from the bad and that valuable screen is missing in Asia. Hotbeds of startup activity like Jakarta, Singapore, Hong Kong, and Beijing are getting better but we are still years away from dissipating the friction that gets in the way of great ideas turning into real products and companies.

The second challenge in Asia is the deep rooted cultural aversion to risk. The average Asian parents did not invest so much money and effort in their children’s education for them to turn down a prestigious and well paying job. Priority number one is saving enough money to buy a home because only then is marriage and having children viable. There are no zero percent down payments in this part of the world. Today, it’s a 50 percent deposit, so there goes your bootstrapping. The longer we wait the harder it becomes to start a company.

There is also shame in failure. I have said before that in the US, people wear failure on their sleeve like a badge of honor. It says “I had the guts to try and here I am…stronger and smarter from the experience”. In Asia, our family and society view failure as simply the converse of success. Japan’s startup scene has suffered tremendously just because individuals are not given room to fail. And to fail and try again…well, that is just plain stupid, people think. Asian VCs are not much better and absolutely gravitate to proven and scalable models. I think Sarah Lacy captured it beautifully in this TechCrunch post.

The third challenge in Asia is that nobody wants to work for a startup. Startups are not cool and very few people care about equity as a currency. Once you are able to look outside the enthusiasm of the founding team, you will see that the fourth employee wants security, market pay and medical benefits. Until you can look and act like a real company you will surely struggle to find talent. There is absolutely no shortage of young and talented engineers in Asia but they are protected behind the fortress of the big companies they work for. Instead of developing an amazingly ubiquitous HTML5 application, they are more likely fiddling around with Pascalin the basement that houses their company’s legacy technology. They are certainly not all starting companies or clamoring to join yours.

I have absolutely no doubt that Asia will rise to the occasion, though. It will be the very same entrepreneurs that are struggling with these challenges today that will solve the problem for tomorrow’s entrepreneurs. The lens through which entrepreneurship is viewed by skeptical outsiders will change only once we demonstrate success. Success takes time. Across Asia’s we are seeing ecosystems form through the delicate interconnection of willing entrepreneurs, accelerators, risk tolerant investors, education and public & private services geared to serve startups.

As these ecosystems take hold, more companies are receiving seed capital than ever before. Now we need to see these seed funded startups break out and command the attention of venture capital. The A & B round announcements are few and far between. When more Asian companies secure growth capital, it will be a leading indicator that success is near.


Read More
Get The Latest Tech News

By email:

   Daily newsletter

   Weekly summary

   Member-only content

Sign up now

Follow us:

   

   

Have Your Say
  • http://www.easilyproject.com Albert Tirtohadi

    Yes, running a start up is hard, however if we persevere, we will make it to the end.

  • http://www.socialagent.me michael michelini

    Great post Mikaal! There is all this news and buzz about startups in China and Asia – but the funding and real support and ecosystem like you said is still few and far between.

    I think its the aversion of risk factor that is harder than the raising of money.

    Also, the copycat syndrome…. if there is success – the best way to show respect for the idea is to copy it! That is how risk is reduced, finding business models that work.

    Over and over again Chinese investors ask me “what US business model is your startup based on”.

    Chinese Investors need to support innovation, then there will be innovation in China! Chinese entrepreneurs have the creativity, they just don’t have the support.

  • http://larrysalibra.com Larry Salibra

    Great post…starting a business in asia presents unique challenges. Respectfully disagree with a couple points.

    You can find awesome talent if you know where and how to look–the risk averse types whose parents put a lot of pressure re education and jobs are NOT the types you want to work for a startup. Most of them are in careers / fields they’re not passionate about…and startups need passionate employees people.

    If you’re starting a business in Hong Kong legally (aka you’re a permanent resident or you have an employment visa to start/join in a business) you are covered by the excellent, low cost Hong Kong public health system where a doctor visit costs flat rate 45HKD including treatment (meds, tests, X-ray,etc) and hospital treatment is 50 HKD a day. So in fact you don’t need health insurance unless you want coverage outside of Hong Kong. This is a huge, not well-known benefit to starting a business in Hong Kong versus USA, China, etc.

  • Booman

    “It will be the very same entrepreneurs that are struggling with these challenges today that will solve the problem for tomorrow’s entrepreneurs.”

    How I hope I’m the part of the “tomorrow’s entrepreneurs” gang.

  • Wyn

    Disagree…we’re a startup in Beijing and we raised from Chinese investors, and found many of the others we have spoken to to be sharp with less preconceived notions about how a tech company should be run. We also found local employees to join us. The hunt for talent is difficult everywhere…in Silicon Valley costs are high both in terms of cash and equity, and for every founder that has risk-loving partners/investors/employees, there are probably others looking. While I can’t speak personally for Japan, Hong Kong and much of “Asia”, it’s notable that Hong Kong at least has been consistently ranked as having one of the best business environments, as well as a number of self-made businessmen in traditional industries. I’m not dissing all that is said and I’m sure some of it bears truth from experience. But I do wish that such articles came with less broad sweeping statements like “deep-seated cultural aversion to risk”, that “Asia” is somehow unique in its entrepreneurial challenges, and that limited personal experience in a couple of cities can allow one to form a conclusion on the entire continent.

  • http://www.siliconyuan.com Mikaal Abdulla

    Wyn and Larry,

    Thanks for the different points of view and its always welcome. Wyn, if we assume the best talent is employed when you bring them over to your startup in China – were you able to convince people outside of the founding team to take equity in lieu of a market rate salary (e.g. an engineer takes lower compensation he/she can get at a large company for reduced salary + equity)? This is one important indication of risk tolerance. I don’t intend to make sweeping statements but my experience has shown me that the cultural aversion to risk in totally rational in Asia. For one, individuals are typically supporting family and there is no social security system in most geographies. Furthermore, there is immense pressure for couples to save for marriage. This makes it incredibly challenging for young people to make a decision to defer education and/or a stable salary and future. In the US, people don’t have the same perspective. Its not atypical for students to pay their own expenses after the age of 18 with no further support from family. Also, they don’t typically have the same pressure to support their family financially. So if I am going to make a generalisation, I do think its MUCH easier for an American to assess risk/reward and join a startup than a counterpart anywhere in Asia.

    Yes, Hong Kong has a great business environment and it should logically rank highly as a dynamic startup hub but it is not. It is a very avverse environment and I don’t think its reputation as an entrepreneurial market outside of real estate investing or franchises is warranted. Just my opinion.

    Mikaal

  • http://weibo.com/yujunde Junde

    I think it’s a huge sweeping statement to claim say there’s no Glamour across Asian startups when you’re based in HK. It’s a different market, different playground here. You can target local, regional, or the international market, according to the skillset and experience of your founding team.

    Naturally, if you’re in HK, people might be risk-averse due to the high cost of living. But even in tier one Chinese cities like Beijing and Shanghai, one can live ok in a 2-3k RMB/month apartment, and 50RMB a day on food and commute. Most of the first-time young entrepreneurs were either just out of college, or were previously working in a 8-10k/mth job. Hence, it’s much easier to take a pay cut, or even work for no pay. There are many many groups of young people who run off with their ideas, passion and ambition just like this, even when their idea isn’t fantastic or fully developed yet.

    And then there’s Korea, Japan, Thailand, Indonesia with very different cultures and ecosystems. Singapore’s probably very similar to the HK though.

    There’s no one Asia and it’s maybe just a few cities that are like what you described.

    Junde

  • Rivers

    Very well said and good comments guys.

  • Dino Slender

    Great storytelling text and clear point of view.