Startups in Asia: change has come, and it’s never going to be the same

L-R: Fritz Demopoulos, co-founder and former CEO of Qunar; Paul Srivorakul, co-founder and executive chairman of Ardent Capital; Ryu Kawano Suliawan, co-founder and CEO of PT. Midtrans; Shin Takamiya, partner and CSO of Globis Capital Partners; Sam Kaneda, founder and CEO of Yo-ren

Tech entrepreneurship in Asia has undergone a sea change in the past half decade. While Silicon Valley has remained a barometer for the rest in terms of building a sustainable culture of innovation, Asia is closing the gap.

At the recent Asia Leaders Summit in Singapore, a panel of entrepreneurs and investors talked about the state of the tech startup scene in the region, what the differences are between countries and across time, and how the different companies have strategized their expansion.

China is still big, but it might have trouble globalizing

Fritz Demopoulos, co-founder and former CEO of Qunar (QUNR), a travel search site in which Baidu now has a 58.8 percent stake, says that if a startup is big in China, it’s big globally.

Like the United States, China is a great anchor market. Many large Chinese companies aren’t expanding outside of China rapidly because investors get rewarded just for investing in the country. A company with US$10 million in revenue out of China would be worth US$200 million in valuation, he says.

Chinese startups also get some “unfair advantages”. Besides being able to raise a lot more money than startups in neighboring countries, these companies also have access to talent that’s not just cheap but plentiful.

“The significant engineering resources mean that at a company you can easily have hundreds of engineers working on a problem,” he says. That explains why Chinese companies tend to prefer building their own products to partnerships or acquisitions.

But China isn’t the same as it was in 2005, when Qunar started. The market for one is getting saturated, and returns-on-investment are shrinking.

Chinese companies are well aware of this. Tencent is bringing WeChat abroad, while Xiaomi is taking its smartphones to Greater China and Southeast Asia. But some challenges might hold these firms back.

Sam Kaneda, founder and CEO of marketing company Yo-ren, says that China’s domestic competitiveness could affect its global expansion plans.

“Their anchor market is too big, so local competitors may catch up easily,” he says. As such, any disruption at home could cause the company to devote attention back to defend its home court, taking energy away from expansion efforts.

These things won’t happen to Japanese chat app Line, which faces a much tamer domestic market.

For the rest of Asia, the story is different

China’s scale dwarfs even large countries like South Korea, Japan, and Indonesia. So when startups from these countries globalize, their strategies may differ.

Shin Takamiya, partner at Globis Capital Partners, says that startups have to choose between addressing the flat global market, tackling the region, or opting exclusively for local markets. The route companies choose depends on the nature of their businesses and the size of the markets.

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