The anatomy of a Southeast Asian unicorn

Xendit. Carousell. Momo. Flash Express.

What do these companies have in common? They’re all Southeast Asian startups, and they’re all unicorns, part of a group of over 50 companies in the region that have achieved – and often exceeded – the US$1 billion valuation mark.

Becoming a unicorn is a remarkable achievement, but conversations about these companies always lead to a handful of questions: What can startups do to reach unicorn status? Why are they important? And how can the ecosystem support the emergence of more of these companies?

Let’s go deeper.

The anatomy of a unicorn

How does a startup become a unicorn? To answer this, let’s look at its definition.

“[Unicorns are companies] that solve real-world problems for ordinary people in tech-smart ways,” says Jennifer Zhang, co-founder and CEO of Wiz.ai. The firm aims to transform customer communications by delivering personalized experiences and data-driven insights powered by its Enterprise Large Language Models.

For Jefferson Chen, co-founder and CEO of Advance Intelligence Group, a key characteristic of unicorns is their ability to disrupt the status quo and offer innovative products and services that improve the customer experience, typically by leveraging technology. Advance Intelligence Group, which joined the unicorn club in 2021, is behind firms such as digital identity verification and risk management solutions provider Advance.ai, buy now, pay later service Atome, and consumer lending app Kredit Pintar.

That said, the only real defining criteria of a unicorn is that it’s a tech company that has a valuation of US$1 billion or more.

Definitions aside, what’s more crucial is the main characteristics and traits that enabled a startup to achieve this status in the first place. While the exact attributes are often up for debate, there are some commonalities:

Click on the different parts of the unicorn to learn more about some key traits. 

Ultimately, unicorns are tech companies that are addressing a real need in the market and offer solutions that are scalable and have tremendous growth potential. This allows them to attract the investor interest necessary to get to that crucial US$1 billion valuation territory.

The value of unicorns

With an outline of the essential unicorn characteristics in hand, the next question is: Why are they important? From a company perspective, being a unicorn is a form of validation that what you’re doing works and you’re on the right track.

However, unicorns are also crucial to further the growth of a region’s tech ecosystem.

“When a unicorn emerges in a specific market, it attracts more investment. Other VCs, angel investors, and funders start paying more attention to that market. This helps create a more vibrant startup ecosystem, with increased resources available for other startups in the region to grow and scale,” says Zhang.

Plus, billion-dollar companies inspire entrepreneurship and encourage innovation by serving as models for success.

“Having unicorns in Southeast Asia proves that it’s possible to build and scale a startup into a regional powerhouse that is respected not just in the region but across the globe,” adds Zhang.

Within Southeast Asia, unicorns have played a vital role in driving a more integrated, digital community. Some of the region’s biggest tech companies, such as Grab, GoTo Group, and Sea Group, have enabled people to access new services like ride-hailing, ecommerce, and digital payments.

Growing Southeast Asia’s stable

Given the value that unicorns bring to an ecosystem, governments and organizations across Southeast Asia are interested to know what it takes to encourage more of such companies to flourish.

The region is home to many fledgling startups that are “soonicorns” on the edge of achieving US$1 billion in valuation, but these firms face several challenges on their journey toward that goal.

“Companies may face difficulties in terms of funding,” says Chen. “The funding crunch between early-stage funding and later-stage investments can be especially challenging, and even more so in this current environment.”

Trouble hiring the right talent and navigating Southeast Asia’s competitive landscape are other hurdles that stand in the way of soonicorns, the CEO says, a sentiment that Zhang agrees with.

“These companies often face fierce marketplace competition from both local and international players. Establishing a strong market presence and differentiating themselves can be a daunting task,” she shares. This is often where companies stumble and lose the edge they had in the market.

So what can the ecosystem do to support these companies and increase their odds of going from soonicorn to unicorn?

“I’d like to see the creation of conducive regulatory environments. Governments should work on creating more business-friendly regulations that promote innovation, simplify business registration, and reduce bureaucratic hurdles for startups,” says Zhang.

Culturally, there needs to be more support for entrepreneurship and innovation as well, she adds. Think more resources, mentorship, and networking opportunities.

For Chen, improving access to funding will be crucial.

“Governments and financial institutions can partner to facilitate access to capital and relevant networks. This is essential for early-stage startups so that they can grow and tap into the opportunities the market holds,” he adds.

Justin Ang, assistant chief executive for media, innovation, communications and marketing at Singapore statutory board Infocomm Media Development Authority (IMDA), points out that the city-state’s government plays an active role in helping startups grow.

“For example, at IMDA, we run the Accreditation and Spark programs, providing third-party assurance to businesses and organizations on a startup’s ability to deliver on their products and outcomes,” he says. These programs also serve to connect these fledgling firms to potential government and enterprise partners, Ang shares.

IMDA has created over US$695.6 million (S$935 million) worth of project opportunities for companies under these programs and has awarded more than 2,800 projects. To date, investors have put in over US$818.3 million (S$1.1 billion) of new growth capital in these companies during and after accreditation.

The regulator expands on its connecting role in the ecosystem with its Open Innovation Platform, where enterprises can source solutions for their business problems from innovative tech companies.

Through the platform, IMDA serves as a bridge between corporates and tech solutions, creating new opportunities for startups. It has facilitated over 300 corporate challenges worth more than US$9.6 million (S$13 million) in prize money.

The road ahead

In 2019, Southeast Asia was expecting 10 more unicorns to emerge from the region by 2024.

It has far exceeded these predictions. In 2021 alone, 23 Southeast Asian startups crossed the US$1 billion valuation mark. Its stable of unicorns is still set to grow – there are at least 15 companies that are on the cusp of joining the club.

“Having more Southeast Asian unicorns is more than just a strong possibility. This region is home to many innovative, creative thinkers who have a lot of grit. Just being able to get through multiple business challenges speaks to the strength of the Southeast Asian entrepreneur,” Zhang says.

“They’re a very unique breed of resilient, street-smart folks that will definitely catch the world’s attention in years to come.”

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This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.