A full 9 months before the kick off of SXSW 2016, our team in Southeast Asia was hard at work brainstorming panel topics to pitch to the SXSW community.
What could we bring to the international stage that is interesting and unique? Was there anything we were building that could inspire others across the globe at this truly international event? What is our team deeply passionate about?
We passed on topics that were based on the Piktochart product in order to focus on the bigger picture. When we thought about our involvement and leadership in the startup ecosystem in our own backyard, we knew we were onto something promising. What if we told the SXSW community about the growing startup ecosystem in Southeast Asia?
We were inspired by entrepreneur and venture capitalist Brad Feld’s book Startup Communities: Building an Entrepreneurial Ecosystem in Your City. We used the book as a guide for the content that would be discussed in the panel. Our team drafted our pitch and put it out to the world.
In the book, Feld says sustainable entrepreneurial communities must have 4 key things. We wanted to talk about each of these things in the panel and what they look like in Southeast Asia.
- Communities have two types of people: leaders (entrepreneurs) and feeders (people who support startups, such as government agencies, funders, and service providers). While the “feeders” are the very fabric of the community, the entrepreneurs must be in the lead. Who are the leaders and feeders in Southeast Asia?
- Sustainable entrepreneurial communities all have a long-term view and commitment to building this community. What does the future look like for Southeast Asia?
- These thriving startup ecosystems have a deeply ingrained philosophy of inclusiveness that welcomes everyone with an interest, not just entrepreneurs. How does Southeast Asia’s startup ecosystem welcome all, not just the superstar, venture-backed founders?
- Communities that are growing deliberately host substantive activities that engage the entire community to help startups move forward. If someone is thinking about starting up in Southeast Asia or being part of the entrepreneurial community, what are some events they should attend?
In the community voting process, we received encouraging feedback and lots of upvotes. The PanelPicker process allows the SXSW community to have a voice in what sessions are scheduled at the SXSW Interactive Festival. First launched in 2007, the PanelPicker allows the community to enter, review, comment, and vote on the speaking proposals that they want to see become a part of the event. We love this deliberate community focus.
To our amazement, the SXSW community loved our panel topic, and we were selected for SXSW 2016! “Startup Hubs Outside the Valley: Southeast Asia” was going to happen.
To talk about the topics we’d outlined, we knew we’d need to have startup ecosystem leaders from the area on stage. We picked three notable people who call Southeast Asia home. We wanted people who possess a wide range of background experience with navigating government, venture capital, growth hacking, mergers and acquisitions (M&A), and scaling startups in the region:
- Cheryl Goh is the VP of Marketing for Grab. Grab is a ride sharing network that allows Southeast Asians to move people and things, and it operates in 28 cities spread out over 6 countries. Grab is one of Southeast Asia’s best-funded startups, having raised nearly $700 million in the past 18 months. Cheryl has previously worked for tech companies like Friendster and MOL Global, and over the years, she has developed a profound understanding of digital audiences and how to build businesses around them.
- Jeffrey Paine is the managing partner of Golden Gate Ventures, an early stage technology venture capital fund based in Singapore that invests primarily in Southeast Asia. Jeff is also the founding director of the Founder Institute in Singapore, where he is currently overseeing its expansion in Southeast Asia. He is a recipient of the Founder Institute Director Award 2012 for “Greatest Ecosystem Impact” Worldwide (Singapore) and is currently an investor/advisor. He is a Singapore native and graduated with a Bachelors of Business Administration (Information Systems) from the University of Southern California in Los Angeles.
- Cheryl Yeoh is the former founding CEO of MaGIC, the Malaysian Global Innovation & Creativity Centre. Before being appointed as MaGIC’s first CEO in April 2014, Cheryl had spent the previous 12 years in the US, most recently in Silicon Valley. Her company, Reclip.It was acquired by Walmart Labs in 2013. With her experience and a strong portfolio, Cheryl led MaGIC to spur entrepreneurial activities in Malaysia and serve local startups.
In addition to Periscoping the session, we wanted to provide those who couldn’t attend a written recap of the panel. Below are the questions and a summary of what was shared.
What are some misconceptions you often hear about Southeast Asia as a region and the startup ecosystem there? What is something you wish people who have never visited the region knew about Southeast Asia?
Entrepreneurs and startup founders sometimes think of Southeast Asia as a shopping destination or a place to spend a holiday at the beach, but Cheryl Goh wants them to consider the opportunity the region provides for business. She suggested focusing on the rising middle class.
According to Goh, 190 million people are in the middle class today, and that number is expected to double in the coming years. The startup ecosystem is also anticipating mobile penetration to double in the next 5 years, paving a solid path for startups in the mobile space.
“I think Southeast Asia provides a really unique opportunity for those who want to explore a different lifestyle to come in and be proud of what they are working on,” Goh said.
“I think other misconceptions are that we live in the trees or we don’t speak English,” joked Cheryl Yeoh. “Singapore is one of the most developed nations in the world, and it’s right in the middle of Southeast Asia.”
The Association of Southeast Asian Nations, or ASEAN, consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. Yeoh said startups who come to the area must consider a region-by-region strategy to cover each country in Southeast Asia.
She advised that launching in 2 or 3 countries at the same time would yield a higher valuation compared to sticking to one country. Some startups work on their proof of concept in one city or region, but it’s important to consider launching in more markets quickly thereafter.
Yeoh then listed concepts that developed in other countries first before coming to the Southeast Asian market. She said that because it’s an emerging market, there is a large opportunity for services that work in other areas of the world to come to the region. Examples she gave were HappyFresh, an InstaCart equivalent, and KFit, Asia’s answer to ClassPass. These companies are receiving millions in funding because they are first to capture the regional market.
“There’s also a misconception that we have corrupt governments, which is partly true,” added Jeffrey Paine. “But that is changing.”
In the last 10 years, Paine has observed that the English language has brought the ASEAN countries closer together. In the past, business people would be required to bring an interpreter to meetings in a neighboring country, but now, he sees that less and less.
“If you are bold enough to take on south Asia, in addition to Southeast Asia, the population there is 2 billion,” advises Paine. “The population in that region is actually bigger than China.” Southern Asia countries include India, Pakistan, Sri Lanka, and others.
“Southeast Asia accounts for a quarter the consumption amount of China, but because of the 10 countries, 10 languages, 10 cultures in ASEAN, it is sometimes difficult for startups to expand. But therein lies the opportunity,” continued Paine.
“If a startup concept from elsewhere in the world is cloned in China, there will be 1,000 clones within a year. In Southeast Asia, when an idea is cloned, you’ll see about 10 companies take on the concept. That 100x factor means if you start a clone in Southeast Asia, there is not going to be 999 other companies after the market share.”
Who are the leaders (entrepreneurs) in the startup ecosystem in Southeast Asia? How are they taking the lead?
Cheryl Yeoh shared her story about coming to the United States from Malaysia to pursue entrepreneurial ventures then returning to Malaysia at the suggestion of the Malaysian government to act as the founding CEO of MaGIC.
“It was an example of the leaders in the startup ecosystem being the entrepreneurs,” she said. “I took on the position as the leader and the feeder and was given a $20 million budget to build the ecosystem over 2 years by the government.”
Over the past two years, there were key things Cheryl and the team at MaGIC focused on to build the startup ecosystem in the region:
- Started an academy. Although there were many conferences in the region for startups already taking place, Cheryl and her team found entrepreneurs were inspired to start companies but still weren’t exactly sure how to start companies. The academy programming is education-based and includes UX workshops and coding bootcamps.
- Started Asia’s largest accelerator program. The team at MaGIC saw that the regional expansion challenges were hindering some startups from succeeding. They decided to start an accelerator program modeled after Startup Chile, a government effort in Santiago, Chile that used to offer $40,000 equity-free startup grants, to those wanting to come to Chile to launch a startup. Cheryl and her team launched the MaGIC Accelerator Program, which is the largest program in Southeast Asia to grow a community of regionally-focused startups. The program’s goal is to build a strong ASEAN startup community, and they contribute to that effort by twice a year working to accelerate 75 startups to be investment-ready in 4 months. The cohort concept has worked for creating a strong community that helps startups succeed even after the cohort is over. Members of the cohort from across ASEAN keep in touch and help one another with regional challenges.
- Launched ACE. The ASEAN Centre of Entrepreneurship (ACE) is the first startup support services platform in ASEAN. The platform provides key services to help startups expand regionally and globally. Questions startup founders have before launching in a new region, such as which bank to use or how to incorporate in a new region, are answered by the team at the center.
“People like Patrick fund the smaller startups,” she explained. “His role is to inspire the next generation of people to let them know that this dream is possible in Southeast Asia.”
Goh also points to the company she works for today, Grab, as a leader in the ecosystem. She says one of the biggest challenges her team faces is recruiting talent. “Specifically, engineering talent is really hard to come by,” she said.
To overcome this challenge, Grab has invested $100 million in their R&D center and have three engineering hubs across the world – Singapore, Seattle, and Beijing.
“By investing directly into talent, globally and regionally, we are helping the ecosystem to grow,” she said. “It helps all of us find better talent and helps the Southeast Asia ecosystem compete in the world.”
Jeffrey adds that in Singapore, the ecosystem is just starting to see the first generation of successful entrepreneurs give back to the ecosystem. In the next 3-4 years, he predicts more and more entrepreneurs who have exited enter the VC circles as investors backing new founders and ideas.
Cheryl Yeoh added that in each region of Southeast Asia, an entrepreneur looking to plug into the ecosystem should reach out to connectors. She suggested contacting the heads of coworking spaces and accelerators to find out who these 2 or 3 key connectors are; oftentimes, those core connectors are the people who run those types of organizations.
Examples Yeoh gave included Amarit Charoenphan, CEO and co-founder of HUBBA in Thailand; Andy Sitt, founder of 123RF.com in Malaysia; and Pham Minh Tuan, the founder of Topica, an online education startup, which also runs Vietnam’s Founder’s Institute program.
“Ai Ching Goh, the CEO and co-founder of Piktochart, has been phenomenal in giving back to the community,” Yeoh said. She pointed to Ai Ching’s work hosting Ruby on Rails meetups and our team’s monthly startup community series, WebCamp.
“But overall, I would have to suggest reaching out to Khailee Ng,” Cheryl suggested. “He is the managing partner for 500 Startups in Southeast Asia. He has been doing a lot of work building the ecosystems region by region. You’ll see him speaking at every single conference. He has the largest number of seed-stage deals in Southeast Asia. Khailee is a good person to know.”
Who are the “feeders” (government agencies, funders, and service providers) in the startup ecosystem in Southeast Asia? How are the feeders in this ecosystem unique?
Cheryl Yeoh says in Singapore and Malaysia, startups see support and encouragement from the governments, but in the other 8 ASEAN countries there is very little help provided. When it comes to the private sector, she says all the major telecommunications companies in Indonesia are launching accelerators to boost new innovation.
When it comes to attracting venture capitalists to the region, Singapore’s government has taken the lead by providing matching programs for VC dollars. Because of this support, Singapore has become known as the venture capitalist hub of Southeast Asia.
“The thing to remember about many government programs is that most of the time, the programs are intended to support locals,” said Yeoh.
“However I always felt that wasn’t the right way to go about it. That’s why we started the MaGIC Accelerator Program, which is open to anyone who wants to build a company in Southeast Asia. You need global talent to come into the local ecosystem to raise the standards in the local region. I believe in an open-door policy, we cannot have a closed door.”
Yeoh points to Brazil’s startup ecosystem efforts, which she says was limited to locals only, as an example of a closed door approach that didn’t work.
Rather than naming a specific agency, Cheryl Goh named Singapore as an entire country that is taking the lead on feeding the startup ecosystem effectively. She points to the country’s policies on quickly giving foreign talent the right to work and its position as the hub for venture capitalists and talent as the two main distinguishing factors. Because of this, Goh and her team at Grab recently relocated their engineering hub from Malaysia to Singapore.
“Overall, Singapore is a great place to start a business,” she said. “Many press outlets like CNN have a presence in Singapore, and it’s easier to land coverage. When raising money, it’s good to get your startup’s story out there. It’s a great place to consider, but keep in mind it’s very, very expensive.”
Second to Singapore, Goh points to Malaysia as another place to consider when building a startup because of the low cost of living.
Paine said JTC LaunchPad @ one-north, an initiative supported by A*STAR, iDA, MDA, NRF and SPRING, is a vibrant community for startups and incubators. He also suggests taking a look at a strategic incubation program called Blk71.
“If you come to Singapore and ask anyone involved in startups where you should go, they will point you there,” he said. “You will easily find a high density of startups there.”
Paine said attracting the capital was the important first step the government in Singapore took in 2009. They identified a problem, created a solution, and, perhaps most importantly, they are still backing that solution because it’s working for the ecosystem.
The government recognized the risk of investing in a startup and created a matching program, which is currently at 5 to 1.
“This means you put in $100,000 and they will put in $500,000,” he explained. “This helps investors spread their risk a little bit. If the company does well, you can buy out their $500,000 at cost plus interest.”
What is the long-term vision for the startup ecosystem in Southeast Asia? What’s going to make it unique or first of it’s kind?
“Right now, Southeast Asia is trying to get to developed nation status,” explained Cheryl Goh. “So a lot of the problems we see – safety, congestion, infrastructure, education, and poverty – make it so entrepreneurs are in a unique position to make a difference. You have the opportunity to solve real problems. And the challenges of having a business in each region provides a natural barrier to competition.”
Cheryl Yeoh said the number of customers engaged in mobile shopping in Southeast Asia is the highest of anywhere in the world, topping out at 87 million active mobile shoppers. “Mobile commerce is huge,” she said.
Yeoh says that many startup ecosystems focus on the early-stage companies and fostering a community for new founders, but it’s also important to focus on the end game for startups at the same time. If there are no exits, M&As, or IPOs in an ecosystem, the investors won’t make any money and founders won’t have their next venture.
“Failure is a badge of honor here in the US,” she said. “Oftentimes, after failing multiple times, founders will see their success.”
To accelerate this natural ecosystem churn, Yeoh suggested that if a large company was interested in getting involved in tech but wasn’t sure how, they might explore acquiring smaller startups to form their innovation team. She sees this trend continuing to grow in the coming years.
Paine added that the startup ecosystem in the region is still relatively young, a mere 6-7 years old in many ways. As more and more people get onto the internet and learn English, he thinks the market will grow.
“There are a lot of things that need to be improved,” he said. “I hope the English language continues to tie us together.”
There are many startup ecosystems that, over time, turn into an “exclusive club” for the dominant players. They exclude early-stage entrepreneurs or even those who have an interest in startups but haven’t yet joined a team or built a product. How does the startup community in Southeast Asia view inclusiveness? Is there a way to get involved in the community without being a venture-backed founder?
Cheryl Goh said that although top players are typically busy, engaging with them is still possible. She suggested having talent, hunger, drive, determination, and fire in your approach. In general, she thinks people in the Southeast Asian ecosystem aren’t trying to be exclusive of others. It’s just that those at the top are busy running their ventures. That said, most of them make efforts to give back and grow the startup ecosystem in the region.
“At Grab, we spend a lot of time on things like internship programs, community talks, and provide education,” she said. “These are all ways that we choose to give back. We want more people to be part of the ecosystem.”
Cheryl Yeoh added that there are many successful entrepreneurs in Southeast Asia that want to give back, and perhaps they just need a platform to do so. One platform that exists are mentor hour sessions between successful founders and those just starting out.
Then, Yeoh shared her tips for approaching those you’d like to meet in the Southeast Asia startup ecosystem:
- At events, it’s not about collecting business cards. Identify the top 3 people you want to connect with, get their business card, and then follow up. “The key is in the coffee meeting,” she said. “From those meetings, you might be able to get introduced to 3 more people in that person’s network.”
- She also suggested not asking questions that have answers that are easy to come by through a simple Google search. “Come to me when you’ve done your research and you are stuck,” she said. “They say ‘I’ve tried these 3 experiments with my company and I know you have experience with this. Can you help me?’ Those are the people I help.”
“Do your homework,” echoed Paine. “And I’d also say that you have to be yourself.”
“That’s it,” he advises. “They will know everybody. From there, if you want to invest or raise capital, ask those people who the top angels are in their city.”
Thank you again to Cheryl Goh, Cheryl Yeoh, and Jeffrey Paine for joining us at SXSW for our panel Startup Hubs Outside the Valley: Southeast Asia. We appreciate their time and offering to share their knowledge and expertise with conference attendees!
Also, a giant thank you to those who took time to add us to their list of sessions at SXSW this year. We hope you found the topic as interesting as we do!
What are your thoughts about the startup ecosystem in Southeast Asia? Or the startup ecosystem in your own backyard? How are leaders and feeders helping to shape it? We’d love to learn from your experience! We invite you to share your thoughts in the comments below.