Going Global in South East Asia, Europe + AI Ecosystem Building in SEA

Attended this event hoping to learn more about the challenges, opportunities, and resources of expanding the business operations of a Southeast Asia-founded startup, especially in AI and high-tech, which has at times been claimed to be a comparative advantage of countries like Singapore given the strong technology ecosystem. Some of the key questions the event hope to cover were:

• What are some interesting things happening in Singapore and other ecosystems in SEA, MENA, Europe?
• Who are the key ecosystem players to know if you want to enter one of these markets?
• What are the latest vertical trends in each startup scene?
• What are some red flags in terms of doing business and receiving investments
• What are some secrets about each ecosystem that only locals understand

Having heard Mr. Le Hong Minh of VNG, Vietnamese unicorn and provider of technology ecosystem of products, speak about the company’s strategic focus in AI, it would have been great to find out more both about building AI products and services in SEA as well as expanding beyond SEA, from a different (investors’) point-of-view.

The event skewed more towards going global in general rather than just focusing on AI, given the backgrounds of the panelists and interest of the audience, through the Q&A. Nevertheless, it was an extremely engaging session and conversation between the panelists and audience, covering a wide range of topics and industries.

This event was jointly organized by the GlobalSouthTech (GST) community, MOX accelerator, and Chinaccelerator.

Panelists

• Vinod Nair, Senior Partner, Delta Partners
• Yiping Goh, Partner, Quest Ventures
• Nikhil Kapur, Head of Investments, GREE Ventures
• Jessie Yip, Business Development Head, GE Digital
• Michael Blakey, Managing Partner, Cocoon Capital
• Andries De Vos, CEO & Co-Founder, Slash.co

Host: Felix Oen, Co-founder, KANG Healthcare

Panelist session

• Insights on startups in the region
  • MB: There are two ways to look at companies. In Southeast Asia and Singapore, companies can be categorized into either regional or global
    • It is very hard to do business in the region, compared to in Europe, with the reason being, because of the European Union, tax laws and employment laws are more similar across countries than they are here in Southeast Asian countries and hence it is much easier to move between countries, both for companies and for labor
    • No country is much of an exception, as it is difficult to move between, for example, Singapore to Malaysia, or from Malaysia to Jakarta
    • In response to this challenge, founders have to work more closely with more local entities as well as local talent
    • In terms of expansion outside of the “home country”, for deep-tech startups from Singapore, the next step might be Europe or the U.S., where the markets could be more ready for the industry, as opposed to within Southeast Asia
• Sharing of experience of going global
  • JY: Believe that going global implies the desire and ability to win, and to do that requires having a product that is credible
    • There is a need to think about yield – how much any amount of effort taken can be multiplied when selling to a client. For example, a client can go on to refer and recommend the products and services of the company to other clients, or it could be that the client themselves have a large footprint in the industry or region
    • This is especially important because founders need to realize that they have tight resources and will need to optimize for any dollar or effort spent
    • On this note, it is good to have corporate accelerators like GE Accelerator, to provide opportunities for startups, to help to connect the dots. Ultimately, however, the founder has to be the one making good of the relationships and closing the deal
  • YG – When making investments, believes in finding hustlers, people who will do what it takes to succeed. For example, she has worked with a couple with young children who were willing to move as the company expanded
    • Startups fail when the founder decides to give up, not when the odds are stacked against them
    • Expanding is complicated, but even the top startups who expand end up getting way more revenue from other countries. However, this requires a thoughtful and careful plan, due to potentially large opportunity costs, as picking one country to expand into implies missing out on another
    • Would like to challenge SEA startups in thinking if they should look more globally, not just Europe and the U.S., but also Australia and Hong Kong. Case in point – Letgo is copy of Carousell and was relatively late to the game (having launched in 2015 vs. 2012), but has successfully gone through multiple rounds of fund raising.
    • Another case-in-point is in scooter sharing, where Spin, co-founded by a Singaporean, got bought by Ford
• What are the larger challenges you see for startups in the region and how can the Singapore ecosystem compete
  • VN: startups need to have ambition, just like some of the children he has come in contact with nowadays who want to build huge businesses
    • A more practical advice would be to pick the right market – one that is big enough to cater to the ambitions of the startup. This is important as there is a need to have access to a large consumer base
    • Also, he notices that there are times when a small firm looks like a hammer looking for nail, that is, a solution looking for a problem. For example, there was a credit-scoring company that they brought to the Philippines, and the management team could not understand how the rich in the Philippines thinks about fraud and hence failed to take off
    • He likes businesses that do not see themselves as being rooted to any one place. For example, he is working with a company that has teams and target markets in different geographies, by construct
  • NK: In contrast to some of the speakers, he thinks that Indonesia is a very tough market to operate in because there is a lot of local money looking for local founders
    • Going global hinges on the startup’s ability to realize their strength and unique value proposition. One unique proposition SEA has is the cost structure. Technology talent is much cheaper here, maybe 1/3 of the U.S. For example, Freshworks is winning against Zendesk because of cost
  • MB: The strength of Singapore is in technology talent, specifically deep technology. There will probably be companies coming out of Singapore but likely only in a few more years
• Thoughts on brand building
  • JY: Startups need to have an identity. GE looks for partners with both the right brand and identity
    • She has worked with startups that brand themselves as solving facilities energy efficiency, and hence the GE accelerator attempts to partner them with asset energy efficiency companies, and together, they will be useful to any plant
    • Intellectual property is just as valuable as a hard asset. There are many ways to sell IP. For example, the oil and gas team partners with an Italian company that makes smart helmets for field engineers and they sliced out a part of the hardware IP and partnered with GE
• Given that B2B has a long lead time (i.e. do not see returns immediately), how do you explain to founders that there is a need to build branding first
  • MB: There is a need to make sure that founders understand there is a long lead time and that sometimes opportunities can be too big for them
    • In this case, founders need to know what the low hanging fruit is and prioritize accordingly
    • Targeting a larger market might not necessarily be the best strategy, as every company has limited dollars, so there is a need to focus on one, or smaller, target market (i.e. target the pain-points where the company can succeed most easily). This means that it might be that expanding into the U.S. does not make as much sense as regionally.
  • NK: Always tell founders not to spend money on Facebook advertising as it is not cost-efficient. Regardless of whether he is evaluating a B2B or B2C company, he looks for founders who can hustle with the least amount of resources
    • Likes founders that are able to come up with creative ideas as opposed to taking the mundane method of simply doing advertising through Facebook, and feels that this is one of the aspects of the “founder DNA”
    • Feels that money is better spent being invested in hiring people who can think creatively, stretch every dollar
    • Likes to ask this as an interview question, especially if the candidate came from a corporate background: If given $1K, what can you do?
• Thoughts on scaling organically or through partnerships
  • JY: Has seen startups that hustle in a way so that they have a 360-degree vantage point of who they are. These are startups that partner with government agencies, have backing from credible investors, and are able to win high profile corporate accelerator challenges
  • YG: when choosing who to partner or take money from, startups need to be very aware that any relationship should not be just about having money, but also recognize the ability to be introduced to partnerships
    • For example, Jeff (Jeffrey Seah), who comes from a corporate background, helped with advising and mentoring SGAG, which now has >30 blue chip companies as partners
    • She has also seen failures as a result of partnerships with family offices or corporates, with the reason being, there are times when these strategic or corporate partners want to lead a fundraising round and they have strong opinions because they want the target company to fulfill a certain objective for them, hence pushing them towards a certain angle too early on in the business. For example, in Indonesia, there are cases where once a company partners one family office, it cannot subsequently work with others
  • VN: has large companies go into partnerships with good intentions but are not clear on the goals of the partnerships. Because of the size of the company, there could be a lot of different opinions. Besides that, these large companies typically they run at very different speeds from startups and startups hence end up becoming hostage to that

Further reading

• Can AI help bridge digital divide in Southeast Asia?
• Why 2019 is a pivotal year for Southeast Asian startups
• Why many Indians are moving to SE Asia to launch their ventures
• 8 Trends That Will Shape Southeast Asia eCommerce in 2019
• A Guide To Southeast Asia’s Thriving Startup Ecosystem
• The prospect of AI in Southeast Asia
• 3 startups shaping AI in Southeast Asia