Bright spots for start-ups in urban S-E Asia

South-east Asia is largely seen as a tough nut to crack for Internet start-ups because its fragmented markets and language barriers tend to make expansion difficult, but there are bright spots.

Venture capital firm Jungle Ventures says the region's biggest cities, including Singapore, Jakarta and Manila, are a fast-growing, homogeneous market that present significant opportunities for firms with products targeted at urban consumers.

The firm's new report highlights how urban consumers in cities across the region use common platforms like AliCloud for cloud computing and PayPal for payment networks.

The growth in the number of Internet users in South-east Asia - surging 39 per cent in the past year - exceeds the global growth rate of 10 per cent.

Internet users made up at least half of the population across the six key Asean markets - Singapore, Malaysia, Indonesia, the Philippines, Thailand and Vietnam.

Not only does the growing Internet user base provide an expanding e-commerce market that start-ups can tap into, the use of common platforms also provides readily available infrastructure solutions, according to the report.

"Investors and founders are looking for familiarity in what appears to be an extremely complex market from the outside," said Mr Amit Anand, founder and managing partner of Jungle Ventures.

In the report, in 2014, Asean's top six markets' capital cities had an average combined GDP per capita of US$11,924, over five times that of India's six largest cities at US$2,148.

This large spending power would benefit start-ups focused on urban consumers, it added.

Mr Anand said the firms that could benefit the most are in "those sectors that are under-penetrated, such as financial services and healthcare".

The report also cited five examples of start-ups that have successfully scaled-up across the region - Lazada, Reebonz, Zalora, RedDoorz and Pomelo.

Mr Rishabh Singhi, chief operating officer of online budget hotel booking chain RedDoorz, felt the large cultural and geopolitical diversity in South-east Asia affects the success of different approaches companies take in expanding into local markets.

"I feel that each market needs a focused product market strategy along with a great local execution team to drive sustainable growth," he said.

"The business opportunities look great with ever growing smartphone and Internet users in the region," he added, highlighting how the boom in the Internet industry in the region helps businesses to evolve and remain sustainable.

A version of this article appeared in the print edition of The Straits Times on May 03, 2017, with the headline 'Bright spots for start-ups in urban S-E Asia'. Print Edition | Subscribe