Southeast Asia has become a bright spot in the global startup landscape.
In 2021, 19 startups in the region saw an increase in valuation to unicorn status, bringing the regional unicorns to 35. Particularly, Singapore got the lion’s share with 15 startups achieving unicorn status. Indonesia came a close second with 11 unicorns.
This growth and success have drawn global attention, and in a particular keynote titled ‘The rise of the ASEAN unicorns’ held during the ATxSummit event on May 31, four panellists came together to talk about the contributing factors that made Southeast Asia (SEA) the tech hub it is today.
A look at the tech landscape in SEA
The technology ecosystem in SEA has seen tremendous growth over the last few years. This has been on the back of our large growing population and economy across the region with 600 million people, of which about 110 million are coming to the middle class over the course of this decade.
In particular, the tech ecosystem saw multibillion-dollar IPOs being completed, with startups being funded by some prominent global investors from around the world. That said, the market conditions now are somewhat muted — we’ve seen pretty significant market correction for the stock markets, a macro-economic slowdown, and for the first time ever, a bear market for the tech ecosystem.
With the recent correction in the markets, how has it changed the way businesses operate?
Traveloka for instance, has relied more on partnerships, such as with local governments and agencies to bring more impact and social connection to the bigger community. Traveloka also worked closely with its local business partners to rethink how they can better promote domestic tourism to stay resilient.
“I think it’s important to make sure that we always listen to customers and be more sensitive to what need they so that we can add more value to our users,” said Albert Zhang, co-founder and Chief External Relations Officer of Traveloka.
Carousell, as a consumer-facing business, resonated strongly with this sentiment. Co-founder Marcus Tan observed two key changes about operating during COVID-19.
Firstly, consumers tend to expect more from a peer-to-peer marketplace, especially in terms of convenience and trust; and secondly, the company has learnt to be more “prudent” in terms of the way they operate, and the way they look at expenses and budgeting.
Charting the path to profitability
From an investor’s perspective, one of the areas they are focused on with when it comes to the companies that they invest in, is their path to profitability. In a bull market however, that is sometimes more conceptual than an actual plan.
Therefore, this has accelerated a lot of thinking around the strategic decisions that they make instead of making big bets in this kind of environment.
One key trend that Chun Li, Lazada Group CEO, noted is that more businesses have embarked on the e-commerce journey as Covid-19 accelerated digitalisation.
Following this, companies have explored new ways to build trust among their customers as they ramp up their digital presence, as well as implemented new processes to work more efficiently across different countries as they widen their logistical footprint.
As the early adopter of e-commerce in SEA and one that’s invested by Chinese tech giant Alibaba, Lazada has strongly focused on the game of scaling up with long-term investments and not relying too much on marketing so they can remain sustainable.
Essentially, the pandemic has forced companies to “tighten the hatches” and innovate more, setting the bar higher for new startups coming into the space.
When it comes to innovation, technology is a huge driver — and companies need to have the necessary infrastructure to support it. This can be challenging when companies attempt to expand overseas, especially in third-world countries.
When expanding overseas, there are also other considerations that companies need to take note of, including the diverse cultures, religions, languages and socio-economic classes. Ultimately, a company needs to adopt a different strategy when entering different markets — what might work in Indonesia might not necessarily work in the Philippines, for example.
There are many aspects to scaling a business
When talking about scaling, there’s a lot of different ways one can go about doing it, from regional expansion to expanding into new verticals.
The latter is in line with the ‘superapp’ model, which we learnt from Chinese tech giants — we have since reiterated it and made it our own.
For Carousell, despite expanding into new verticals, their core mission stays the same: to offer an easy and convenient way to buy and sell amongst ourselves.
In this ‘new normal’, Singaporeans seem to have shifted their focus onto their long-running love affair with cars. This is seen by how the demand for vehicles in the country during the pandemic is higher than in January 2020, before Covid-19 hit Singapore.
Additionally, as more people stayed home to shop for their needs, they also did the same for autos. Statistics from Carousell revealed that there are more than 500,000 live listings on its autos categories.
This is a huge number of listings given that Singapore is a tiny nation — as of 2020, there were only approximately 974,000 motor vehicles in the country, according to data from research site Statista.
In Singapore, five out of 10 cars sold annually get transacted through Carousell’s marketplace and more than half of Singapore vehicle owners engage and use Carousell’s autos categories on a monthly basis.
In early 2016, Carousell noticed that more people were looking to sell and buy cars on the site and decided to step up its offerings in that department.
It went on acquire Caarly, Singapore’s mobile-first used car marketplace and dealership platform, and it eventually also acquired OneShift in 2018 to expand its automotive content and network of dealerships in Singapore for its users.
In short, Carousell sees mergers and acquisitions (M&A) as a way of organically growing the company.
Summing up the panel discussion, all three executives expressed their optimism towards the Southeast Asian technology ecosystem and hope that it will continue to thrive and breed more unicorns in the years to come.
Featured Image Credit: Carousell / Lazada / Traveloka