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Investing in Southeast Asia, here’s how it’s different

Posted by on 17 September 2018
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What’s the next big thing to do after cashing out of your Silicon Valley startup? Vinnie Lauria, Founding Partner at Golden Gate Ventures, shares his thoughts.

Seven years ago, I made an unusual choice: teaming with a couple of other experienced founders to launch a VC fund in Singapore. We saw the 10-country ASEAN region as a promising place to find new growth companies, and the promise has been more than fulfilled.

Both the volume and sophistication of startup activity keep increasing, in nations that are eager to keep growing and open to new ways of doing it. These factors produce an investment scene that has unique qualities.

Many of the best young firms here don’t look like the tech darlings of the U.S.—or of China. They’ve shaped themselves in “frontier” markets which differ from those of the mega-countries. And, in some respects, they may actually be more representative of the global cutting edge. Let’s illustrate with three high performers from our portfolio at Golden Gate Ventures.

Carousell is a C2C-oriented platform for people selling or buying anything from electronics and clothing to household goods, bikes, and cars. You could call it an eBay equivalent, except its DNA is different. Firms like eBay (or in China, Alibaba) evolved in the web world. Carousell, like many Southeast Asian firms, is a newer creature of the mobile world.

The company started out mobile-only, with no website initially. Today you can access Carousell from a desktop computer but the mobile app still rules, and so do the features that demonstrate mobile-first thinking. For instance, chat is built in. That’s very handy for a back-and-forth between buyer and seller—and perhaps even handier if you are shopping for a new job or a loan, two categories that Carousell has added beyond the usual ones.

Carousell has developed an adaptable technology stack to scale around the region, with a data-intensive app in Singapore to take advantage of 4G, to a lighter weight app in the larger market of Indonesia (population 266 million) that works well on slower and intermittent mobile internet connections. They’ve expanded their platform into Malaysia, the Philippines, Hong Kong, and Taiwan. The firm combines user-aware design with multifaceted strategies for growth, which thus far is a winning package.

Alodokter seems an odd name for a company until you try speaking it aloud. It’s how an Indonesian might say “Hello, doctor.” This mobile-first (but also web-based) firm combines the services of U.S. platforms such as WebMD and Teladoc.

On Alodokter, you can read expert-vetted posts about a wide range of health topics. You can also chat with a physician, discuss your concerns, and set up a personal visit if needed. This helps Indonesia address a problem it shares with many countries, as the platform links people in remote rural areas with physicians who tend to cluster in cities, and directs all patients to the best/nearest in-person care.

Alodokter is expanding into Thailand. It’s also expanding into bigger sources of income: most physicians here are based in hospitals, to which the company will soon provide services such as booking and billing.

Carro, who raised one of the largest Series B rounds in the region (US$60m) is tackling the used car market. Carro exemplifies much of what’s distinctive about Southeast Asia - multinational and multicultural. The three co-founders—one each from Singapore, Indonesia, and Thailand—met as students at Carnegie Mellon in Pittsburgh. They came back to launch Carro in all three home countries simultaneously.

Initially, Southeast Asia didn’t have a Kelley’s Blue Book service for valuing used cars, so Carro built this out and leveraged it on their mobile/web platform for trading the cars, both C2C and B2C.

Carro has incorporated an element you’ll hear about often in the ASEAN region, O2O (online to offline). The company shepherds buyers through the process with real-world aids which also become revenue streams. From insurance, to financing, to service contracts.

With boundaries, come opportunities

Constraints and caveats that investors should be aware of in the ASEAN region? It’s hard to build a cross-border business (e.g., linking buyers in one country with sellers in another) because this isn’t yet a unified easy-trade region to the extent the EU is, or the internal markets of the U.S. and China. Look instead for business models that can scale via in-country growth plus replication across countries.

In evaluating firms, be aware of where their target countries are on the development curve. What works well in Singapore may not fly in a place where few can yet afford or even use the products—and vice versa.

Don’t worry too much about cultural differences. The culture of tech has proved infinitely adaptable. Rather, look for countries where the business and institutional infrastructures are still evolving—that’s the “frontier” aspect, which allows new firms to step in and provide what’s needed, with state-of-the-art solutions—and for countries where the regulatory environment is friendly to innovative startups.

While all of these provide challenges in the region, they also make it difficult for global players to swoop in, so you are going to find plenty of local, startup opportunities in Southeast Asia.

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