Swimming with the Tigers — Building Your Company in Southeast Asia

Southeast Asia is a highly condensed and relatively young region with people coming online rapidly, presenting huge opportunities for internet startups looking to expand into new markets. A report by Temasek and Google shows that Southeast Asia’s internet economy could surge to be worth $200 billion annually within ten years. Driving this trend are a number of the region’s demographic and economic conditions:

– Youthful populations: According to BDG Asia, More than half of Southeast Asia’s population of 600 million is under 30, making it much younger than developed regions like Europe (34% under 30) and North America (40% under 30). While China’s aging populations make it increasingly hard to fill labor markets, Southeast Asia has a deep pool of potential workers.

– Growing internet penetration: Since January 2016, the number of internet users around the region has grown by more than 30% in the past 12 months alone. Internet penetration rate in Southeast Asia is just at 53%, leaving a lot of room to grow, compared to 91% in Japan, 80% in the European Union and 73% in the United States.

– Growing middle classes: By 2020, the region’s middle class will more than double to 400 million people (Nielsen).

– Highly penetrated mobile region: There are 700 million mobile connections in the region, reaching 130% of its overall population in 2016. People are comfortable with mobile payments due to limited traditional banking infrastructure.

The opportunity for mobile startups has grown so big that the $300 million venture fund SOSV, known for its industry based accelerators, started a mobile only accelerator, MOX, to help mobile apps enter the emerging markets, especially Southeast Asia. MOX’s aim, states William Bao Bean, who runs MOX in Taipei and Chinaccelerator in Shanghai, is to target the “last four billion” internet users, who will skip PCs and use mobile devices only.

Opportunities are extensive, but variations among markets regarding customer needs and customs, local nuances, regulation, religion, etc. have proven prohibitive for companies that expand without investing in proper due diligence and product adaptation.

Entrepreneur Paul Meyers, an Expert in Residence at MOX, has over 20 years of experience building and exiting companies in Southeast Asia. Paul spoke with us and divulged five topics to candidly consider before venturing into a Southeast Asian country:

Have consumers in the market demonstrated a need for your product? In this market, is there a gap that your product could fill? What competitors already exist in this market?

Study the market beforehand — Do your due diligence.

• Is there an audience for your product in this country?

How do the needs and tastes of consumers in this market compare to those of consumers in your current market? What are the profiles of your potential users? What are the profiles of users of similar/competing products?

• Would your product work in this market?

Does your product (physically) work here? What technological device does your product require, and do your potential users already have access to this product? Do consumers have access to internet and mobile data?

Consumers in India often download an application on their mobile devices and delete it immediately following a single use. This practice is due to limitations in mobile storage capacities, and necessitates a large reduction in application size for companies coming from more developed markets.

• How will your product fit in the market?

Consider…

– Culture
— Religion
— Habits
— Most suitable discovery/marketing
— Consumption model

In Muslim countries, dogs are considered to be the dirtiest animal. Motorola once produced an advertisement for Indonesia featuring a dog carrying a phone in its mouth, realizing just before release just how potentially damaging this campaign could be for the brand.

• What do you need to change about your product to make it work?

– Language
— App size and connectivity

An app that requires a lot of memory would fail in a market where data is expensive and storage is scarce. In Nepal, for example, consumers tend to have an old-model phone for SMS and calls, and a smartphone to use infrequently for social media and apps when free internet is available. In India, for example, consumers often download an app to use it, and then immediately delete it to avoid clogging up limited storage space.

– Payment and monetization

How will you develop and test your payment process? What partners do you need to facilitate your transaction/marketing/“tech train” process?

For example, most transactions in India take place through PayTM. In order to make payments with PayTM, however, you need to have a local partner.

Final considerations

• Get as local as possible as quickly as possible — do your due diligence, discuss your models with locals, analyze strategies of competitors
• Turn a profit as quickly as possible
• Get a local partner — Who is the market leader? Can you work with them?
• Test incessantly
• You will make mistakes. Be humble, be patient, and adapt quickly.
• Always listen to your customers.

About Paul Meyers:

Paul spent the first part of his career as an award-winning television producer, creating nationally broadcast science documentaries and corporate work for Apple, IBM, HP, Motorola, Visa and others. Since moving to Asia in the early 1990’s, Paul has worked in interactive, mobile and digital media. Roles have included:

— Starting Vietnam’s first computer animation facility
— Running multimedia for Asia Business News (now CNBC Asia)
— Founding/building MTVAsia.com and bringing E!Online, CNET and DoubleClick to Asia Co-founding and running business development for early internet company AsiaContent.com (IASIA), helping to bring it public on NASDAQ in 2000
— Founding, running and ultimately selling SEAsia’s largest supplier of mobile games, Acme Mobile Consulting on mobile, digital and sales strategies for such companies as Xerox, Blackberry, Vodafone, ESPNStar Sports, MEF, etc.
— Running business development for mig.me.

Originally published at sosv.com on April 6, 2017.