Three prominent investors sit down at Echelon Central Asia 2015 to talk about the startup trends in Southeast Asia and what catches their eye
It is not an overstatement to say that the tech startup landscape is ever-changing. One vertical may dominate the market for a period only to lose flavour with investors when trends shift in favour of another industry.
e27 correspondent Elaine Huang sat down yesterday with Kuanhua Hsu (General Partners, KK Fund), Arnaud Bonzom (Director of Special Projects, 500 Startups) and Frank Lee (Investment Manager, TNF Ventures) for a freewheeling discussion on trends in the Southeast Asian startup ecosystem and what they are keen to invest in.
E-commerce still dominates in Southeast Asia but…
While the panel generally agreed that e-commerce still reigns supreme, it has evolved and diversified to cater to different segments.
Bonzom said that Zalora and Lazada are still the biggest e-commerce players, but niche marketplaces like RedMart, a Singapore-based online grocery startup, are popping up with more frequency.
He added that more Southeast Asian entrepreneurs are looking to adapt US products to the local market. One example, he said, is the emergence of KFit, a fitness class-sharing platform that is essentially a clone of US-based startup ClassPass.
Hsu said that the e-commerce industry in Southeast Asia reached a peak last year but the trend of sharing economy and daytime analytics startups is picking up fast.
Valuations in e-commerce startups are sky high but Hsu urged caution against joining this proverbial gold rush.
“For me, I am looking more at e-commerce enablers, startups that will help e-commerce spread [its reach and influence]. For example, startups that will help solve the logistics issue, payments issue as well as distribution,” said Hsu.
Bonzom echoed the sentiment, adding that although the barrier entry to e-commerce is low, you have to go head to head with the big boys such as Amazon and Lazada. Competing against these companies for investors would be an uphill struggle.
Lee also agreed that the e-commerce landscape is reaching a saturation point.
“I personally like B2B startups. I definitely want to focus on B2B entrepreneurs but finding founders who can tackle problems in this space is difficult, much harder than the consumer space,” said Lee.
He also observed that more investors are flocking to invest in healthcare, Big Data, and logistics startups.
“The beauty of B2C is that you can see the fruits fast. For B2B, it takes a while; at least six to 12 months to close because you are dealing with corporations such as banks,” said Bonzom.
Timing is everything
A novel and practical idea is laudable but can it hit pay dirt? The panellists agreed that funding young startups at the right time is critical in order to see tangible positive results.
“The key to be successful in early emerging markets is to identify teams with good foundations. Doesn’t matter if they are in the Series A, B or C stage. As an investor we can invest early in developmental process,” said Hsu.
Bonzom said that some VCs will err on the side of caution and do a small Series A or seed investment, then keep track of the results before investing in larger sums of money.
“It’s about understanding the market, having foresight to see the evolution, as well looking at previous trends,” said Lee.
Join us before the end of 2015 at Echelon Central Asia! Held on Dec 2-3, Echelon Central Asia is a two-day conference held in Almaty, Kazakhstan, aimed to create a bridge between Central and South-East Asia.
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