The countries in the region have a lot of potential to dominate the home market first, so should they avoid regional growth? Decisions, decisions
When I began writing this article, the hypothesis I was following was, ‘What can startups built in the Mekong region do to go global?’ But, after speaking with investors, mentors and entrepreneurs, the clear question was, ‘Should Mekong startups even consider going global? Or for that matter, regional?’ What is better? Dominate the home market or try to grab market share across the region?
Myanmar needs everything tech: A case for staying local
Less than two years old, the Myanmar market is grabbing eyeballs for its potential, with a large population, an economy that is opening and a country feeling optimistic about the future.
Also, it is moving to mobile.
The November 2015 report from Ericsson said Myanmar added five million mobile subscriptions in Q3. Ranking it fourth behind the much larger countries of India, China and Nigeria (and ahead of the United States).
Furthermore, Myanmar’s four competing telcos (Telenor, Myanmar Posts and Telecommunications, Yatarpon and Ooredo) are rolling out tower-building initiatives in an effort to cover the entire country.
The Economist reported that the foreign firms of Telenor and Ooredo will need 8,000 towers each to cover the country. Corruption and beaucratic roadblocks remain an issue, but towers are still cropping up throughout the country.
So what does this mean for startups?
“Myanmar is going to have a significant domestic market, but that market is still developing from a tech perspective,” David Madden, Founder of Phandeeyar: Myanmar Innovation Lab tells e27. “The interesting thing about Myanmar is that there are enormous needs all around. So whether it is the basic building blocks of consumer Internet or classic listing sites, they are all needed and have been some of the first biggest players we have seen,” he adds.
“But there are also ride-sharing apps. There is a team sitting outside working on the Myanmwar version of Waze. So that is the really interesting thing about Myanmar. All the stuff is happening at once. Traditional Internet companies as well as the latest ones,” he enthuses.
Vietnam: Sleeping dragon of startups
Vietnam is the region’s most populous country and many think the alarm clock went off and this startup sleeping dragon is beginning to awake.n
The country boasts 40 million Internet users but as that is less than half the population, the potential for growth is obvious. It also has a relative low mobile penetration rate of 34 per cent and 60 per cent of smartphone users have made purchases through their mobile device. But foreign VCs like 500 Startups are making moves into the country, suggesting they see an upward trajectory for these numbers.
The country offers two exciting hubs in Ho Chi Mihn City and Hanoi. While Vietnam’s economy is a bit larger than Myanmar, the per capita GDP (IMF) is still less than US$2,000 per year. So, yet again, the country presents a lot of opportunities to fill local gaps.
Late last year, Navigos Group (maker of the locally-focused jobs platform VietnamWorks) was bought by en-japan. Unconfirmed reports put the number at US$22 million and made it one of the largest exits of the year. It showed Vietnam can exit, and can do so without a market outside the country.
Finally, VNG Corporation is the country’s largest Internet company and a unicorn which grew out of the country’s first Internet boom of the early 2000s.
As the regional presence of Vietnam grows, it may be sexy to cite a ‘growing regional focus’; but history suggests the biggest rewards may come locally.
But, each business is unique, and Vietnam is the best exemplification of a complicated region.
For example, the business models of travel startups like Triip and plug-in developer Magestore require a regional or even global outlook. Both companies are quite successful.
Why go regional? The Thailand story
The ‘Gateway to the Mekong’ is the region’s largest economy by a long-shot. It is host to an international city in Bangkok as well as notorious ex-pat conclaves like Chiang Mai and Phuket.
Thailand also has a significantly higher per capita GDP than Vietnam or Myanmar at US$6,152 per year. It also has a mobile penetration of 150 per cent which is second only to Singapore and a vibrant social media presence with 32 million users.
After speaking to Ardent Capital and dtac Accelerate, both companies said a global focus is fine, but not overly relevant until a startup can prove the model works locally while keeping ambitions regional.
However, both companies said they do find it important for a company to have regional focus.
“We are focussing to support Thai startups. Anyhow being a startup in Southeast Asia, it is really important to think globally from day one because of the economic landscape here. We aim to push our startups to expand regionally,” Anattaphisa Jantathai of dtac Accelerate tells e27.
One of the allures of Thailand, and a serious reason to consider a regional outlook, is the massive island nation south of the country: Indonesia.
According to Adrian Vanzyl, CEO of Ardent Capital:
“[A company needs to] start in Thailand, prove the basic model, get a good investor that can help with expansion, and go to Indonesia next. If you own those two markets, you will own the region.”
One of Ardent’s investments, the woman-focussed e-commerce company MOXY is a company with a regional approach, jumping from Thailand to Indonesia.
“Half of the population in Southeast Asia is in Indonesia. Within 20 years, it will probably be the same size as North America. If you think about it, Indonesia is definitely 50 per cent of the whole region’s potential,” Moxy’s Jeremy Fichet told e27 in October.
One major problem facing Thailand is finding English-speaking talent. No matter how good the idea, or how much a Thai company wants to go regional, English proficiency is a must.
Thailand is the economic leader of Mekong, and, as a result, is a good place to launch a regional company.
The other end of the spectrum: Cambodia and Laos
Cambodia and Laos are regional players for reasons that are on the other end of the spectrum. Both countries have small populations (six million and 12 million citizens respectively), and mobile penetration rates remain low. Cambodia only has 2.2 million smartphone users and 3.8 million Internet users.
With only six million people and an economy on par with the rest of the region, Laos’ Internet stats are quite paltry — 850,000 Internet users and 680,000 on social media. For their own unique reasons, these countries require a quick regional focus.
However, someone with long-term vision may find a few, fantastic first-to-market opportunities in Cambodia. With an underdeveloped tech scene, a bustling capital city in Phnom Penh and a developed tourist industry, the country presents itself with creative opportunities for an entrepreneur willing to take a risk.
Like much of the region, Cambodia is skipping the computer (desktop) and jumping straight to mobile.
A report by WeAreSocial said Internet usage in Cambodia grew by 414 per cent in 2014. Furthermore, the report suggested the growth rate was as much a part of more accurate reporting than a massive uptake — suggesting a market that had already existed.
Cambodia offers entrepreneurs an unsaturated market, an ability to be the first player but a market that forces the company to look abroad relatively quickly, ensuring scaling success.
Laos is in the middle of a hydroelectric push; already accepting Chinese investments to build hydropower dams for energy exports across the region.
With less than a million Internet users, it immediately forces entrepreneurs to look abroad to reach their market. And like the whole region, some of the statistics point to a positive future ahead. Since January 2014, Internet usage has increased by 20 per cent and mobile is seeing a 62 per cent rise.
In the last few years, the Mekong region has become an exciting market for the startup industry.
It is a complicated decision to focus on regional growth or local domination, but, at the end of the day, a good problem to have.
Disclaimer: MOXY Indonesia is an Ardent Capital portfolio company. Ardent Capital is an investor in Optimatic Pte Ltd, the parent company of e27.
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