The five markets that share the Mekong river are nascent and complex but are a treasure trove of opportunities for those keen on tackling the combined market of 240 million
The Mekong region, made up of Thailand, Vietnam, Myanmar, Cambodia and Laos, are consistently evolving.
While Myanmar continues to slowly open up, it’s seen as a “fit for purpose” economy thanks to it’s nascent economic development. Meanwhile, Vietnam emerges as a manufacturing hub in Southeast Asia and has been piquing great interest from foreign investors.
For startups looking to enter any of these Mekong markets, which vary in their startup climates, here’s a brief overview which touches on the economic and ecosystem-specific factors that showcase their potential.
Thailand, Mekong’s gateway
Known as the “Gateway to the Mekong Region,” the market of 68 million (World Bank) and the second largest economy in Southeast Asia after Indonesia has been humming along despite the ongoing wash of political instability. Recently, the proposed Single Gateway policy, which threatened to become the ‘great firewall of Thailand,’ was a strong threat to the local ICT industry.
Once home to a booming electronics industry, Thailand’s manufacturing index continues to fall for the 22nd consecutive month as neighboring markets are offering lower costs.
Still, the very young ecosystem has all the makings of a promising tech scene. According to a comprehensive country report made by Bangkok Entrepreneurs, Thailand has mobile penetration of 150 per cent which is second to Singapore, with 32 million users on social media.
As one of the much earlier homegrown startup success stories, hotel-booking behemoth Agoda was founded and built in Bangkok since 1997 until it was acquired by Priceline in 2007. Another notable deal was web portal Sanook.com which had 50 per cent acquired by Tencent for over US$10 million. The startup was founded in 1998 and the deal went through in 2010. Most recent was Yello Digital Marketing Group’s acquisition of Bangkok-based startup Computerlogy.
As for the most well-funded startups in the Thai ecosystem, digital publication platform Ookbee has raised US$9 million to date in two funding rounds. Another is e-commerce solutions provider aCommerce, which has raised US$18.8 million at the Series A level.
There are five venture capital firms on the ground including 500 Startups’ US$10 million microfund 500 Tuk Tuks, Ardent Capital which typically invests up to US$12 million at a time and Inspire Ventures which invests up to US$2.5 million at a time.
Vietnam, the great outlier?
As the second largest market in Southeast Asia, Vietnam is seen as “a great outlier” in the emerging markets despite its past and current troubles.
The country saw a speedy boom in its telecommunications industry where the market eventually became so oversatured that investors pulled out in 2012. That was a few years back, but currently weighing on Vietnam’s economic growth is its prolonged fight against bad bank debt which is finally beginning to see the light at the end of the tunnel after three years.
In the next few years, the country of 90 million may see its GDP expand by six to eight per cent, a lot of it is owing to the booming manufacturing industry. In fact, 1 out of 3 Samsung phones are actually manufactured in Vietnam making the Southeast Asian country an essential part of the smartphone manufacturers global supply chain. Case in point, Samsung has invested around US$9 billion into Vietnam-based factories and assembly plants so far.
Also Read: Your cheat sheet on Vietnam’s startup scene
Home to two vibrant startup ecosystems Hanoi and Ho Chi Minh City, Vietnam’s two tech scenes offers a mixture of tech talent from the North and business-minded entrepreneurs from the South. According to a report compiled by Hanoi-based ecosystem builder HATCH!, Vietnam has almost 40 million Internet users with a mobile penetration of 34 per cent and 60 per cent of smartphone users have made purchases through their mobile device.
There’s been a few notable things to happen to the Vietnamese ecosystem in the past year. In May, Silicon Valley cloud gaming platform Weeby acquired social networking app Tappy for a seven-figure sum made up of stock and cash.
Also, global VC shop 500 Startups has recently launched a micro-fund for Vietnam, bringing on Binh Tran and Eddie Thai as Venture Partners. While Tran was the Co-founder and CTO for Klout which exited last year for US$200 million, Thai is an experienced strategist for Fortune 500 companies. Other global VC firms on the ground include Japan’s CyberAgent Ventures and IDG Ventures.
Going forward, Vietnam will have a lot more excitement coming out of it besides the Flappy Bird phenomenon of 2013.
Myanmar, the final frontier
With a population of 60 million, 46 million who are of working age, Myanmar (Burma) was under military rule for half a century before finally opening up to the world. Seen as the “final frontier,” Myanmar is a mobile-first country that took a flying leap into the modern world when foreign telecos Telenor and Ooredoo won licenses in 2013. To date, the country has received US$8 billion in foreign investment.
According to a McKinsey report, there are four areas that Myanmar needs to focus on or risk stagnating it’s growth.
The first is to bring the country on board with digital technology, which will require an aggressive tech infrastructure plan — particularly in the telecommunications sector. The second is priming the manufacturing sector for growth, as it was an area that picked up US$2 billion of foreign investment. Thirdly, as the majority of Myanmar’s population lives in rural areas — the country has to prepare for urbanisation and plan for the shift to local governance.
The greenfield advantage has drawn in a number firms with experience navigating the emerging markets. Besides the Norweigian teleco Telenor, German venture builder Rocket Internet arrived in Myanmar with a number of e-commerce platforms as soon as it opened up and Google announced earlier this year that Gmail was now available in Burmese.
As for deals, last year a pair of Myanmar e-commerce startups received funding from Malaysian VC Frontier Digital Ventures. The rounds were undisclosed, but put it into perspective — digital startup NEX raised a small round of US$150,000 from Singapore’s Blibos Group.
As for the ecosystem builders, the most active of them all is Phandeeyar, which runs a co-working space and hackathons in hopes to bring together communities (developer, designer, journalists, techies etc.) currently working in silos.
The fate of the ecosystem is about to be determined within weeks as voters gear up for the first General Elections in 50 years.
Cambodia, more social than tech
Compared to other Mekong markets, Cambodia’s much smaller market of 15 million puts it at a disadvantage. Similar to markets like Singapore, Cambodia-based entrepreneurs have to think beyond its borders right from the start and that may be tough as many local founders who are not well-versed in English.
According to a report by We Are Social, the current market doesn’t not seem particularly promising for tech startups upon first glance — with only 2.2 million active smartphone users and 3.8 million active Internet users. Still, the growth numbers look promising — with a 414 per cent jump in Internet users since January of last year. The number of smartphone users has also leaped 100 per cent within that time frame.
As for social media users, Cambodia currently has 2.4 million which grew from 600,000 in 2012.
In terms of resources, the Cambodian tech scene has its own tech blog Geeks in Cambodia that covers topics such as mobile, gadgets and social good. Tech incubators such as KOTRA have also shown up on scene, but the projects they support range from IT and software to climate change and green energy. The focus as it seems is mostly on social enterprises instead of tech entrepreneurship.
Rocket Internet is also in Cambodia, having launched e-commerce site Kaymu earlier this year.
Laos, the battery of SEA
Gearing up to be “the battery of Southeast Asia,” Laos has and will be building a number of dams on the lower Mekong river which is the catalyst for interest from foreign investors. These projects, controversial because of its interference with marine life and industries on the river, are a part of the Lao government’s plans to become a major power exporter to Thailand and Vietnam.
Laos’ hydropower potential has attracted some foreign investment, mainly from China who has become the country’s top investor last year by putting in a total of US$5.1 billion.
Also Read: HotelQuickly enters Myanmar and Laos
The small Southeast Asian country of 6.6 million is still wetting its feet in the digital age. According to a We Are Social report, Laos has just 850,000 active Internet users with 680,000 social media users. However, since January 2014 there has been a 20 per cent jump in Internet users and social media users leaped 62 per cent.
While it’s still very early days, there has been some tech activity. Last-minute hotel booking app HotelQuickly expanded to Laos in Oct 2014 and the National University of Laos has launched the Lao IT Business Incubator Center to support tech startups.
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