StartupVille is really loving the animal analogies these days, so it seems like a good time to check in on our four Asian tigers: Taiwan, South Korea, Hong Kong, Singapore.
Before there were unicorns, we had The Tigers: Taiwan, South Korea, Hong Kong, and Singapore had achieved stunning economic growth from the 1960s onward, fast tracking them to the status of The World’s Richest Economies.
After WWII, these countries started from virtually zero. The governments focused on rapid-fire industrialization by building up export economies, a highly educated workforce, and avoiding debt (read: no trade deficit).
Fast forward to now, the glorious post-industrial information age, where the pressure is strong for the four tigers to develop high value, technology-powered economies and maintain their regional competitiveness.
Young people are increasingly choosing to build their own world-changing companies over climbing the corporate ladder. Willingly or not, the four Asian tigers are going to StartupVille.
As Asia Regional Manager of Seedstars World, I’ve spent the past couple months in the heart of the fast-growing startup scenes in Taipei, Seoul, Hong Kong and Singapore. Each city aspires to be a startup hub in the region — a title that’s still very much up for grabs.
(1) Existential startup crisis: China has crowded out Taiwan, which used to shine in hardware and manufacturing. The talent and production centers in Taiwan set the country up as a key center for hardware and IoT (Internet of Things) innovation and startups. Taiwan doesn’t have the ruthless business culture of China, so it will need to figure out what game it wants to play, or how to play it differently.
(2) Government getting into the game: Taiwan government is pouring $400 million into startups. A great move to incentivize startups and accelerators to get into the field, but there’s still work to be done from a policy level. For example, easing laws that hurt the climate for startups, such as the actual securities law that treats founder equity as taxable income.
(3) Insular: Taiwan is an island in itself, which makes it very easy to focus inward. But now that Taiwan is in StartupVille, it’s a numbers game. In Taiwan the total population is just 24 million. Startups have to sell investors on a total addressable market that can offer 10 times, 20 times, and 50 times returns.
So in many cases, Taiwan is just too small, especially relative to the other big markets in the region – China has 1.4 billion people, India has 1.3 billion, Indonesia has 260 million, and Bangladesh has 180 million. In the same way that Tiger Taiwan has built a strong export economy, its startup ecosystem will need to focus outwards early on.
(1) We ❤ Korean culture: ah, the ubiquitous power of K-pop. Korean culture is highly influential in Southeast Asia and increasingly in the US and Europe. When cultures cross borders, it’s a positive sign for startup ecosystems: Korean founders see concretely the value of going global; other nations see the value of “Made in South Korea”.
Bonus points: because South Korea has such cultural influence in the region, a product that has been widely adopted in South Korea often gets a nod of approval from other markets, which can help in regional expansion plans.
(2) Government’s got the money: the government has committed US$3.7 billion to support startups, which is currently the highest government backing per capita for startups. Again, a positive sign as the government is a critical stakeholder, but it’s not a magic wand. Capital’s good for getting things started but ultimately market dynamics should weed out the startups who are without product market fit.
(3) Meta-meta-digital: Seoul, the capital city, is prime for digital virality. Not only do you have 80 – 90 percent of the population connected to smartphones, but due to the high population density and relative homogeneity of the consumer segment, a properly targeted mobile app can easily spread like wildfire.
(1) It’s a transaction world: unlike other ecosystems, Hong Kong doesn’t have so much of a startup existential identity crisis — finance is clearly its strength. With the right enabling environment, it can be a powerhouse regional center for FinTech startups, given its USP as a legacy financial center, its open economy, and positioning as an entry point into China.
(2) Corporates want to play: even during the Tiger years, the private sector was an active driver of economic growth, and the same is true in StartupVille. Case in point: Swire Properties, one of the most respected legacy Hong Kong companies, is the primary supporter of blueprint, one of the top cowering spaces and accelerators in HK.
They may not know exactly how they want to play the game, but in classic Hong Kong style, they are opportunistic and carefully calculating their move.
(3) Big Brother China: depending on the generation, the word “China” conjures up rather polarizing reactions. Some embrace it fully, others lament that things will just get worse.
We see startups and accelerators making the best of both worlds — basing manufacturing operations in Shenzhen but setting up official operations in Hong Kong, which offers stability and transparency in the investment and legal environment where China cannot.
(1) BLK 71 / 73 / 79: the JTC Corporation and SPRING Singapore government agencies redeveloped an old industrial center into a central hub for startup activity in Singapore in 2011. The area now houses 500 startups, and the number is set to grow to 750 by 2017, thanks to this successful pilot.
This is ecosystem aggregation at its finest — co-working spaces, open floor event spaces, cafes, and the universities either with building space (NUS Enterprise) or just close by (INSEAD).
(2) Government’s heavy hand: It’s no secret that Singapore’s government has been the director of the show, from the heavy marketing of Singapore as the top innovation and startup hub for the region to enacting tax, legal, and visa incentives to bring foreign talent to the small island nation of 5.5 million.
This is steeped in history — Singapore has no natural resources, so it has built itself into an information and services economy just to survive. Current topic for startups over beers: how much of this is just hype? This is one of the biggest TBDs (to be determined) for the Singapore ecosystem.
(3) The Asia Headquarters: US and European companies set up their Asia HQs in Singapore, so Singapore is the place to be for connections to enterprise. This makes Singapore a strong climate for SaaS products and FinTech.
Investors from abroad tend to set up shop in Singapore when starting their foray into Asia, so as a startup you have access to high connection density, i.e. a high number of potential connections concentrated in one area.
Tigers → Unicorns?
Taiwan, Singapore, Hong Kong, and South Korea all became powerhouse economic Tigers thanks to aggressive and arguably intrusive government measures. The governments are now taking a similar approach to developing the startup ecosystems as they compete to be the centers of innovation and startups in Asia.
Can similar tactics be as successful in StartupVille? The government can and should set an environment for tiger cubs to grow, but no subsidy can guarantee your product market fit, no tax benefit can make a startup a unicorn.
A strong capital and legal enabling environment can buy startups time to pivot and iterate, enable them to hire key talents, and provide investors with a stable investment climate, but these measures on their own will not produce unicorns.
That takes a visionary entrepreneur, a pain-exterminating, problem-solving company, a team that can execute, a healthy dose of perfect timing and luck, along with time, patience, and grit.
Full disclosure: I’m a two-time entrepreneur currently on a 14-country tour as the Asia Regional Manager of Seedstars World to find, connect, and invest in the top startups in Asia. These are my own views, but they are inspired by the entrepreneurs, developers, designers, government officials, investors, and new friends I have been fortunate to meet along the way. Thank you for reading!
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