Investing in Asia: Key Opportunities for Outsized Returns
Asia encompasses a diverse mix of advanced and high-growth emerging economies undergoing immense demographic, economic and technological transformations. As such, the region’s growth and dynamism represent one of the world’s best long term growth stories.
At Binarystar Ventures, we’re confident many of the coming decade’s most significant investment opportunities can be found by focusing on the businesses and industries set to benefit from the sustained transformations playing out across the region.
Consumption growth & the mobile Internet economy
Many of the most significant investment opportunities across the region in the coming decade will be the beneficiaries of growth in disposable incomes, middle-class consumption, and the proliferation of smartphones.
According to the Asian Development Bank, Asia is set to contribute approximately 60% of global growth by 2030. Perhaps even more staggering, the Asia-Pacific region will be responsible for 90% of the 2.4 billion new middle-class members entering the global economy and drive around 40% of the world’s consumption by 2040.
In addition to the region’s increasing wealth and growing middle class, the mobile Internet is transforming Southeast Asian economies. Unlike people in developed countries who were introduced to the Internet mostly via desktop or laptop computers, people in Southeast Asia have gone direct to mobile devices.
A recent report found that Southeast Asians are the most engaged mobile Internet users in the world. Out of 360 million Internet users in the region, 90% connect to the Internet primarily through mobile phones.
Digital financial services, e-commerce, and gaming and entertainment are perfect avenues to tap into rising wealth and high mobile Internet engagement across the region.
In countries such as Indonesia with large markets, enormous opportunities exist to build businesses in this trio of sectors with much less competitive intensity than mature markets like North America and Europe.
Deloitte estimates 110 million bankable unbanked citizens in Indonesia could access financial services and products thanks to the widespread prevalence of Internet-enabled mobile devices. Digital financial services and e-commerce are expected to drive the region’s internet economy to grow to $300 billion by 2025, according to a report by Google, Temasek, and Bain.
Southeast Asia lies at the epicenter of a complete shift underway towards delivering games and entertainment via mobile devices, especially in esports. The number of mobile gamers is expected to grow from approximately 227 million to 290 million in 2023 in the greater Southeast Asia area alone. Lucrative opportunities exist for developers utilizing technologies such as blockchain to create engaging mobile experiences that employ innovative in-game monetization strategies.
There are also significant investment opportunities in the SME market, which make up 96% of all businesses in the region. Currently, intra-regional trade with neighboring countries accounts for more than half of Asian trade.
Yet, many SMEs, especially in emerging Southeast Asia, face challenges accessing trade finance and other financial services that can enable affordable and efficient cross-border payments and micropayments. Currently, 56% of SME proposals for trade finance are rejected compared to 34% for large and multinational corporations.
Much like businesses all over the world, many SMEs in the region are also in the process of digitizing their operations. As such, they are quickly adopting new SaaS-based solutions to digitally transform cost-effectively and efficiently. Of 1,000 businesses with an annual turnover of US$20 million and under, technology was ranked the top investment priority for 2020 by 64% of respondents, according to a United Overseas Bank (UOB), Accenture, and Dun & Bradstreet Asean SME Transformation Study.
Population growth & urbanization
Rapid urbanization is one the most important overarching trends to watch in Asia in the coming decades. In 2019, the Asian and Pacific region became majority urban for the first time in history, with more than 2.3 billion people in the region living in cities.
From Southeast Asia to China and across the entire region, population growth and rapid urbanization are stretching the infrastructure and resources of cities and creating new socio-economic and environmental challenges.
Governments have launched ambitious smart city initiatives to automate and digitize many essential city processes and functions to lower costs, enable more efficient public services, and improve sustainable outcomes.
“The cities of 2030, 2050 and 2100 will be very different from today. They will be cities transformed: in their demographic composition, in their implementation of technology and in their wider ecological contexts.”
— UN: The future of Asian & Pacific Cities
Demand for IoT and blockchain based solutions in healthcare, transport, education and much more that make cities more intelligent will continue to be highly sought after in both the public and private sectors.
Complexities and shifts in global trade and manufacturing
The COVID-19 pandemic has highlighted the shortcomings of global supply chains already straining under changing consumer expectations, rising compliance burdens, and geopolitical shifts. These challenges and others have made transparency, traceability, accountability, and efficiency an emerging default for competitiveness.
As such, for manufacturers in the region to remain competitive, they must think about how they can improve and innovate throughout the entire value chain. We see significant opportunities to invest in new and innovative tech-enabled solutions that can automate and improve supply chain performance to meet the demands of a more complex on-demand digital economy.
Additionally, as people across Asia continue to become wealthier, demand for quality products and services is rapidly increasing. If we look at China as an example, the number of wealthy Chinese people has overtaken the number of affluent Americans for the first time. The country now represents around a third of the global market for luxury goods.
As a result, the need to deliver greater consistency and quality across supply chains while keeping costs low will become increasingly critical in the coming decade. This will create added impetus to develop new solutions that can unleash greater productivity and profitability into the heart of supply chains.
BINARYSTAR is a deep technology fund that invests in seed to series A stage companies and helps them scale throughout Asia. We partner with management teams providing them with the capital, product
management, technical development, and regional partnerships to accelerate growth and build enduring businesses.
