Episode 1: The Bright Future of Southeast Asia
Southeast Asia is much more than pretty sights and good food — it’s the next hot innovation economy.
For many of us, when we hear “Asia” we immediately think of the East Asian countries — China, Japan, Korea. Or if you’re thinking more towards the southern frontier, India. But how often have you thought that Indonesia is one of the most exciting, growthful countries in the world? What about Thailand, Cambodia, Vietnam?
Southeast Asia, despite a massive population of nearly 700 million, is often forgotten as a prominent region of the world. But let’s be clear: SEA is not merely China and India’s younger sibling. The region contains 11 deeply diverse countries and is home to some of the most unique cultures and histories in the world. Social, political, and economic ideologies vary widely and contribute to the richness of the area. It is home to some of the most beautiful places and the most delicious cuisines in the world (but don’t just take my word for it, CNN rated the world’s 10 best foods and 6 of them are from SEA!). And with the recent merger between Gojek and Tokopedia, it is also home to one of the most valuable startups in the world. While less developed than its East Asian counterparts as a whole, SEA punches far above its weight when it comes to innovation and potential for growth.
I’ve been at Stanford GSB for almost two years now (graduating in just a few weeks!), and I’ve had the chance to develop a more global view towards business innovation. As an American, I sometimes found it hard to appreciate all that other countries have to offer or to even be aware of it. But through taking various classes and forming close friendships with Southeast Asian classmates, even I am surprised at how excited I’ve grown to be about the potential of the region! In fact, I anticipate moving there sometime shortly after graduation.
I’m determined to convince you that Southeast Asia is underrated, in particular around the bright future of SEA’s innovation economy. To evaluate SEA’s potential as a robust and global startup ecosystem, I’ve examined four criteria: GDP growth, talent, access to capital, and culture.
1. 📈 GDP Growth
While not as steep as that of China, Southeast Asia’s GDP growth has been robust — and significantly higher than the US’s GDP growth. Taking a look at SEA’s largest countries, nearly all of them have outpaced the US since 2010:
Unlike that of many other developing countries, SEA’s GDP growth has been driven primarily by GDP per capita growth as opposed to by population growth (SEA’s population growth has stayed fairly steady at 1% per year). A key reason for this is the rising middle class: Bain & Company estimates that 50 million people have joined the middle class in the last 3 years, bringing the total middle class to 350 million individuals in the region — more than the total population of the United States. This middle class has increased 17% increase, a stark comparison to 3% in the total population in SEA in the same timeframe. And picture this: this rapidly growing middle class is blossoming at a unique moment in time where radically new, “leapfrogging” technologies make it possible to get goods delivered from all around the world within hours, be productive anywhere on any device, and participate in the global economy. And notably, the middle class brings with it $300 billion in disposable income annually.
Going forward, I expect this strong trend of economic growth to continue. SEA’s GDP is projected to grow in the mid-5% (and higher in tech sectors; in fact, SEA’s internet economy is expected to grow at a roughly 30% CAGR.¹), with Indonesia, Vietnam, and the Philippines leading the charge. In addition, the median age in SEA is 30.2, significantly younger than the US’s 38.5 and China’s 38.4 — this suggests that the waves of increasing per capita productivity and growing middle class consumption should continue into the medium term.
2. 🧑🏻🎓 Talent
Education has been a key focus on every SEA country’s growth agenda and it shows. For example, in the last 15 years, Indonesia’s tertiary enrollment rate has more than doubled, from 17% to roughly 37% today. Similarly, Vietnam has seen an increase from 17% to 29% and Malaysia 28% to 45%.² There is also a real emphasis on getting students work experience early, including government funded programs and partnerships, as these countries seek to maximize their workforce participation. As a result, edtech startups like Ruangguru are some of the most hyped ventures in SEA.
Monk’s Hill Ventures and Glints’ new Southeast Asia Tech Talent Compensation report (summary here) paints a picture of a thriving recruiting ecosystem, with a growing base of capable talent on one side and an even faster growing set of companies (including large multinational organizations) on the other. All this has provided a kickstart to the virtuous cycle:
In addition, nearly all of the Southeast Asian countries’ governments have launched large-scale programs to encourage entrepreneurial talent into their borders (for example, Malaysia’s Tech Entrepreneur Programme and Thailand 4.0). If nothing else, these programs represent key priorities in the national agenda and symbolize SEA’s commitment to innovation.
3. 💰 Access to capital
There has been a tremendous boom of venture capital invested in Southeast Asia in the last 3 years, driven by an increase in total deals, increasing median valuations, and mega-rounds for unicorns like Grab, Tokopedia, and Gojek:
As a result, more and more venture firms are being formed locally. But perhaps even more significantly, US-based and multinational firms are investing heavily in SEA — top tier VCs like Sequoia, Lightspeed, ICONIQ, and GGV all have dedicated presences in the region, and even US-based VCs without dedicated presences like Accel, Goodwater, or Ribbit are becoming increasingly active. Having spoken to investors at many of these firms, I can tell you that they have no intention of slowing down.
SEA entrepreneurs’ access to capital has never been easier than it is today. The entrance of premier global VCs in the region will spur valuations as well as require capital providers to differentiate on services provided to entrepreneurs, all of which are good for innovation. With more mentorship from founders who’ve been through it before and more capital flowing, the barriers to innovation will lower significantly.
4. 🥳 Culture
One thing that I’m learning is that people in Southeast Asia work hard. As I speak with entrepreneurs, operators, and investors, I can tell you that they are hustlers. They are looking beyond simply bringing established business models from the developed world to the region; instead, they are identifying unique problems and, taking the global learnings of business leaders before them, inventing unique solutions. I saw this personally during my time at Payfazz — Hendra and his leadership team think hard every day about the evolution of finance in Indonesia and SEA broadly, how he can stay a step ahead of competing banks and fintechs and superapps, and hustle hard.
From my point of view, SEA is unique culturally. As an East Asian growing up in the US myself, I’ve faced some serious cognitive dissonance between my Eastern and Western values. My collectivistic, social hierarchy-heavy upbringing often clashes with my learned individualistic, merit-based mentality. I perceive the culture of SEA to be a happy medium — the people are individualistic enough where entrepreneurship is readily embraced, but still retain the strong emphasis on community that keeps the fabric strong. Of course, though, I recognize I’m speaking in broad strokes, and I’m excited to learn all about the various nuances.
The Startup Genome ranks Jakarta as the #2 best emerging startup ecosystems in the world, and many other SEA cities populate the list. This is yet another piece of evidence that experts are recognizing the value of SEA and find it a compelling region for innovation. Similarly, I hope I’ve convinced you (or at least moved you) that Southeast Asia may be the most exciting region of the world that you haven’t thought much about.
On Going Southeast, I’ll be interviewing exciting innovators in the region — entrepreneurs, investors, and other accomplished individuals — as well as sharing my own reflections as I immerse myself further. We’ll go deeper into what people are building and the most interesting aspects of the region. Through this work, I want to provide a unique perspective and bridge the gap between Southeast Asia and the US. I hope you tune in to future episodes, learn something new, and enjoy!
More from Going Southeast:
If you want to be featured on Going Southeast or want to contact me for any reason, please email me at imgoingsoutheast@gmail.com or reach me on LinkedIn here. I would love to hear from you!
¹Source: SME & Entrepreneurship Magazine
²Source: World Bank
