This is the third in a series of articles about the State of Entrepreneurship, based on Seedstars field experience.
Over the past 3 years, we at Seedstars World have been traveling around Asia and the world, aiming at finding the best entrepreneurs, connect them to investors, partners and media and to study each local innovation and entrepreneurship ecosystem in emerging markets.
One of the most appealing aspects of Asia is the sheer size of the market opportunity due to the exponential growth in smartphone ownership and consumer buying power, led by the predominantly youth population in countries like Indonesia, Thailand, and Vietnam. In fact, Asia is expected to account for over 50% of global online payments revenue growth over the next five years. China has proven itself to be a powerhouse innovator on its own, with Facebook taking notes from WeChat’s extraordinarily success in making chat the center of mobile communications. India is being wooed by the likes of Amazon and Uber as it presents not only a large market opportunity but also expected robust GDP growth up to 7% in the years to come.
While travelling across Asia we collected valuable insights on each startup ecosystem, got to know what makes them unique, what are their strengths and what’s still interfering with their development. It led us to develop our own Seedstars Index (SSI):
The Seedstars Index Methodology
We developed the Seedstars Index (SSI) to measure the quality, maturity and future potential of the 54 ecosystems we interacted with in 2015 . The SSI is made up of three pillars:
- Culture: How prevalent is the entrepreneurial mindset in the country? How much is entrepreneurship and risk taking celebrated and promoted?
- Environment: How conducive is the legal, political and financial environment to build and grow companies in that country?
- Opportunity: How possible is it to grow and scale within local and foreign markets?
We believe these three pillars are fundamental in building a successful entrepreneurial ecosystem and, that success is both the desired output and catalyst.
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These three pillars have been measured across over 15 underlying factors, hundreds of on-the ground interviews as well as the qualitative research and quantitative research that our teams conducted while visiting every country. Each factor is benchmarked against the United States or Silicon Valley that receives 100 points. Scores range from 0–100 (0 worst, 100 best) and they can go above 100 implying a more favourable situation than USA/Silicon Valley. The index score is correlated with the GDP per capita of the country, to indicate how much the entrepreneurship ecosystem is over or underperforming compared to the general economy.
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Entrepreneurship in Asia: Results overview
From all the regions, Asia is the one with the largest disparity, with Kuala Lumpur, Malaysia at the top of our list and Yangon, Myanmar at the bottom of all 46 countries. With the addition of Singapore and Hong Kong to our developed nations list, Asia has a number of hotspots to offer.
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Having a closer look at the numbers, we see that seven Asian ecosystems are outperformers and three are underperformers. 60% of the countries are also above the SSI regional average of 59.6 points and, the disparity between the top and worst performing ecosystems in Asia is clearly high — Malaysia has scored 75.3 and Myanmar is significantly behind with 33.4.
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Entrepreneurship in Asia: Highlights per country
A few observations and anecdotes that stand out from these results:
Malaysia: Takes the golden crown of all 46 developing markets we covered in the index. Catalysts for Malaysia are the good market efficiency, quality of institutions and financial market development. In retrospect, one major cornerstone for the Malaysian ecosystem was the launch of a special economic zone called Multimedia Super Corridor in 1996, which created a vibrant level playing field for entrepreneurs. In 2015 the country gave birth to their first unicorn, the e-hailing app GrabTaxi.
China: Represents the biggest consumer market in the world and it has the largest number of mobile users. Entrepreneurship education in China did not start until the Ministry of Education initiated a pilot project in April 2002 at nine universities.The Government is focused on boosting the economy and they setted up a USD 6.5B VC fund for startups in the beginning of 2015. However, the process of creating a business is still very complex and the fact that the government is blocking some of the main websites used in the west constitutes a major downside.
India: The 4th largest startup ecosystem in terms of IT and digital startups in the world is as dynamic as the economic reforms planned by Prime Minister Modi. What is Bangalore doing so right? Well, opportunity stands out as the strongest pillar with market size and access to funding as the single best indicators. Even more interesting, Bangalore achieved the highest cultural score of all Asian countries by being open-minded and having a strong media coverage.
Thailand: It is a very competitive ecosystem. There has been a significant growth in the number of coworking spaces in the last 2–3 years, but this growth is driven by the increasing number of foreigners coming to Bangkok. Businesses face a lack of relevant skillsets in the students from the local universities — so recently the demand is getting bigger for workshops and post-university bootcamps like Disrupt University to equip the high potential students with relevant skills. Often the best students, many of whom had international exposure or experience, will go abroad or to Singapore to work so there’s a talent shortage.
Indonesia: Following up on the exciting boom of the startup scene in the recent years, the Government has become more and more involved in supporting the local entrepreneurs, with the newly launched 1,000 Startups initiative. Nevertheless, the country would still benefit from having strong success stories to influence and motivate future entrepreneurs. It is also not very easy for foreign companies to incorporate in the country, as the process can take up to 6 months.
Philippines: The startup scene in the Philippines is very unique. While two year ago it was driven mostly by the two main telecommunication companies, this year we have noticed significant increase in the number of co-working spaces and self-standing incubation and acceleration structures. Because of the country’s geographical character as an archipelago, startups are especially solving problems related to the ease of access in various forms, whether it is in terms of banking, healthcare or education. While stable wifi remains one of the largest hurdles, Philippine entrepreneurs are very driven and outward thinking, not afraid of taking their business outside of their country.
Vietnam: Older tech startups were created in 1980s, so the level of experience in the ecosystem combined with tech talent is generally high. Startups in Vietnam at the earlier stages lack the education, team synergy, product-market fit, and basic fundamentals to grow their companies. Nevertheless, the increasing interest of foreign investors and companies looking for tech talent sets Vietnam on the right path to start learning these skills from the outside experts and implement them in their own businesses.
Pakistan: Due to low infrastructure and negative media exposure, the startup scene in Pakistan remains still undiscovered from the outsider perspective. However, being a large and homogeneous market with 182 million people enables the local entrepreneurs to roll out their products quite easily, and the number of entrepreneurial initiatives is increasing with astonishing speed all around the country.
Bangladesh: With a predominantly young population under 35 years old, it is very easy for the users to adapt to new technologies. Social enterprises are an especially strong trend in Bangladesh, and there are numerous NGOs and startup initiatives trying to provide solutions for the massive population. The government-linked BASIS is also actively working to support the IT industry, and with the annual conference Digital World it manages to attract high levels of foreign talent to familiarise themselves with the county’s business environment.
Myanmar: Overall, the startup ecosystem faces some huge hurdles as it really is just being born. A great number of these challenges come from the country’s very weak infrastructure, inherited from 50 years of military dictatorship. When the economy began to open up in 2011, less than 1% of Burmese had an access to the internet. Today, the government forecasts that by the end of 2016, 80% of its citizens will have a mobile phone and 69% will use the internet. The economy is fueled by strong growth momentum with an expected growth rate of 8.5% in 2016 and an energy we are expecting to spill over to the startup scene.
