Why Asia Is The Place To Be A Startup
With a focus on innovation, access to talent, and proximity to customers and markets, Asia is the place for startups. Here’s why.
Considered the fastest growing region in the world, Asia’s economy is expected to continue growing by around 5.5 per cent this year, which accounts for nearly two-thirds of global economic growth. In fact, unicorn companies already exist in the region. A unicorn is defined as a company with a valuation of at least US$1 billion. While 221 unicorns exist across the world, 76 sit in Asia and 59 alone are in China. Four are in Southeast Asia: Grab, Go-Jek, Traveloka, and Tokopedia. This shows that there is tons of potential for startups in Asia.
Besides the impressive economic growth, Asia is also becoming the world’s innovation hub. According to Yossi Vardi, there are three things needed to become an innovation hub. Vardi, a veteran Israeli entrepreneur and investor, told CNBC the three things are: culture, ecosystem, and the urban environment. Vardi explains that there needs to be a culture of risk-taking and an ecosystem of talent. While cultures vary between Asian countries, there are many opportunities for cities to attract talent who are calculated risk takers. Lastly, cities looking to attract talent need to offer a “comfortable standard of living.”
Here are three other reasons that Asia is the place to be a startup:
A focus on innovation
There is already a focus on innovation in Asia. According to the Global Innovation Index 2018, a study conducted by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO, an agency of the United Nations), five of the top 20 startups are in Asia: Singapore (5), South Korea (12), Japan (13), Hong Kong (China) (14), and China (17). The study ranks countries based on seven pillars: institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and creative outputs.
By why is Asia the crux of the innovation centre? A recent whitepaper by the Harvard Business Review, “Asia: The Face of Innovation” explains that “business leaders and academics cite a wide range of factors, but three appear to be key: a regional economy that is growing many times faster than developed Western economies, robust and growing demand for products and services not only from the deep and wide range of manufacturers domiciled in Asia but also from the region’s fast-growing middle class, and strong support for the business community from governments that recognise the crucial role innovation plays in growing both companies and economies.”
Access to talent
Asia is home to 60% of the world’s population, which makes the region an incredibly diverse place with unique cultures in each country. This also means that there is a diversity of thinking and availability of well-educated talent pool for startups which aim to make Asia their home base.
In “Asia: The Face of Innovation,” the authors cite that “the region’s higher education systems score well, too, with Asia placing four countries among the top 10 in producing graduates in engineering, manufacturing, and construction annually. They are Japan (fourth), South Korea (fifth), Indonesia (sixth), and Vietnam (10th), according to the World Economic Forum 2015 and the UNESCO Institute for Statistics.” Brain drain does exist though. Journalist Ethan Baron states that “about 71 per cent of tech employees in the [Silicon] Valley are foreign-born.” This shows that there is plenty of talent in the region, even if they have moved to the United States.
Proximity to larger markets, consumer appetite, and government support
Another benefit for startups in the region is being close to large markets such as China and India. These two countries have huge potential. In a World Economic Forum study (in partnership with Bain & Company), the “Future of Consumption in Fast-Growth Consumer Markets” estimates that emerging markets (China, India, ASEAN) will make up over 40% of world population.
In addition to potential customers, it makes financial sense to be closer to the customer. While this may seem to pertain more to startups with physical goods, the whitepaper “Asia: The Face of Innovation” explains that being geographically closer is good for any company: “physical proximity to customers doesn’t just make it cheaper to ship products and services to them, it also makes it easier to get close to them and understand what they want and need--which in turn can help steer innovation efforts in the right direction.”
In addition to being closer to the customer, startups in Asia also receive support from certain countries. With organisations like the Economic Development Board in Singapore and Beijing being touted as the new Silicon Valley because of assistance from the Chinese government, Asian countries definitely see the value of incubating businesses. Why not be close to that?
There is no question of the talent in Asia. With a healthy percentage of the unicorns already in Asia and with a diverse and large pool of talent from the region, there is no question that Asia is the place to be a startup. There’s also the benefit of a not-yet-saturated market.
James F. Moore once said, “Innovation businesses can’t evolve in a vacuum.” With this region’s talent, startups would be in a thriving ecosystem, not a vacuum.