Nobody can deny that Indian startups have made a mark globally.
For some of them, however, their ambitions are not limited to India alone. The term “build in India, sell globally” has never been more relevant.
After thriving at home, these startups want to expand to other geographies. Initially, the natural inclination was the US and perhaps Europe. But another region has now emerged.
South-East Asia is one of the most promising markets to penetrate.
Now the question arises – Why is South East Asia so relevant for Indian startups?
The obvious answers are similar demographics, GDP per capita, rising internet penetration and sizable collective market.
But there is much more to it than what catches the eye.
Same same but different
To begin, it is easy to at least setup shop to attack Southeast Asia. In Singapore, you can set up company incorporation within 45 minutes. For those that have been through the process in India, this should not be a hassle.
But the most important reason is the homogeneity in behaviour.
Studies suggest that a 24-year-old’s millennial behaviour in Delhi, Jakarta, Manila and Vietnam is mostly similar and learnings of one market can be leveraged in other markets to scale up the business.
If consumption habits and purchase behaviour across Indian and Southeast Asian markets are so similar, it makes logical sense for Indian companies to attack this market.
It proves to be a natural expansion of their addressable market, and one that can provide immense opportunity.
A key factor, however, is localization. Adopting a blanket approach almost never works in Southeast Asia. Even if consumption habits may be similar, cultural nuances need to be accounted for.
However, assuming this can be achieved with slight, non-costly modifications to the product, makes Southeast Asia extremely attractive.
ho are the companies entering Southeast Asia, and how are they doing it?
Leading the pack
Technology companies – Consumer services, enterprise tech and fintech have emerged as the top three sectors where Indian startups are expanding or are planning to expand their operations to Southeast Asia.
There are no specific trends in terms of expansion of startups specific to a business model — there’s an equal number of startups that serve enterprises i.e. B2B and customers i.e. B2C.
But these players are treading with caution, considering Southeast Asia is a highly fragmented market. Each market is unique and it is important to start with the market which resonates well with its products or services.
To maximise the chances of success in Southeast Asia, startups are attacking one market at a time.
ho are the ones that have made the trip successfully?
OYO was one of the first start ups to turn its eye towards the region. Despite the pandemic, OYO has continued its expansion plan in SEA, with strong growth plans for Malaysia, Indonesia and Vietnam.
Over the past four years, they’ve adopted a localised approach, with dedicated teams to expand their hotel partnerships in each country. Their DRHP delineates plans to invest further in SEA expansion, given the favourable outlook towards tourism and travel in the region.
Lenskart is another consumer brand that has expanded successfully in South Asia, with more than 20 physical stores in Singapore. Their tech-first approach now enables customers to try on frames virtually using AR technology, enabling them to cater to a large consumer base despite a limited physical footprint.
Capitalising on the young demographic and rising demand for trendy eyewear, they plan to double down on marketing efforts and expand their physical network to 75+ stores across Indonesia and Vietnam in 2022.
Livspace, home interiors and renovation platform founded in 2014 in Bengaluru, has also seen success in the region.
After setting up a strong base in Singapore, they closed a 90 million fundraise to set up shop in Indonesia and Malaysia in 2022.
Fintech startups from India have also expressed interest in expanding into SEA.
Pine Labs, India’s leading provider of point-of-sale terminals for retailers, entered the South Asian market with a strategic investment in Fave, to access its regional merchant base and loyalty solutions. The acquisition gave Pine Labs a sales of 350 people and enabled them to expand their network of stores rapidly.
With a strong foothold, they have now launched ‘Buy Now, Pay Later’ services to retailers in Malaysia and plan to follow suit in other markets. Razorpay and Zeta services are other notable companies that are setting up teams in SEA.
However, not all startups have seen a smooth run.
Meesho entered the Indonesian market in 2020, intending to capitalise on the fast growing social commerce space there.
While the market dynamics were similar, Meesho had to expend significant effort to adapt their business to the dynamics in the archipelago, especially on logistics and payments. While India is largely land-locked with a solid UPI based payment infrastructure, Indonesia has a complex geography spanning multiple islands and an equally fragmented payments network.
With funding pouring in and stiff competition from homegrown players like Kitabeli and Super, they decided to withdraw and focus on their plans for the India market.
With more startups maturing in India, this trend of expansion to SEA is going to gain momentum in the coming years.
In a survey conducted by Inc42, a third of the firms with greater than $100 million in funding were actively planning their SEA expansion strategy. The movement to SEA brings in a host of benefits for the startup ecosystem.
It could lead to the emergence of prominent regional brands, much like Shopee and Grab’s growth in the last five years. At the same time, startups in SEA could benefit from better exit opportunities as more companies look to enter through strategic acquisitions.
Moreover, in an era of geopolitical tensions, Indian startups offer a strategic balance to reduce the influence of US and China in SEA.
While things may not not always pan out, if executed correctly, in the long term, this looks like a win-win for both India and SEA.