Can Southeast Asia look to India to Find Unicorns?

Despite a year in which the world faced a deadly global pandemic, the startup ecosystem continued to evolve, persevering and in some instances, taking advantage of the acceleration COVID-19 provided to its tech-enabled business models. 

India in particular, had a blockbuster year – with 765 deals (of which 655 were unique), US$8.4 billion in funding, 80 M&As, and 8 companies achieving the coveted “unicorn” status. However, Indian venture capitalists, angels and founders have now started to also look at another region for their next set of bets – Southeast Asia. 

Why so? 

Composed of 11 geographies, the region’s key geographies, such as Indonesia, Thailand and Vietnam, share a number of  macro similarities with India – comparable demographic profiles, rising internet penetration rates, low but rising GDP per capitas, SME dominated industries etc.

With 360 million internet users, the region has more people online anywhere in the world, with a tech savvy, rising middle class with more money to spend than ever before. The ones able to capitalize on serving the needs of these users have seen hugely successful growth, with 10 unicorns created in the last decade, at a combined valuation of close to US$40 billion

Similar to India, Southeast Asia too had a strong 2020 – with around US$13 billion investment across 248 deals in the region. Most of the popular sectors were the usual suspects – fintech, edtech, e-commerce, logistic, healthtech and others that got a boost as a result of COVID-19. 

Yet, Southeast Asia still has the lowest proportion of venture capital dollars invested per consumer compared with China and India.  For every US$100 invested per consumer, India sees investment of ~1.7 times that, despite being lower in terms of GDP per capita, suggesting that the region is still in the early stages of accelerating investment in tech.

Ranging from sectors such as B2B supply chain to EdTech, startups such as Khatabook, Udaan, Meesho, Byju’s and others have found similar counterparts prop up in Southeast Asia.Given these factors, India’s relatively mature VC and startup ecosystem has lent itself to several startups in Southeast Asia to take cues from it and emulate popular models that have worked in the subcontinent. 

Not surprisingly, many of the founders starting these businesses are Indians themselves – as in the case of Bukuwarung (Chinmay Chauhan,) Bukukas (Krishnan Menon), Ula (Nipun Mehra), Kitabeli (Prateek Chaturvedi) and several others. Most of these have been ex-operators or senior executives in India, now attacking the Southeast Asia landscape. 

Correspondingly, this has lent itself to increasing interest from a number of VCs previously active in India now looking to the region 

All these factors point to one fact – that it is an exciting phase for Southeast Asia. The next decade is ripe for innovation and disruption by founders adopting unique business models, many of which have been validated by success seen in India.