Southeast Asia’s startup ecosystem has historically been formed by learnings from more mature markets. But the growth of the region’s digital economy has uncovered uniquely emerging market challenges that have given rise to new species of venture-backed startups.
This article dives into one example, mental health tech company Intellect, as they leveraged their localised approach to the nuances of East Asia’s relationship with mental health to rapidly scale across the region.
Highlights
- Amidst the short-term uncertainties, Southeast Asia will continue to be ripe for startup and venture capital opportunities. Among the venture-backed companies, endurance will be determined by solid business fundamentals and strong moats.
- Southeast Asia has seen clone and mutant business models rise in the region, but “new species” companies brought about by uniquely local needs pose greater possibilities to build localised product-market fit and strong and sustainable moats for growth essential to endure through short-term uncertainties.
- Asia’s fastest-growing and largest mental health tech platform Intellect is a “new species” company born out of an environment ripe for mental health tech adoption.
- As a “new species” company, it has leveraged the possibilities of solid and sustainable moats from a single market to multiple markets across East Asia through its tech platform, a network of local mental health care professionals, and the synergies across its multi-product ecosystem.
- More “new species” can be expected to emerge in Southeast Asia as more uniquely local demands and pain points are addressed by venture-backed tech companies.
While short-term uncertainties of interest hikes, geopolitical tensions, and the pandemic loom overhead, a recurring narrative we’ve had on this publication is that Southeast Asia will continue to be ripe for startup and venture capital opportunities regardless of the seasons.
Now the question is, which venture-backed companies stand to see the seasons pass and take advantage of the growth story fundamentals you should all be familiar with by now, growing middle income, talent influx, the region outpacing China’s GDP growth, etc.?
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Just as we wrote back in 2020 amidst the initial impact of the pandemic in articles about fundraising in a bear market, dancing skyscrapers, and the longevity of blue oceans, a lot of it will boil down to which companies will be able to justify real growth with their prices, leveraging solid business fundamentals, revenues, and strong moats.
Stage 1: “Clones” leveraging market opportunity
Southeast Asia’s startup ecosystem has had a history of (or arguably found its origins in) playing host to Silicon Valley or European clones (i.e. building X or Y in Southeast Asia) that have ended mainly up not faring too well.
These clones saw the growth opportunity but didn’t truly localise (i.e. we’re not just talking about language here), possibly due to the bias of “why change the winning formula?” and the costs that come with pivots in new markets.
In other cases, global companies tried to set up regional operations or acquire these clones, but the results did not often pan out so well.
Stage 2: “Mutants” finding stronger product-market fit
Then mutants emerged, seeing the opportunity to surpass these clones by building specific to the nuances and needs of the local markets.
The classic example is Gojek with their two-wheeled, ojek approach to scale ride-hailing services in Indonesia instead of the premium taxi vibes of Uber in the region.
Many of these mutants were able to pull in funding primarily because of the “time machine” thesis where investors, seeing the success of very similar comparables in mature markets, conclude that these Southeast Asia localised versions could fare similarly or even better with the region’s growth opportunity because they were able to find more sustainable product-market fit.
Stage 3: “New species” building stronger moats
The biggest challenge for mutants has been building strong enough moats to force the hand of potential competitors, making them think twice about expanding resources to compete on the local advantages or unique proposition the incumbent company already has.
This is where new species come in, effectively flipping the script on the localisation challenge and turning it into a localisation moat against competitors. Instead of tweaking, let alone transplanting existing models to local markets, new species are brought about local problems that necessitate a unique, innovative approach.
The product itself might not be innovative, but more often than not, in Southeast Asia, startups have to be creative with distribution and the way they package or deliver their value proposition.
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Emerging markets are more likely to produce these new species, especially since we call them “new” relative to business models that have seen success in more mature and developed markets.
Payfazz is one example we’ve discussed in the context of finding growth in Indonesia’s historically underserved rural economy. They leveraged a strong distribution network to build a “self-learning” platform and engineer “platform-driven growth” as opposed to “market-driven growth.”
The agents serving as touchpoints for their financial services app became drivers of the platform’s product development roadmap (we cite a specific case study here).
One thing to note here is that these categories are not static states for any single company, especially for such dynamic organisms as startups. Clones and mutants can evolve even further to become new species, and some new species are not always born overnight.
And so, in the context of an increasingly uncertain environment, “new species” lend themselves to greater chances of thriving and enduring.
When being a “new species” is the key to global scale
While the drivers for the internet economy across more previously niche, untapped, or stigmatised market segments have unveiled more local needs leading to the creation of more new species, in this article, we write about the learnings from one such company, in particular, mental health tech company Intellect.
This is because instead of localisation simply being an evolution designed to build stronger moats and thus more sustainable growth, Intellect’s localisation of its mental healthcare offerings also importantly unlocked global scale.
Their “hyper-localisation”, as they call it, has been their key to scale beyond Southeast Asia and across the Asia Pacific, with multinational companies among their enterprise clients and app users from over 150+ countries, all in all, serving more than 3 million people.
Compared to how Southeast Asia’s startup ecosystem was populated, driven by learnings from more mature markets, these “new species” turn the tables on this narrative and pose a new one entirely: what can the rest of the world learn from Southeast Asia?
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Specifically, we identify three key insights on how this “new species” evolution could unlock global scale for Intellect.
These are outlined further below with excerpts taken from our interview with The Ken on their recently published piece on the company, a piece which also goes more in-depth into the industry as a whole:
- Environment drives the evolution of “new species”. Demand for mental healthcare in a region with diverse experiences and pain points made it ripe for a “new species” company like Intellect to emerge.
- Populating new markets as a “new species” goes beyond language localisation and bears having the resources to cater to the differences across these markets. Intellect leverages technology and a network of local mental health professionals to expand their coverage across East Asia.
- Evolution needs to be fast short-term and sustainable long-term. Intellect can do this through synergies within its ecosystem of products and offerings.
Environment drives the evolution of “new species”
Evolution isn’t an isolated event; the environment also has to be conducive for these “new species” to emerge. There were shifts in consumer behaviour and even business perception around mental health that would allow Intellect to thrive in Asia the same way that mental health companies have in the West.
“Five years ago, there were hardly any investments in healthtech (in Southeast Asia). With greater awareness of healthcare issues, rising healthcare spending, and greater trust in digital solutions, there’s more momentum for healthtech startups, and this has attracted US$1.1 billion in funding in the first half of 2021”, infers our findings through an article published in November 2021.
The issues in particular Intellect is addressing regarding mental health are not new but long-standing pain points: underserved segments, high costs to access mental healthcare, and inaccessibility.
In Asia, especially, there has also been the stigma associated with availing this kind of healthcare (which is now changing). We’ve also observed these same challenges and pain points in other healthcare subsectors, like sexual and reproductive health.
It’s worth noting that many of these pain points that are unique to the region play heavily into the emergence of these “new species.”
As mentioned above, while the problems have persisted, what has changed are the attitudes and perception of mental health, especially in the workplace, with shifts like “The Great Resignation”, remote work, self-care movements putting the pressure on businesses to invest in their employees’ mental wellbeing actively and making them realise that employees’ mental well being has a direct impact on the bottom line.
Also Read: What telemedicine and Health Tech holds across SEA amidst COVID-19
Theo talks about the shift on our podcast, “It was not long ago, two or three years back, mental health…was a nice-to-have piece. Now, it’s become evident that if companies don’t actively look after employees’ wellbeing, the ones affected are the companies themselves.
“So I think it’s become quite clear that workforces are looking at this in a way where, “It’s my people first,” but also…. “How does this affect my business? And my bottom line as well?” So we actually can show robust correlations that better well-being leads to better outcomes for companies.”
With pre-pandemic mental health spending in APAC more than tripling from US$100 million in 2019 to US$310 million in 2020, and projected to hit $US620 million in 2025, Intellect sees massive opportunity in providing this hyper-localised solution built for Asia.
There is apparent demand for these solutions, but according to Theo on our podcast, there “are not enough players that are making a big enough dent in Asia in mental health care.”
If you can localise here, can you localise anywhere?
As we’ve previously discussed, the emergence of “new species” represents a form of localisation that does not just adapt existing solutions but caters to uniquely local pain points and can build on existing infrastructure.
In the case of Intellect, their hyper-localisation is not just about translating their app and programmes but also partnering with local psychiatrists and psychologists and positioning themselves as the platform for Asia, in an industry where most players come from the West.
As Theodoric shares on our latest podcast conversation with him, “I would say the challenges in what we’re trying to drive and move towards more quickly is hyper-localising it towards Asia-wide needs and use cases…Now we are live in 11 languages, and we have therapists on the ground in twelve countries across APAC.
“The goal is not just English-speaking markets, but anywhere in Asia that needs access to care where a lot of our clients have a presence…The key thing is that we win by adding a nuance towards an Asian perspective on mental health.
“In the US, it’s not without stigma, but it’s a lot more open than in Asia. We understand that by market, even between Singapore and Indonesia, or the Philippines and Thailand, there are different nuances. So we hyper-localise it. We get [our solutions] very much geared up for an individual in the local market with actual, live native professionals. That makes it very, very attuned to them.”
However, unlike the Alicia Keys song, if you can make it here (in one market), it doesn’t necessarily follow that you can make it anywhere. Covering multiple markets means understanding and catering to the diversity in the depth and nature of the environments in each of these markets.
Also Read: YC-backed mental health startup Intellect bags US$10M Series A
Theo continues, “One interesting trend we see is that across the region, and there are many, many local nuances by country like Singapore differs quite a bit from Japan and Thailand, [but] the one thing holds true is that it is stigmatised. For the most part, [mental health care] has been seen as a very, very clinically severe topic to touch on, and not so much [something] that’s every day.
“But what’s been very clear as well is that for the markets of the countries that have been affected by the lockdown, it’s become very top-of-mind for them as well. A key part, as you just mentioned, is that we hyper-localise it, not just translating the app, but making sure we answer the nuances of what each market struggles with.”
Evolve or perish
Even with these features and offerings localised to their target markets, the main question for Intellect’s evolution as a “new species” has been maintaining this hyper-localisation while still scaling across the region and expanding its revenues. Without speed in populating and sustaining its growth, “new species” could quickly die out or eventually fall prey to more prominent players.
For Intellect, the way to rapidly scale on top of its hyper-localisation approach has been to address the low adoption of mental healthcare benefits in businesses in Asia.
Since launching their business-facing, digital-first programs in early 2021, Intellect has seen their revenue grow 20x year-on-year driven by enterprise clients availing these programs like foodpanda, Shopback, Singtel, Kuehne & Nagel, and Schroders.
They have also established a strong commercial presence in Singapore, Hong Kong, and Australia, where multinational companies often set up their APAC headquarters.
Its go-to-market strategy of launching a consumer app and growing into a multi-product platform approach has enabled it to create unique synergies across its offerings.
For example, users of their consumer app can serve as evangelists for enterprise clients to adopt Intellect’s solutions company-wide. Essentially the B2C product builds the brand for the B2B product.
On the other hand, Intellect’s enterprise business has allowed the company to scale quickly while also driving monetisation and retention in a greater way vis-a-vis the consumer approach.
Expanding the pace and possibilities of “new species” growth
While Intellect’s self-guided mental healthcare app has more than 3 million users across 20 countries globally, serving as the foundation for the brand they have today, the focus for the company has always been to build a complete mental healthcare system for Asia, recognising the specific needs in markets across East Asian countries especially.
What Intellect has done thus far as a “new species” company is to expand the possibilities of having a strong, sustainable moat beyond the shores of a single market.
Also Read: Discussing the future of healthcare tech with Blair Hirst
Of course, the nature of its solution and the industry lends itself more easily to this rapid multi-market, multi-offering ecosystem (versus consumer financial services, for example), but to have executed on these possibilities is a feat on its own.
While Intellect is leading the way in “making this dent” in Asia, and they have made significant headway quite rapidly over the past year, there’s still a lot more to be done in terms of driving adoption of both their consumer and enterprise products here in Asia and localising it to the various markets in the region.
Intellect is just one of many more “new species” of companies that are coming out of Southeast Asia. We will continue to cover here on Insignia Business Review as more uniquely local demands and pain points are addressed by venture-backed tech companies.
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