In the 2021 Tokyo Olympics 1500m event, Sifan Hassan, Dutch middle-distance Olympian, had good prospects for the race, and it went off to a good start. Just 380 metres left in the run, or less than a third of the race, and one of Sifan’s competitors just behind her tripped up, causing Sifan to take a fall as well.
That wasn’t game over for Sifan, however. In the remaining 44 seconds, she was able to pick herself up and go from being left trailing in the dust to zipping past the front runner (who had been 30 metres ahead of her when she fell), crossing the finish line and winning gold. Sifan had her 44 seconds, where she took what seemed to be a lost position and converted it into victory.
Every company has their 44 seconds or their “golden hour of opportunity”, and often it happens more than once, from pivots into larger businesses or leveraging crises into market leadership. And now, this “golden hour opportunity” extends to Southeast Asia’s growing startup ecosystems amidst the global turbulence and uncertainties coinciding with the continued growth of the digital economies in the region.
As we mentioned in the press release for our US$516 million third venture fund, we see today as the region’s golden hour opportunity because while the market fundamentals for digitalisation still remain strong, strains on spending and investments in the financial markets have made it so that the outliers and winners of this decade will become more apparent.
So it becomes more important than ever for early-stage investors to spot the “Sifan Hassan’s” of the technology markets before they even make it on the race track. For founders, in a capital-scarce environment, it becomes even more critical to shaping the business up to be like “Sifan Hassan” and stand out amidst the pack.
The first step is to understand the context in which these market creators and leaders will arise. For this article, we list seven market drivers behind Southeast Asia’s golden hour of opportunity. In discussing each of these, we also cover key, practical opportunities for both early-stage startup founders and investors to take advantage of.
The market drivers of Southeast Asia’s golden hour of opportunity
- The influx of talent-bearing ideas and capital flowing into Southeast Asia, especially through Singapore, is driven by market uncertainty.
This is a progressing trend a decade in the making, tracing its roots as far back as the initial efforts of the government to bring venture capital firms into the city-state. And at the turn of the decade, rather than slowing down amidst the pandemic and global uncertainty, the influx has only ramped up precisely because of the current market environment.
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Dominated by big tech talent, unicorn founders, and HNW families and individuals looking for the next growth opportunity in technology and innovation, this talent bears with their ideas on company growth and the capital to make it happen.
How this influx has evolved over the years is that now this talent is more involved in company building than ever before as either operators or direct investors in startups. Geographically, this influx has also been increasingly dominated by an exodus from the Greater China Bay Area.
And Singapore remains a destination for this influx not just because of Singapore alone but because the country has long positioned itself as a commercial and financial gateway to the rest of Southeast Asia. Of course, the flows of tech talent and capital have diversified a lot more to countries like Indonesia, Vietnam, and the Philippines, but many will still find haven in Singapore as a base of operations, either to set up shop and/or live there, then just travel around the region.
- Massive dry capital has been raised by venture capital funds in the last 12 months as deployment selects for capital efficiency.
This combination of supply accumulation (dry powder) and tightening distribution to an equally increasing demand pool (startups fundraising) is shifting the dynamic of startup fundraising where investors will have more leverage. However, this also has its potential downsides for investors that may not be able to deploy as actively with respect to their fund size.
But this shift in leverage will not apply to all companies. Those run by the more resourceful and capital-efficient operators will thrive in terms of fundraising relative to the rest of the market.
“In a climate like this where there’s a flight to the quality, you’re gonna get the best companies. The truth is that they still select who they partner with. It used to be the case where we decide who to partner with, but I think these [companies] have the privilege of choosing which venture investors choose to partner with. And we certainly hope to be the partner of choice in terms of what we can do for them,” Yinglan Tan, On Call with Insignia podcast.
- ASEAN economies are posting near-term resilience to breakout inflation.
GDP growth for ASEAN-6 economies has, for the most part, remained above CPI, as illustrated in this Financial Times article, thanks to rejuvenated travel regimes, exports (e.g. Vietnam manufacturing), and economic policies (e.g. price controls).
- The rise of the “entrepreneurial” middle class driving demand for a “producer-first” digital economy.
Alongside the resilience of the ASEAN economies is the continued rise of the middle class, with GDP/capita across ASEAN-6 countries having rapidly closed in on the US$4000-5000 mark of massive tech market creation.
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But more than just the rise of the middle class per se is how the rise is taking shape. In particular, with the increasing adoption of e-wallets or crypto wallets, there are more people taking ownership of their wealth growth and generation, whether through investments, starting a (side) business as an MSME, or even engaging in the creator and gaming economy.
This is not just driven by rising incomes and therefore “room” to invest, but also a mindset shift around what makes a career (e.g. linear, dependent progression vs experimental, independent growth), what brings income (e.g. single job vs one main job along with side hustles and other income sources), and what constitutes personal fulfilment (e.g. financial security vs financial stability + personal impact/ following passions).
That said, this evolution into an “entrepreneurial” middle class is not something without fundamental roots in Southeast Asian cultures. For instance, in Vietnam, the emergence of digital platforms to support wealth management like Finhay has tapped into the country’s deep-rooted culture around entrepreneurship and risk-taking.
Becoming an e-commerce entrepreneur or even a venture-backed startup founder as well is not as “taboo” as it once was a decade ago, with more tools, resources, and networks available.
- Digitalisation is becoming independent of market cycles and rooting itself in the socio-cultural fabric of Southeast Asia’s societies.
While there’s a lot of discussion around the sustainability of thin-margin, discount-subsidised business models, the reality is that regardless of business model sustainability, the impact of venture-back tech startups is not skin-deep. We wrote earlier in this piece about specific cultures unlocking ease of adoption for certain digital services; the reverse is also true.
This causal relationship between digitalisation and the socio-cultural fabric of societies is best observed as well in rural areas, where digitalisation is meant not just to fulfil conveniences but solve longstanding inefficiencies from excess costs and waste in the fisheries supply chain to access to equitable financing for MSMEs. Ultimately the nature of this dynamic is rooted in startups needing to localise their services precisely to the relationships and behaviours of their target users.
It’s also worth noting that this progression from purely transactional or economical to socio-cultural nature of digitalisation is also driven by regulation (i.e. release of licences, frameworks) and adoption by political institutions as well.
- Opportunities for Southeast Asia’s three waves of founder talent are becoming more prominent.
The three waves of founders (big tech and unicorn mafia, foreign talent, and returnees) continue to evolve in Southeast Asia. These waves have existed for a long time, but the biggest difference today is that these waves are being drawn in by more obvious circumstances than before.
The sources of big tech and unicorn mafia are diversifying with more local growth-stage scaleups producing founder talent in Southeast Asia and the restructuring many big tech and unicorns have had to undergo recently. Foreign talent, as mentioned in the first point, is being drawn in by the region’s opportunities vis-a-vis other places.
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And finally, for returnee talent, often from foreign business schools, the opportunities to start a company back home are more evident than ever before, to the point that some may even forego going abroad in favour of developing their career locally or delaying it after building up local startup experience.
- Emerging advantages of starting a global company in Southeast Asia driving more early-stage value creation in the region.
While the long-standing narrative for tech startup building in the region has been to take existing models and see how they might work for the region, startups coming out of the region are proving that there is merit to actually building first in Southeast Asia and leveraging strengths or learnings gained from that to scale globally. A prominent example here is in artificial intelligence-based SaaS solutions, where unstructured data in the region is able to make AI models and solutions fitter to deal with the demands of the global market.
Key to taking advantage of the golden hour: Unlocking founder-market fit
For investors looking to find the “Sifan Hassan” founders, those who are unstoppable enough to leverage the market drivers and opportunities we just covered above and build the next decade’s market makers and leaders, a good place to start is founder-market fit. Or more precisely, finding places where this fit is realised, catalysed, or created.
If there’s anything else Sifan Hassan’s story can teach us, it is that the answer to the question of what it takes to turn crisis into opportunity and growth is not capital, resources, or market forces. It’s people. It’s Sifan herself. It’s the founders themselves. So it’s important for founders to be able to operate in a space where they can turn dust into gold and not be limited by misalignment.
At Insignia, we’re building platforms and tools to catalyse this founder-market fit, from things as fundamental and simple as the market statistics page on our website to Insignia Ventures Academy, a VC education company bringing together the next generation of investors and founders in the region through its 12 week VC accelerator and other programmes.
For the full article, you can read it on Insignia Business Review. If you’re looking to build this platform with us, join our team! If you’re looking for your own founder-market fit or are already working on something, we’d love to see how we can work together.
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