Despite the economic bottleneck, many tech heavyweights still surprisingly prevail at the top of the investment chain. Across the tech ecosystem, e-commerce giants from the US and China are flourishing, while startups from emerging markets like Southeast Asia are doing their best to adapt and follow suit.

While the next normal is undoubtedly shaking things up, the question remains: can Southeast Asia outclass the prominence of tech companies from the US and China that are currently dominating the global tech landscape?

It is true that Southeast Asia tech companies are still beating the odds despite the global market shift. But if anything, history has taught us that some of the unicorns we have come to know and respect were born out of various forms of crises, all because they simply had the right idea. If it is possible for them, it is certainly possible for many startups in Southeast Asia today.

Rising to the occasion

US-based taxi-hailing app Uber and accommodation matchmaker Airbnb were by-products of the financial crisis in 2008 that snowballed globally from the US housing bubble. One co-founder admitted that the crisis created a unique opportunity for companies to innovate and cater to a new market.

This time, the pandemic has certainly made a rapidly growing market demand for digital services. Companies that serve mostly by connecting people such as e-commerce and media streaming prove to be indispensable. In effect, many startups and new businesses are pivoting towards that direction to stay relevant — whether by shifting verticals altogether or by digitalising their interfaces in order to meet consumer demand.

Also Read: Why the TradeGecko acquisition by Intuit is a promise fulfilled by the SEA tech startup ecosystem

But as competition is getting stronger, the dominance of tech giants from the US and China are also outsizing the market.

BBC reported that tech moguls such as Amazon and Facebook, for instance, have seen a steep increase of activity and stocks at all-time highs during the pandemic. Both Amazon and Facebook saw stock prices rise 80 per cent and 45.5 per cent respectively compared to the previous year. Recently, Apple also hit a record-breaking $1.9 trillion market cap before a share split.

The Power of Big Tech

Everyone including world governments have growing dependencies on these companies’ products and services. The UK government, for instance, announced in June that it was switching its coronavirus-tracing app to a model based on Apple-Google technology.

They have grown so large that the US House of Antitrust Subcommittee had to hold a congressional hearing in July to probe CEOs of Facebook, Google, Amazon, and Apple for thwarting competition in their industry.

Ironically, platforms such as Amazon Cloud for data services, and Google and Facebook ads for advertising are undeniably essential for many types of businesses to run. In China, most businesses, especially small enterprises, highly depend on WeChat, Alibaba, and even Xiaomi to survive the crisis.

The Challenge for Startups

On the flip side, Big Tech companies can stifle innovation from a startup with policies that restrict access to their services. “We used to have a policy that restricted competitors from using our platform,” Facebook’s Mark Zuckerberg said.

Besides weaponising their policies, large tech companies also have the unrivalled market power to tempt a big buyout of an emerging rival before it becomes their equal. Facebook bought Instagram for US$1 billion only and WhatsApp for US$16 billion — a small price to pay when compared with its US$600 billion market valuation last year.

Also Read: A closer look at MyStartupEquity: digitising, automating, and securing company assets

But sometimes, acquisitions are risky, especially in recent times with the looming tech cold war. So, when they cannot buy, big techs have the resources and financial muscle to replicate innovations created by a smaller company and augment it into their products. For example, the 24-hour stories feature from Snapchat lost its market grip to Facebook which replicated the feature on Instagram and WhatsApp. Microsoft made the same “copycat” move to the communication platform Slack for its office messaging system, Microsoft Teams.

There is no one-size-fits-all strategy for tech startups to thrive in the next normal against the giants. According to Harvard Business Review, a copy-proof innovation is essentially required to outsmart big companies like Google from wrongly taking their property.

The Spotlight on Southeast Asia

While a global economic squeeze is on the horizon, Southeast Asia unexpectedly becomes a more welcoming and attractive market to big tech dealmakers. The regional advantage, with rising internet economy and favourable demographics, inspires cross-border trade and company expansions.

“While the region is diverse and varied, the growing middle classes in ASEAN share similar demands and consumption patterns,” said former ASEAN Secretary-General Le Luong Minh. In the first half of this year, Series B and C funding in Southeast Asia is up about 25 per cent from a year ago, making a total record of US$1.2 billion.

Southeast Asia is accelerating its efforts in digital expansion in the diversified market. It is largely thanks to proliferating unicorns that provide e-commerce, fintech, and on-demand services in the region.

Also Read: How to train a diverse and dispersed workforce during COVID-19 and beyond

In general, most of Southeast Asia’s unicorns have outgrown their humble beginnings to rank third in the APAC region behind China and India. Grab, one of the most familiar Singapore-based tech giants, boasts a market valuation of more than US$14 billion as of September 2020.

Together with other Southeast Asia unicorn peers, Grab has nearly 40 mergers and acquisitions of smaller startups in Southeast Asia. Its counterpart from Indonesia, Gojek, entered Vietnam with an ambitious US$500 million international expansion plan, with Thailand next. More than that, big tech companies from elsewhere around the world like Facebook are gearing to strengthen their presence in Southeast Asia as the region’s digital economy continues to flourish, evidenced by its recent investment to Gojek.

The swift change in customer behaviours also brought growth to another Singapore-based company, Razer. The gaming hardware and brand producer was reported to have recorded US$447.5 million in this year’s first-half revenue. Meanwhile, another Southeast Asian unicorn, Sea Group, also got into the radar of investors with their share price doubling over the last six months. Chairman and co-founder Forrest Li said to Forbes that the pandemic only speeds up the disruption already in place.

Also Read: EMDDI raises funding to allow users to connect to 30K taxis across Vietnam on a single platform

Such developments resulted in diversified ventures such as Razer Fintech under Razer, and e-commerce powerhouse, Shopee, under Sea Group.

“The stock market demonstrated a fairly dramatic reaction. The whole market — the tech market in particular — is hitting the roof. Obviously, there is a lot of euphoria. But digitalisation behind small and medium-sized enterprises and their consumers is real. That’s why the market is kind of playing ahead,” said Jixun Foo, Managing Partner of GGV Capital in an interview with Dealstreet Asia.

Furthermore, Binny Bansal of Mobikon, said in an interview with Forbes “the digital world has been accelerated thanks to the pandemic, giving a boost to ventures in edtech, digital finance, and health care technology.”

With political and societal uncertainty particularly between the US, China and India, Southeast Asia is on the radar as a profitable and viable market for innovators and investors alike. Opportunities abound for those daring enough to seize them. Will Southeast Asia’s big tech reach the prominence of its counterparts in the US and China? The jury’s still out on that. But one thing’s for sure: it will be a battle for dominance unlike any we’ve seen before.

Changemakers Conversations: Our New Normal

In order to discuss strategies on how Southeast Asian startups can seize the market during today’s global crisis, Singapore Management University (SMU) Institute of Innovation and Entrepreneurship (IIE)’s marquee event, the 10th Lee Kuan Yew Global Business Plan Competition (LKYGBPC) invites all to its inaugural Changemakers Conversations – Our New Normal on 30 September 2020, 4:00pm to 5:30pm (SGT)!

Key Topics of Discussion:

● Beyond Resilience – The new playbook for growth strategies in this new era; where are the opportunities for entrepreneurs and investors?
● The Rise of Techno-Nationalism – The risk of a looming tech cold war; what does it mean for startups and investors?
● Dominance of Big Tech – A complicated yet symbiotic relationship with innovation; how can startups flourish under the new masters of the universe?

Featuring esteemed speakers:

● Foo Jixun – Managing Partner at global venture capital company GGV Capital
● Prof Gerard George – Dean of Lee Kong Chian School of Business at Singapore Management University (SMU)
● Piyush Gupta – Chief Executive Officer & Director at the leading financial services group DBS
● Prof Lily Kong – President, Singapore Management University (SMU)
● Oliver Tonby – Chairman & Senior Partner at global management consulting firm Mckinsey & Co
● Shirley Wong – Chairperson of Lee Kuan Yew Global Business Plan Competition Steering Committee and Entrepreneur-in-Residence of SMU Institute of Innovation and Entrepreneurship

Register HERE to be part of this revolutionary event. For more information on SMU’s Lee Kuan Yew Global Business Plan Competition, click HERE.

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This article is produced by the e27 team, sponsored by 
SMU Institute of Innovation and Entrepreneurship

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