Generative AI (GenAI) is reshaping industries worldwide, and ASEAN is emerging as a hotbed of innovation in this space. However, while the region’s startups are making strides in developing cutting-edge solutions, the journey from idea to market remains a formidable challenge. The ASEAN GenAI Startup Report 2024 sheds light on the unique hurdles these startups face and the strategies that can help them succeed.
Understanding the challenges
For ASEAN’s GenAI startups, particularly those focusing on B2B solutions (92 per cent of the ecosystem), the path to market is often riddled with obstacles.
Slow enterprise onboarding
Startups targeting enterprises often encounter lengthy and complex sales cycles. The process of securing contracts, which may involve tenders, validation, and Request-for-Proposal (RFP) submissions, can take months. Many enterprises require startups to demonstrate a proven operational history—an expectation difficult for younger startups to meet, especially given the nascent nature of GenAI technologies.
Cash flow constraints
Limited funding exacerbates the challenge of protracted sales cycles. According to the report, nearly half (49 per cent) of GenAI startups are bootstrapped or rely on angel funding, with only 16 per cent reporting profitability. Startups often depend on paid pilots to validate their solutions, but even when successful, payment delays of 60 to 90 days can strain their operations.
Cultural and workforce sensitivities
In ASEAN, workforce-related concerns often slow the adoption of GenAI solutions. Organisations may hesitate to embrace technologies perceived as threatening jobs. Furthermore, poorly executed proof-of-concept (POC) projects—due to misaligned expectations or inadequate data—can deter enterprises from moving forward.
Despite these challenges, ASEAN startups demonstrate remarkable adaptability. The report highlights that 75 per cent of surveyed startups have pivoted their strategies at least once to stay aligned with market demands.
Also Read: From innovation to impact: Key sectors driving GenAI adoption in ASEAN
Strategies for overcoming barriers
To navigate the GTM landscape, ASEAN GenAI startups can adopt innovative strategies that leverage their unique strengths while addressing market complexities.
Focus on niche applications
Specialisation is a key differentiator for startups in a competitive environment. By developing tailored solutions for specific industries or markets, startups can create defensible positions. For instance, Vietnam’s Mesolitica builds fine-tuned language models that cater to the linguistic and cultural needs of Southeast Asia, setting it apart from global competitors.
Build strategic partnerships
Collaborations with established players, such as cloud providers and enterprises, can accelerate a startup’s path to market. Partnerships are the most effective customer acquisition channel for ASEAN GenAI startups, with 74 per cent citing them as a critical strategy.
Cloud providers like AWS, Google Cloud, and Microsoft Azure play a vital role in supporting startups through credits, technical resources, and GTM programs. For example, ArcanicAI in Vietnam leverages AWS’s GenAI Accelerator Program to secure POCs and gain exposure to enterprise clients. These partnerships help startups overcome resource limitations and establish credibility.
Adopt a regional GTM approach
ASEAN’s diversity presents a challenge for startups but also an opportunity to expand into broader markets. By building region-specific partnerships and customising solutions for different cultural contexts, startups can scale effectively. For instance, Indonesia’s Lexilaw.ai is already running POCs across ASEAN and beyond, demonstrating how cross-border collaboration can unlock new opportunities.
Also Read: Report: New fintech talents emerge as GenAI becomes increasingly popular in Singapore
Support from the ecosystem
Governments, investors, and accelerators have a crucial role in helping ASEAN GenAI startups overcome GTM challenges.
Government-led initiatives
Policymakers across the region are launching programs to foster innovation. Singapore’s Productivity Solutions Grant and Vietnam’s National Innovation Center are examples of initiatives that provide financial support, access to resources, and opportunities for startups to showcase their capabilities.
Accelerators and cloud providers
Accelerator programs, such as AWS’s GenAI Spotlight and Google’s AI Accelerator, offer startups not only technical expertise but also market exposure and funding opportunities. These initiatives enhance startups’ ability to develop products and secure enterprise clients.
Corporate mergers and acquisitions (M&As)
As GenAI adoption grows, enterprises are increasingly interested in acquiring startups to integrate AI capabilities into their operations. Startups that align their solutions with enterprise needs are better positioned for partnerships or acquisitions.
The way forward
The GTM journey for ASEAN GenAI startups is challenging, but it is also filled with opportunities. By focusing on niche applications, forging strategic partnerships, and expanding regionally, startups can overcome barriers and achieve sustainable growth.
The role of the ecosystem—governments, accelerators, and cloud providers—is equally critical in enabling startups to thrive. With targeted support and collaborative efforts, ASEAN’s GenAI startups can establish themselves as global leaders in AI innovation.
In the fast-evolving world of GenAI, success will come to those who adapt, innovate, and leverage the collective strength of the ecosystem. The journey is complex, but for ASEAN’s startups, the rewards are worth the effort.
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This article is the third in a series from the ASEAN GenAI Startup Report 2024. GenAI Fund invests in early-stage GenAI startups across Southeast Asia, focusing on growth strategies and exit opportunities. Stay updated with new articles in this series by subscribing and following us on our channels. For more articles, visit: https://e27.co/category/reports/.
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