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With Southeast Asia’s massive growth in tech funding from 2016 to 2017, all eyes are on the startup economies of countries like Malaysia, Vietnam, and Indonesia. While these three countries saw varying amounts of tech funding and have vastly incomparable startup densities, the challenges their populous face are giving rise to startups in interesting verticals.

Tech in Asia spoke with venture capitalists with stakes in the region to get a better understanding of the potential of these markets. Here’s how they stack up.

The state of the nations’ startup economies

According to the Tech in Asia database, Vietnam picked up the largest amount of funding of the three countries last year, with US$1.74 billion. Malaysia and Indonesia received US$249 million and US$61.5 million in funding, respectively.

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Startup exits, however, tell another story. Indonesia saw 14 exits last year, compared to Malaysia’s four exits.

While Vietnam did not see any exits in 2017, it shows promise in terms of startup density. The country has one startup per 57,982 people, versus Indonesia’s 1:86,836 ratio. Meanwhile, Malaysia boasts of the highest startup density, with one startup per 26,955 people. This means startups based in Malaysia have the best chances of finding meaningful connections with other startups and potential investors.

Distinguishable demographic differences

Indonesia’s comparatively large share of funding can be attributed to the attention brought by the success stories of its unicorns – startups valued at US$1 billion or more.

“I believe Indonesia benefits from the fact that they have grown unicorns, which enables them to hire outside talent,” says Kuan Hsu, general partner at venture capital firm KK Fund.

“Malaysia and Vietnam don’t have that luck, and have yet to claim any unicorns,” Hsu adds. “Though one could argue that Grab is a Malaysian company that is just registered in Singapore, they still put their headquarters and a lot of their talent in Singapore rather than in Malaysia.”

He also says that a country’s population size can make all the difference, especially in the case of consumer-facing startup business models. The bigger the population, the greater the potential of growing your user base. That’s another advantage for Indonesia.

However, Hsu points out that while success stories may not be as abundant among startups in Malaysia, the country’s proximity to Singapore can be beneficial. Malaysian startups have “a very good chance” of entering the city-state and using it “as a regional hub to expand elsewhere.” This practice isn’t exactly new – a lot of Malaysian startups came to Singapore to raise funds even before Grab joined the scene, says Hsu.

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In contrast to its neighbors, Vietnam’s startup ecosystem is still in its developing stages. But it is seeing an uptick, says Nikhil Kapur, principal at Gree Ventures.

“[Vietnam] is something that we were very cautiously and occasionally looking at, where we would go in once a year just to see how the ecosystem is maturing,” says Kapur. “But I think we’re starting to see some really good entrepreneurs building some great companies.”

Hsu agrees with Kapur’s observations, noting that Vietnam is “an up-and-coming country” for startups, so it wouldn’t surprise him “if KK Fund makes some investments there” by the end of the year.

But whatever their differences, the three countries also hold some striking similarities, such as the challenges faced by their people, according to Kapur.

“Basic human needs are not being completely fulfilled in the right manner,” he says. “Needs like access to good food, access to cheap and easy shelter, clothing.”

Promising verticals

Across the three territories, agritech is among the industries that have the most potential for growth and expansion. Hsu says that while he “can definitely see agritech coming up,” it still needs an ecosystem to support it.

“Just a bunch of great entrepreneurs tinkering with ideas isn’t enough. You need the entire ecosystem there and I think it’s still developing. It’s quite early in the process but it is happening,” he explains.

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Hsu adds that startup events such as the upcoming NTT Com Startup Challenge 2018 in Indonesia, Malaysia, and Vietnam benefit industries like agritech by creating an awareness for what the startups are doing.

“As an investor, I didn’t realize that the number of agritech startups had been increasing in Indonesia,” he shares. “But attending startup pitch events, I realized that out of 10 pitches, I saw three agritech startups. This is very different from five years ago, when I’d seen none.”

Kapur agrees, saying that this is particularly applicable to Vietnam’s developing startup ecosystem as much of the capital is coming from overseas.

“Your company might be the best company, but because it did not fit the filtered view of investors, you did not get enough attention,” he says. “[Startup events] help bring companies into that filter zone.”

NTT Com startup Challenge 2018 is looking for startups in Asia from various industries that aim to expand their business in Indonesia, Malaysia, and Vietnam. Register now for the chance to win up to US$5,000, gain access to investors, and get one year of free access to NTT Com ICT services.

This post A peek into the startup economies of Malaysia, Vietnam, and Indonesia appeared first on Tech in Asia.

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