[Source: Crystal Capital Partners]
Venture Capital Hotspot: Governments and agencies have acknowledged that Southeast Asia is one of the world’s most burgeoning markets and investment destinations. Being home to a lot of population, the region has a growing middle-income group and a fast-growing digital economy, many factors make Southeast Asia present many investment opportunities. This blog follows our analysis of why the region will likely be the next popular destination for venture capital.
Population Growth and Middle-Class Growth
[Source: Kepha Institute]
With more than 650 million people, it is a vast, highly populated Southeast Asian region. On top of that, Southeast Asia’s population is expanding rapidly, and according to the UN, it will rise to 780 million by 2040.
In addition to a rapidly expanding middle class, the region’s population is growing. The World Bank recently reported that Southeast Asia’s middle class is expected to swell from 125 million people in 2010 to more than 400 million in 2030. That’s why this represents a massive market opportunity for startups that want to break into the region’s budding consumer market.
Expanding Digital Economy
In recent years, the growth of Southeast Asia’s digital economy has been unparalleled, with mobile technology continuing to rise and more affordable smartphones available. According to a Google, Temasek, and Bain & Company report, the region’s internet economy will reach $100 billion by 2025, from $72 billion in 2018.
A growing number of tech startups, most notably in e-commerce, fintech and health tech, are backing up the region’s digital economy, from Grab and Gojek raising large amounts of money to launch throughout Southeast Asia to Lazada capturing the city of Jakarta.
Government Policies that support business.
The growth of startup ecosystems in Southeast Asian countries is recognised in terms of importance by many governments around the region. Governments have also taken many steps to support venture capitalism, such as tax incentives, funding programs, and regulatory reforms.
For example, the Singaporean government has set up various programs and initiatives to support startups, such as the Startup SG Equity scheme, which offers co-investment funding to startups, and the SG Innovate program, which promotes deep tech startups.
Vibrant Startup Ecosystem
The calibre of startups, investors and accelerators is increasing in Southeast Asia, turning this part of the world into one of the most vibrant startup ecosystems. Southeast Asia has seen the number of venture capital firms operating in the region rise sharply, with well over 170 firms now active.
A growing pool of talented people, especially in tech, is also nurturing the region’s startup ecosystem. That said, many universities across Southeast Asia are now providing courses in entrepreneurship and innovation aimed at planting the seed for the next generation of startup founders and tech leaders.
Reflection
Southeast Asia offers numerous opportunities for investors wanting to ride the wave of the region’s booming digital economy. However, with the region’s internet economy forecast to reach $100 billion by 2025, Southeast Asia could be one of the world’s most promising regions for venture capital investments.
