And the Growing Sources of Funding for Early-stage Startups
Southeast Asia is one of the fastest growing regions in the world and it has been on a path of development. The region’s economy has potential because of its diverse markets and geographical location that allows easy access to the world’s largest economies. While Southeast Asia is a region with a huge market, it faces some challenges in the form of low internet penetration rates; however, this trend can be seen changing and more people are now getting online.
The growth in technology along with improving internet penetration have created opportunities for entrepreneurs to start their own businesses. Additionally, many multinational companies are also entering the market and setting up their offices in Southeast Asia as well as Southeast Asian countries becoming more open to foreign investors. All these factors have created opportunities for entrepreneurs to raise funding for their startups through various means, but what are the most popular ones?
Alternative Funding Sources for Startups in Southeast Asia
Angel investors are considered as one of the most popular modes of funding startups in Southeast Asia. Angel investments can be done through regional networks such as Startupbootcamp or via platforms like Seedstars which are global platforms looking for startups across various countries including India and Indonesia. Angel investors help startups find funding from early-stage investors who provide seed funding at an early stage with high value-added services like mentorship from experienced entrepreneurs and support from experienced financial service providers like banks or insurance companies.
Another source of funding that is available for emerging markets like Southeast Asia is crowdfunding which has gained popularity due to new technological developments such as blockchain technology. Crowdfunding is defined by Investopedia as “a means by which individuals pool resources, typically via the Internet, to fund initiatives initiated by other people or organizations”. This allows potential entrepreneurs to raise funds without having any previous business experience or prior knowledge about raising funds. However, there are certain rules that need to be followed when using crowdfunding platforms such as Indiegogo. For example, if you raise funds through Indiegogo you must ensure that you fulfill all your obligations towards your backers otherwise you might face issues related to fraud.
The last source of funding in Southeast Asia is debt financing. Debt financing refers to the process of raising funds through borrowing from a bank or financial institution. This option is available for startups that are already doing well and are looking to raise funds for expansion, which is why it is considered as a last resort option among others.
Southeast Asia’s Leading Startup Ecosystems are Jakarta, Singapore, and Hong Kong are the leading startup ecosystems in Southeast Asia.
Indonesia’s capital city Jakarta has been ranked at number 18 in terms of startup ecosystem performance, followed by Singapore at number 23 and Hong Kong at number 25. With an overall score of 55 out of 100 and with over 6 million gross domestic product (GDP) per capita, Indonesia’s capital city Jakarta is considered one of the best places in the world for startups.
Other leading cities from Southeast Asia include Ho Chi Minh City (ranked 30th), Singapore (ranked 23rd), Kuala Lumpur (ranked 34th), Jakarta (ranked 18th), Bangkok (ranked 38th) and Manila (ranked 44th). These cities have been ranked high because of the presence of strong venture capital investors, great talent pool, and availability of funding.
What are the Challenges for Startups in Southeast Asia?
When looking at the challenges for startups in Southeast Asia, a few things stand out. Some of these challenges include low internet penetration rates, low income levels, and poor infrastructure. However, despite these challenges, Southeast Asia has seen a steady increase in startups over the past few years. The number of startups in Indonesia alone has more than doubled since 2012 when there were only 766 startups.
While this growth is encouraging it needs to be noted that not all startups will become successful and many will fail. A report from Ernst & Young states that over 90% of startups fail within four years. This is because entrepreneurs may face problems related to lack of funding or be unable to convince potential investors on their idea which makes it difficult for them to turn their startup into a success story. In order to overcome these issues in Southeast Asia, entrepreneurs need to partner with investors, mentors, and other service providers who can help them with their business.
Has the Growth of Digital Economy Improved Lives in Southeast Asia?
The growth of technology has helped improve lives in Southeast Asia by creating new jobs for people and helping entrepreneurs start their own companies.
For example, successful startups like Go-Jek have been able to create job opportunities for more than 1,000,000 drivers who drive cars and motorbikes for the company every day. On top of that, these drivers are able to earn a living from the work they do and have been able to improve their lives because of it. This growth has also led to an increase in the number of startups being launched by young entrepreneurs working on innovative ideas that they believe will help solve specific problems that exist in their communities. Additionally, new services like AnyWheel have grown in popularity among consumers because they provide them with an opportunity to get a bike ride at an affordable price and without traffic congestion problems that usually occur in many cities across Asia.
What is the Future for Startups in Southeast Asia?
In order to create a framework for success for startups across Southeast Asia countries need to be proactive towards startup development not only by promoting innovation but also by providing support services such as access to funding via traditional methods or through crowdfunding or angel investments.
Despite this being said it is important that countries put into place frameworks which support startups so that they can thrive without having any issues related to legal or financial issues. I
n addition, governments should set up policies aimed at encouraging young people into entrepreneurship as this would enable them to start their own business through online platforms without having any experience related to starting a business or raising funding through traditional means.
Furthermore, governments can also help build awareness about the benefits of entrepreneurship within their societies which would encourage young people from all age groups and educational backgrounds into starting their own businesses.
The growth of the digital economy has created opportunities for entrepreneurs to start their own businesses in Southeast Asia. Despite this, the region still faces several challenges such as low internet penetration rates, poor infrastructure, and low income levels.
While Southeast Asian countries may face challenges, it would be incorrect to assume that they do not have entrepreneurial spirit. On the contrary, many young entrepreneurs are working on innovative ideas and have already started their own businesses in their respective countries.
In addition to this, governments across Southeast Asia have put into place frameworks which can help support startups by making them aware of finance options such as debt financing or angel investments or by providing access to various support services which can help them grow their business from an early stage.
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students teach and learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
I am also a frequent writer on Medium, covering topics relating to Education, Startups, Founder Advice and Fundraising. You can follow my posts at http://alexanderlhk.medium.com/