Scaling In Southeast Asia: Lessons From The Region’s Biggest Startups

Overseas Chinese Chamber of Commerce

Southeast Asia’s growing technology market holds enormous promise due to the region’s massive young, tech-savvy population. But navigating the market to unlock this promise is not easy. That’s because more than any other global region, Southeast Asia represents a grouping of culturally, economically, and commercially distinct countries. Entrepreneurs and investors alike must consider the localization paradox facing startups in Southeast Asia: companies must simultaneously build hyper-locally and regionally to effectively scale and make their positions defendable.

How are Southeast Asia’s leading startups overcoming this challenge? Which have been able to succeed where others have faltered, and why? Here’s a guide to staking a claim for Southeast Asia’s tech riches, including first-hand insights and lessons from executives of many of the biggest startups in the region.

Expand Early

The first and foremost lesson is to expand early–to develop and activate a market expansion strategy from the onset as opposed to waiting to scale and becoming entrenched in a single country. The reason this is crucial is because so much of the experience of a startup scaling in Southeast Asia is determined by the rate at which it expands across multiple countries, from its relationship with regulators, to its partner network, to its product development (more on these topics later).

Southeast Asian e-commerce giant Lazada and transportation/financial services superapp Grab are two prominent examples of companies adopting a regional mindset and scaling from day-one. Founded in 2012 by European venture builder Rocket Internet, Lazada launched as a regional company from the very beginning with e-commerce sites across Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. This ‘big bang’ launch afforded Lazada the chance to grow each market individually, while applying learnings between markets to optimize the overall model. It also granted Lazada the infrastructure needed to support key differentiators like offering users 2-day delivery.

This strategy attracted China’s Alibaba, which acquired a controlling stake in Lazada in 2016 and has invested US$4 billion into the business in recent years. As a former Rocket Internet executive noted to me, the fact that Lazada had established roots in many Southeast Asian markets at the time of the Alibaba acquisition and was operating across cultures and geographies made it easier for Lazada to adapt successfully to a ‘foreign takeover’ by the Chinese firm and continue to grow.

Grab similarly scaled quite early in its journey, an approach largely responsible for its rise to superapp–its rapid growth not just in other countries, but across different services and products including ride-hailing, fintech, and delivery. GrabTaxi launched in Kuala Lumpur, Malaysia in June 2012, and rather than expand to other Malaysian cities, founder Anthony Tan made the decision to quickly expand to the Philippines, Singapore, Thailand, Indonesia, and Vietnam all within the span of two years.

Grab’s early expansion enabled its team to understand how each local market worked and importantly how to stitch operations together. As Russell Cohen, Grab’s Head of Regional Operations, explained: “we employed a regional lens from day-one, which is what has allowed us to scale and roll out hyperlocal services quickly and effectively.” From a technology perspective, Grab operates at a regional level, although its technology is built to allow for localization in each market, as is its marketing. Grab’s tech teams determine which portions of its stack are localized and handled by in-market engineering teams and which are centralized and handled by Grab headquarters.

 

SOURCE: FORBES