From Unicorns to Camels: The Changing Landscape of Southeast Asian Startups

From Unicorns to Camels: The Changing Landscape of Southeast Asian Startups

Southeast Asian countries highly value privately-held startup companies worth over US$1 billion, known as "unicorns," for their significant contributions to economic development. Unicorns drive job creation, innovation, productivity, and international trade expansion. Their potential for rapid growth and lucrative returns also attract investors. Therefore, many Southeast Asian nations, including Indonesia, Malaysia, and Vietnam, are eager to nurture unicorns within their borders, setting ambitious goals for unicorn creation. Indonesia, for example, aims to establish 20 new unicorns by 2025, following the initial target of three in its Medium-Term National Development Plan (2020–2024). Malaysia targets five unicorns by 2025, while Vietnam aims for five tech unicorns by 2025 and an additional five by 2030. 

A strong startup ecosystem is crucial for generating unicorns. Singapore ranks 8th globally in startup ecosystem strength, leading ASEAN in unicorn creation. It's a top financial center, attracting venture capital and entrepreneurs. In 2022, Singapore had 4,000 tech startups, 400+ venture capital firms, and 700 family offices. However, its unicorn growth slowed in 2022, with only three new ones, totaling 26. Singapore's unicorns span finance and e-commerce, serving global markets unlike most ASEAN nations.

Indonesia is emerging as a unicorn hotspot in ASEAN. In 2022, it had the second-highest number of unicorns after Singapore, boasting 15, including two decacorns like GoTo and J&T Express, formed by the merger of Gojek and Tokopedia. Indonesia's large domestic market, a growing middle class, and tech-savvy youth attract investments, enabling local startups to resonate with consumers and achieve unicorn status. The fintech sector is significant due to a high number of unbanked and underbanked citizens. Indonesia leads in the digital economy, comprising 40% of the regional market. The COVID-19 pandemic accelerated tech adoption, benefiting e-commerce, with Tokopedia's role being pivotal. Vietnam may follow Indonesia in unicorn growth with its four unicorns. Meanwhile, the Philippines, Malaysia, and Thailand recently entered the unicorn arena in 2021 and 2022.

In 2021, ASEAN experienced a unicorn boom, driven by factors like increased smartphone usage, accelerated digitalization from the COVID-19 pandemic, a growing middle class, and government efforts to promote the digital economy. Private equity investments played a vital role, with the Southeast Asia private equity market reaching a record US$25 billion in 2021. However, this figure dropped to US$13 billion in 2022 due to global uncertainties, rising interest rates, and challenging exit conditions.

After achieving unicorn status, companies have several options. They can remain private to retain control or go public through an Initial Public Offering (IPO). Alternatively, they may engage in mergers and acquisitions (M&A). For instance, in 2022, Carsome from Malaysia postponed its dual listing due to concerns about economic conditions affecting valuation.

In Singapore, four unicorns (Razer, Garena, Nanofilm, and Grab) went public, while Lazada and Bigo Live were acquired by Alibaba and YY, respectively. Indonesia had Bukalapak and GoTo successfully listed as unicorns.

Unicorns in ASEAN face sustainability challenges, including concerns about overvaluation. The $1 billion unicorn threshold often reflects aspirational valuations rather than empirical assessments, and limited data makes it hard to study. When unicorns go public, profitability becomes crucial, which can be challenging in uncertain global conditions with rising interest rates. This shift towards profitability contrasts with the earlier focus on rapid growth, making it more demanding for loss-making startups to attract investors.

The "camel" model, emphasizing sustainability, quality over price competition, and positive cash flow, is gaining popularity. This signals a shift away from the unicorn allure as businesses prioritize long-term stability and viability.

Akhyari Hananto

I began my career in the banking industry in 1997, and stayed approx 6 years in it. This industry boost his knowledge about the economic condition in Indonesia, both macro and micro, and how to More understand it. My banking career continued in Yogyakarta when I joined in a program funded by the Asian Development Bank (ADB),as the coordinator for a program aimed to help improve the quality of learning and teaching process in private universities in Yogyakarta. When the earthquake stroke Yogyakarta, I chose to join an international NGO working in the area of ?disaster response and management, which allows me to help rebuild the city, as well as other disaster-stricken area in Indonesia. I went on to become the coordinator for emergency response in the Asia Pacific region. Then I was assigned for 1 year in Cambodia, as a country coordinator mostly to deliver developmental programs (water and sanitation, education, livelihood). In 2009, he continued his career as a protocol and HR officer at the U.S. Consulate General in Surabaya, and two years later I joined the Political and Economic Section until now, where i have to deal with extensive range of people and government officials, as well as private and government institution troughout eastern Indonesia. I am the founder and Editor-in-Chief in Good News From Indonesia (GNFI), a growing and influential social media movement, and was selected as one of The Most Influential Netizen 2011 by The Marketeers magazine. I also wrote a book on "Fundamentals of Disaster Management in 2007"?, "Good News From Indonesia : Beragam Prestasi Anak Bangsa di dunia"? which was luanched in August 2013, and "Indonesia Bersyukur"? which is launched in Sept 2013. In 2014, 3 books were released in which i was one of the writer; "Indonesia Pelangi Dunia"?, "Indonesia The Untold Stories"? and "Growing! Meretas Jalan Kejayaan" I give lectures to students in lectures nationwide, sharing on full range of issues, from economy, to diplomacy Less
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