Expanding to Asia? 5 Key Considerations to Bear in Mind

By Kenneth Chew

A mind-boggling population of over 4.3 billion, speaking over 2,000 languages, and spread across more than 50 countries in the continent.

An astounding $9 billion in venture capital invested into tech startups in 2013 alone, across more than a dozen vibrant startup hubs, each with their own unique character.

Think Asia is a singular, homogeneous region? Think again.

To say there is huge opportunity in Asia would be an immense understatement. But with so many countries, so many options, and so many factors to consider, where does an entrepreneur looking to plant roots in the region even start?

Here are five of the most crucial factors to bear in mind, serving as an introduction to the scene in Asia, and illustrating briefly how the various startup ecosystems differ significantly across the region.

Infrastructure/Funding

Strong, well-oiled ecosystems have emerged in places like Singapore (strong infrastructure from accelerators to funding across stages; tight-knit and dense ecosystem), Bangalore (IT hub; very solid support structures especially in the early stages), and China (a top global VC market; multiple hubs including Beijing, Shanghai and Shenzhen), all of which are regularly and prominently profiled among the top startup hubs globally.

However, there’s an another large group of hubs growing fast alongside them, including, for example, Seoul, Taipei, and cities in Pakistan and Vietnam. South Korea, Seoul in particular, has increasingly been tipped as the next explosive epicenter for tech startups, led by significant mobile game development and innovation in social media.

Similarly, Taiwan recently has seen burgeoning development in its startup scene as many companies are capitalizing on a highly educated, yet affordable, talent pool, among other welcoming factors such as an advanced technological infrastructure and great livability as a city.

Taipei’s scene, however, does have certain fundamental issues such as a comparative lack of funding available – making the city more a place for established startups expanding from elsewhere as opposed to fresh companies looking for their one big break.

Perhaps embodying the definition of "one big break," the Vietnamese tech scene recently shot to global prominence thanks to the amazing runaway success of Don Ngyuen’s addictive mobile game Flappy Bird. The Hanoi-based developer’s almost overnight fame has propelled the vibrant Vietnamese ecosystem into the spotlight. Growing aggressively from the ground up, investment dollars are pouring into the rapidly developing country, which can only mean continued exponential growth.

While not as established nor well-known, the developing scenes in cities like Kuala Lumpur (significant resources from the government), Manila (a large English-educated talent pool; substantial early stage support), and Bali (fast emerging as a surprising, well-connected startup "utopia") all certainly deserve honorable mentions too.

For more information on startup resources, The Bridge has compiled an excellent list of early stage accelerators and incubators in Asia.

Regulatory Barriers

Ranging from major roadblocks in certain cities to more of a minor hindrance in others, distinct regulatory barriers are often a complaint by entrepreneurs in Asia.

One confusing concept that many people have struggled to come to terms with is that of intermediary liability,or responsibility for illegal actions taken by third parties on owned platforms. While content oversight is understandably a key responsibility for any public-facing company, the line is often murky, and numerous stakeholders in the region have ended up facing the full brunt of legal repercussions for the transgressions of their users.

Laws concerning foreign ownership can be another major hurdle in certain Asian countries. For example, Thailand mandates that companies have 51 percent local ownership; Myanmar, however, does not have direct foreign ownership requirements, but many businesses prefer incorporating elsewhere due to the country's complicated clearance processes.

In contrast, Singapore and Hong Kong are comparatively easier places to start businesses due to more transparent regulations and stronger government support. China has found great favor with foreign investors as well -- its surprising "soft-touch" regulatory approach has allowed for massive development.

Size of Market

A key consideration for any potential entry into Asia would be a solid understanding of the characteristics of the different opportunities available in the various markets in the region.

Ecommerce, for example, is seeing explosive growth in Southeast Asia, with international giants like Rocket Internet pumping in massive investments, and regional players responding by stepping up efforts outside of their home turfs.

Similarly, one might want to look at South Korea, Japan, or China to kick off ventures into online or mobile gaming, simply due to the countries' long-standing gaming history, base of resources, and size of market. Japan’s mobile gaming market alone was worth a staggering $5.4 billion last year, nearly double from 2012.

That said, the more established a market is within a particular industry, the greater the competition is entrenched in that target segment. One has to weigh the balance between the pros and cons of heading into a crowded market, or potentially carving out a foothold and helping lay the foundation for a particularly undeveloped industry elsewhere.

Here’s an excellent summary of opportunities that are available in Southeast Asia, the maturity of each market, and the current leading players.

Available Talent

Would your company be building a development team from scratch? Will you require a staff fluent in non-native languages to do business in a global market? Or is your company simply looking to replicate a successful model from elsewhere – meaning your priority would be the availability of experienced talent that can jump in immediately and hit the ground running.

While substantial engineering talent is available throughout Asia, one country with a steady pipeline of technical brains that typically comes to mind is India. Numerous "acqui-hires" (acquisitions to bring the absolute crème of talent into the fold) have been made by major players, including Facebook, over the years. This might not come as a surprise, due to India's strong IT heritage; questions have been raised, however, since a study concluded that only 17.8 percent of Indian engineering graduates were "fit" to work for an IT services company.

For public-facing functions like sales and support, the Philippines has always been a market of choice. Its large, affordable English-speaking talent pool has provided significant mileage to international companies for years. "Outsourcing" has almost become a dirty word, but you’ll be hard pressed to find another multilingual option as attractive as the former U.S. colony for establishing in-house operations and functions targeted to a global market.

Often enough, finding talented hires is not the problem; finding the right talent --particularly for startup companies -- can be an issue. If finding the right employees is a problem and you need to grow your company fast, developed ecosystems such as Singapore or China would be your best bets for locating battle-hardened talent accustomed to the unique responsibilities of working for a startup.

Ironically enough, however, as the scene in Asia continues to develop, "brain drain" will become a bigger issue, as with the "acqui-hires" mentioned earlier. But the region is beginning to see signs of a reversal, especially in the more developed markets, with many entrepreneurs buoyed by stronger incentives and initiatives to take their talents (and businesses) back home.

Cultural/Topical Sensitivities

Last but not least, it goes without saying that in such a diversified region, the differences in cultural nuances and intricacies, especially in a business setting, can be intimidating. For example, a "softer" handshake might be more appropriate in some countries than the firm handshake that people in the West are accustomed to, combined with nonverbal cues specific to cultures or countries such as in Thailand or Malaysia.

Another critical Asian construct would be the time-honored Chinese concept of "face," loosely defined as "pride" or "dignity." Face is a key factor to successful business relations with Chinese-based societies (Hong Kong, Taiwan, Singapore, etc.) in Asia.

Besides these cultural nuances, the wildly differing socio-political climates across Asia can also cause interesting topical sensitivities perhaps rarely seen elsewhere. For example, Facebook was blocked during Thailand's most recent political coup. Unlike the famous "Great Firewall" of China which permanently blocks some of the biggest global social networks, social media-active Thailand’s down time lasted only half an hour. But should the temporary disruption be a sign of things to come, the long-term business implications for the country's developing startup scene could be disastrous.

Finding the Right Market for You

Silicon Valley will likely remain the first name on most people's minds in terms of startups for some time to come; however, many cities across Asia offer substantial opportunities for serious consideration. And while identifying the ideal Asian market for your business can be a long and drawn-out process,  it's a process that could pay serious dividends in the long run.