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With Grab’s announcement of its imminent Nasdaq listing and GoJek merging with Tokopedia to form tech giant GoTo, casual international observers could be forgiven for believing that Southeast Asia’s tech universe only comprises similar companies. However, these companies only represent the highlights of what is a blossoming startup ecosystem.

Southeast Asia is hitting a sweet spot. It remains at a relatively nascent phase expansion in the technology industry but is at the same time developed enough to have a 400-million-strong internet user base. By late 2021, approximately 80% of the Southeast Asian population (aged 15 and above) will be digital consumers, according to a report by Facebook and Bain & Company.

Unsurprisingly, tech startup growth is booming as well. More than 35 tech startups across e-commerce, fintech and SaaS have achieved unicorn status in Southeast Asia, which has over 200 significant startups. As per Jungle Ventures’ calculations, the total value of the region’s digital companies is around $340 billion today and is estimated to grow to $1 trillion by 2025.

Further, Southeast Asian companies are breaking IPO records. Both Grab and GoTo’s valuations hover around the $35 billion to $40 billion mark. Sea is the 65th most valuable company in the world with a market cap of $187 billion, while Bukalapak was Indonesia’s largest-ever IPO at $1.5 billion at a market cap of $8 billion. There are many more waiting in the pipeline hoping to join this illustrious club of Southeast Asian tech decacorns.

Despite strong e-wallet adoption, over 70% of adults in Southeast Asia remain either underbanked or unbanked due to various cost and geographical limitations.

Vertical e-commerce is climbing the vine

E-commerce will continue to accelerate in Southeast Asia — the sector is projected to grow 80% year on year and double in five years to $254 billion from $132 billion in 2021, according to the Facebook and Bain report. Shopee, Lazada, GoTo and Bukalapak are testament to the phenomenal growth opportunities available, and they are still growing.

While initial e-commerce success came from retail-focused companies such as Shopee and Lazada, the next value creation wave is emerging through vertical e-commerce.

Carro, which achieved unicorn status this year, offers an automotive marketplace in addition to supplementary products such as financing and insurance. Others like Livspace, Pomelo, Zalora and Sociolla are serving the home goods, fashion and personal care industries, respectively, and raising millions of dollars in funding. Their success is underpinned by the fact that at a product category level, Southeast Asia is still in the early stages of online retail penetration.

Based on the chart below, just “catching up” to the same level of penetration as China in verticalized segments increases the e-commerce opportunity by four to five times across the region.

Source: New feed

2021-10-28T20:56:47+00:00
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