So despite all the chaos and fear, here’s why I think now is a wonderful time to be making tech investments in the region.
Millennials to help the economy bounce back
Once a slowly developing region, ASEAN is fast becoming a sweet spot for investors and businesses globally – and for good reason. Home to over 660 million people (approximately 8.5% of the world’s population), it boasts a US$6.5 trillion economy that’s fueled by rapid population growth, increasingly tech-savvy consumers, and a budding digital economy.
Currently, the ASEAN population is young, literate, and urbanized, with roughly half of the region living in urban areas and with a median age of 30.2 years old.Contrast this with those in Western European countries that have been hit hard by the pandemic: Spain, Italy, France, and the UK. Not only do they rank in the top 25 countries with the largest percentage of adults over 65, but they also clocked in among the top 10 most visited countries in 2019.
With Covid-19 threatening a large chunk of their populations and actually wiping out a key economic sector (tourism), it will be inevitably harder for these European countries to bounce back, in comparison to ASEAN nations that have high domestic demands and young workforces to fall back on.
Lessons old and new
The pandemic and the resulting movement restrictions imposed by most countries have brought old lessons into focus, as cash flow became every entrepreneur’s single most important metric seemingly overnight. This was something that industry stakeholders had touted in the occasional think piece in 2019, but now, it’s become a tenet for every founder.
Many agile entrepreneurs and businesses are actually embracing the paradigm shift. As consumers turn to the internet while stuck at home, startups that are able to are pivoting and repurposing key aspects of their businesses, and in some extreme cases, are even undergoing complete and rapid change.
In Indonesia, movement restrictions have already affected 34 million people in the Greater Jakarta area, and it is looking very likely in the coming weeks that more provinces and municipal authorities will activate their own lockdowns.
These restrictions further emphasize the importance of public necessities such as healthcare, education, logistics, and agriculture – sectors that savvy VCs and angel investors would do well to support in the post-pandemic era, especially as more rural parts of Indonesia begin shutting down in the weeks that follow.
There still remains a large swathe of startups that continue to attempt to bridge the gap between farmers and consumers and are now lifelines for small businesses and farmers in rural provinces. Companies like TaniHub, a business-to-business agriculture marketplace, have instantly become more important to the nation’s digital economy.
Meanwhile, healthcare startups have also taken on the role of serving as vital information channels and lifelines for the immunocompromised who are afraid to go to hospitals or pick up prescriptions at pharmacies.
Digital firms like Halodoc and Alodokter have quickly gained consumer trust in a time of fake news and WhatsApp hoaxes. These startups are acting as medical information purveyors for all things Covid-19, setting up credible and trustworthy channels for FAQs and government messages.
Prioritizing public necessities
Investments in these types of companies should not be short-term propositions, however, as social distancing and fully online supply chains are expected to be the new normal for at least a year after the virus subsides. By then, there will be no going back; B2B and business-to-consumer habits and norms will have mutated categorically.
Pithy sayings from people like Rothschild and Warren Buffett may be true, especially if you’re the kind of investor who only cares about returns.
Our thesis, however, is about being bullish on investing on public necessities, whether there is a crisis or not. The Covid-19 outbreak shouldn’t have changed our capital deployment strategy one bit.
Shifts in demographics and consumer behavior have been clear calls for venture capitalists and institutional money to triple down for several years already; in this respect, the pandemic is just a jarring kick in the rear. Tech investors with any kind of liquidity should make more bets on local startups in 2020, not fewer.
Recalibrating to stay the course
Assuming a Covid-19 vaccine pops up soon – and if 2021 resembles anything like 2019 – ASEAN’s digital economy should grow to over US$300 billion in as little as five years. This is a signal for small- and medium-sized enterprises and companies to look toward tech and the internet to reach a growing demographic.
With a younger, digitally fluent population spending more, ASEAN is the perfect petri dish for growth. But as Covid-19 continues to wreak havoc this year, there are a few things that need to happen to keep our digital economy purring.
Venture investors that are set to weather the storm need to adopt a higher risk tolerance in general and continue deploying capital into the ecosystem. If needed, they should shift their investment priorities toward companies that can not only survive but even thrive under the new market conditions.
Startups, on the other hand, need to prioritize cash flow and ensure that their business models can be financially viable from day one. But that’s not all: Every founder should decide whether they need to make a hard pivot, one that may even change the fundamental fabric of the business.
This article was first published on Tech in Asia on 11 May 2020.
