Tech start-ups in Southeast Asia and India are drawing venture capitalists from Silicon Valley in California who are heading there for a new round of investment in tech start-ups that are mushrooming thanks to the region’s youthful population and fast-growing number of Internet users.

According to venture forum AVCJ of Hong Kong, the first quarter of this year saw a jump in start-up funds flowing into Singapore, the region’s start-up hub, to $199 million, compared with just $53 million in the same period last year.

Indonesia attracted the largest share of funding, followed by Malaysia, Thailand and Vietnam.

For Southeast Asia, the 10 countries grouped together in the Asean Economic Community have a combined population of over 600 million while India’s current population is around 1.3 billion.

Previously, most venture capitalists flocked to China and India for start-up investments. In the first quarter of this year, China attracted $1.8 billion in funding, down 28 percent from the same period last year, while funding for India’s start-ups dropped 17 per cent to about $730 million.

On the other hand, funding for the AEC’s start-ups has been growing rapidly. According to Google, Southeast Asia currently has the world’s highest growth rate of Internet users, with more than 120,000 new netizens added every day.

At present, AEC countries have a total of 260 million Internet users out of the combined population of 600 million. The number of Internet users is projected to reach 480 million in the next four years, so there is tremendous growth potential for start-ups in the AEC as e-commerce, online media and other digital content continues to dominate the regional economy. Over the next decade, the value of digital economic activities in the AEC is projected to rise from the current $30 billion to around $200 billion per year.

However, there are a number of challenges facing tech start-ups in the region, including barriers of different languages, laws and regulations as well as diverse consumer preferences.

In addition, the region needs to catch up on developing an ecosystem conducive to nurturing start-ups, especially with regard to logistics for delivery of goods and services as well as for payment.

In Thailand, tech start-ups are seen as a new economic growth engine, but one lacking an ecosystem that would attract newcomers. Responsibility for building that ecosystem lies with the government and other stakeholders.

For instance, the Thai Finance Ministry is considering tax exemption on capital gains and dividends for venture capitalists and private equity trusts as well as individuals and companies who invest in venture capital and private equity funds.

In addition, state-owned Krung Thai bank and SME Bank will provide a combined 6 billion baht ($16 million) in seed money for investment in promising start-ups in addition to funding from overseas and domestic venture capitalists, private equity trusts, individuals and companies.

Some of the promising homegrown start-ups include the seven fintech, travel tech, logistics tech, and social-tech teams recently selected by the Dtac Accelerate program.

These Thai start-ups attracted an initial combined investment worth 70 million baht from venture capital and private equity funds such as 500 Tuk-Tuk, Golden Gate Venture, KK Fund and Galaxy Fund, among others.

Fintech start-ups Piggipo and Finnomena promise to revolutionize online banking and financial services, while travel tech start-up Take Me Tour will leverage Thailand’s strength in the tourism industry by offering a new option for foreign visitors to experience local culture, attractions and way of life as part of the new sharing economy.

Nophakhun Limsamarnphun wrote this for the Nation. –Ed. 

(Asia News Network)