KOKU

Perspectives of a SEA Startup Founder: What the Startup Ecosystems in EU and SEA Can Learn from Each Other

By Calvin Goh, CEO & Founder of KOKU

Startups face multifaceted challenges – such as securing partnerships, setting up operations and engaging in investor relations to get through successful funding rounds amongst others.

Earlier this month, a mentor of mine, Kevyn Yong, Associate Dean at ESSEC Business School extended an invitation to attend Europe’s largest startup conference, VIVATECH 2019 in Paris. To give context to the scale of this event, in attendance were some of the world’s greatest entrepreneurs and companies including Jack Ma, Ken Hu, Google, and IBM. 

The visit deepened my knowledge on the differences that make the startup ecosystem between Europe and SEA so unique and successful respectively. Below I’ll touch upon observations which I found interesting – framework, startup conditions and how we are in a unique position to grow in SEA. 

Like us, they have a framework in place – but how do they differ?

One of the first and perhaps most identifiable differences between Europe and SEA is that their startup ecosystem is to an extent more structured. From an operations perspective, European businesses enjoy a level playing field as the European Union (EU) has laid out a framework coined “Four Freedom” pillars. The four pillars include free movement of goods, services, capital, and labour – these pillars ensure the same standards for businesses in the EU to work with one another. This structure is mirrored for startups and the general business environment. 

In SEA, the Association of Southeast Asian Nations (ASEAN) is perhaps a framework which bears the closest resemblance – however, compared to the EU, ASEAN has fewer common policies and shared legislative frameworks which provide European businesses an advantage when it comes to expanding their businesses. For businesses in the EU, these shared legislations put forward a standardised set of rules which ensure that there’s an element of fair play. 

Both SEA and Europe consists of various countries, and with that, there are differences in languages and culture. However, perhaps the biggest difference between the two is the legislative frameworks in place, of which regulations is a subset. As mentioned before, Europe operates within a shared regulation, meaning a company from Paris can operate in Brussels seamlessly because both operate within the EU regulatory framework. 

This is not the case for SEA’s startups where the market is fragmented. Besides having to address varying market maturity levels, fintech startups need to consider the different legislations and respective regulations across the entire region. For any startup in the region operating within the financial ecosystem, knowledge of each market’s unique legislation and how to best adapt is imperative for growth. For example, Singapore’s regulations are among the strictest in the world and thus it places us in an better position when penetrating other SEA markets such as Indonesia. 

The different conditions and understanding needed to form a startup 

Many startups exist because its founders sought to address inefficiencies and frustrations shared by a community that is more often than not left unattended. With much business growth based on a self-starter mentality and knock-on-the-door approach to bring in investments, we’re founded on the ability to take risks. These risks see us starting our business from scratch; such as customising and adapting business models, products or services as they expand into different markets.  

When we compare the story of startups in EU, some have ventured on the same path as us but the visit to VIVATECH revealed interesting insights into how most are established.  

Compared to SEA’s startups, EU startups are established through the venture capitalist arms of large conglomerates, who operate within legacy processes which allow little room to innovate. It is easier for them to establish startups to tap on opportunities they’ve identified within their industry. This also means that most of these start-ups already have the necessary infrastructure and support for the business to take off – such as key partners, access to data, funding, and technology.  

Given the existing resources, the barrier of entry is much lower for our European counterparts when entering the startup environment. But like two sides of a coin, this can also present opportunities for SEA founders – to build our business from scratch, gain a deeper understanding of the business model, and cultivate the ability to redesign the startups to fit the different needs and requirements of the various markets.

Ready to embrace our region, challenges and all 

The visit reassured me that choosing to operate out of SEA was the right decision for our business. We started KOKU to help solve a problem that the region is facing, that of financial inclusion. From my interactions and observations, although the EU’s startup ecosystem is well established, it’s not a market that we would necessarily look to enter at this moment in time. As we’re extremely strategic in our business plan, any venture will greatly depend on the benefits to our business as well as the customers who we are looking to empower. 

Opting to remain in SEA allows us to further grow our business. There is more potential for growth here as we’re able to pair our technological expertise with our knowledge of the region’s diversity when it comes to varying regulations and unique market needs. For example, although the issue of financial inclusion is evident in the EU, the space is extremely crowded with players looking to address the same issue – and the only way we would succeed there if we collaborated with partners with a strong presence within Asia.  

In short, we envision a very bright future for fintech startups in SEA like ourselves. What I’ve learned from starting my own business in SEA is that the challenges we face, makes us more unconventional in how we solve the problems, and forces us to be open to risk and forward-thinking. Due to the heterogeneity of the region, if start-ups are able to overcome these risks and succeed, the rewards are significant. 

Regardless of whichever ecosystem that we decide to pursue, we face differences and challenges, which requires startup founders to leverage on different opportunities and strategies to put our business out there. 

Photo: ikedaleo / Pixabay
Insight: Faster, Better, Digital-First: Leveraging Fintech for Remittance Services Interview: Digital-led NBFIs set to bring financial inclusion up to speed in Indonesia