Digital Currency – Lessons from China

A close look at China’s lead in the digital currency race and the countries primed to follow China’s footsteps

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Mr Stan Wong, Summer Associate

Mr James Tan


Digital Currency has been a hot topic in recent years, with its growth being driven by rapid advances in internet speeds, global connectivity and data storage capabilities. While many different types of digital currencies have emerged, this report will focus on a specific sub-type of digital currency, Central Bank Digital Currency (CBDC). CBDC refers to a digital form of fiat money – a currency which is established as money by a country’s government.

With many countries already looking at developing their own CBDC, China has recently emerged as the frontrunner to roll out its own national digital currency – the “Digital Yuan”. The focus of this report is, therefore, on the viability of CBDCs. This report will – (1) trace the development of the “Digital Yuan” in China; (2) examine the key takeaways from China’s digital currency – such as, the requirements for a successful digital currency as well as the potential risks of adopting a digital currency; and (3) highlight countries which are primed to start a digital currency.


Mr James Tan
Managing Partner
Quest Ventures

This forward looking report traces the development of China’s digital currency – Digital Yuan – and considers the implications of such a tool if the world’s second largest economy were to adopt – and embrace – it. While other countries are also at varying stages of development for their CBDCs, China’s early start provides valuable lessons. Concerns have surfaced in the areas of cyber security, privacy, legality and financial inclusion.

China, as the first mover in the CBDC world, has set the bar high in terms of successful development of a digital currency. Its success is attributable, in part, to (i) its careful recruitment of highly qualified individuals; (ii) its strategy in easing the transition from the use of physical currencies to digital  currencies; and (iii) its extensive pilot programme and thoughtful selection of commercial giants as participants in the programme. We believe that China’s digital currency development will be modelled after by countries intending to launch their own digital currencies.

Introduction to Digital Currency

What is digital currency?

Digital currency – otherwise called digital money, electronic money, electronic currency or cyber cash – is a term used to include the meta-group of sub-types of digital currency, including virtual currency, cryptocurrency, e-Cash and Central Bank Digital Currency (CBDC). It is a form of currency available only in digital or electronic form.

A key difference between digital currency and physical currency lies in their tangibility. Unlike banknotes and minted coins, digital currencies do not have a physical form – they are intangible and can only be owned and accessed using computers or mobile phones. This difference is instrumental in conferring digital currencies with numerous advantages unattainable by traditional payment methods. For instance, while the latter always involves banks or clearing houses, digital currency transactions can be made directly between transacting parties, rendering obsolete the need for intermediaries. This in turn facilitates instantaneous and more cost-efficient transactions.

Differences in tangibility aside, digital currency is intrinsically similar to standard fiat currency in that both may be used to purchase goods and services – although, the use of digital currency may be limited in certain contexts such as payment on gaming and gambling sites. In addition, just like physical currency, digital currency enables cross-border transactions as long as the transacting parties are connected to the same network required for transacting in the digital currency. It is therefore possible for Person A in Country A to make payment in digital currency to Person B in Country B.

How is digital currency being used around the world today?

Given the viability of digital currencies, it is no surprise that a myriad of different types of digital currencies have since emerged and thrived. Of the many different types of digital currencies which currently exist, a small handful have established themselves as the foremost digital currencies in use today. These include cryptocurrencies such as Bitcoin, Ethereum and Zcash.

CBDCs – otherwise called digital fiat currency or digital money – on the other hand, are not as widely used. CBDC is potentially a new form of digital central bank money or fiat money that can be distinguished from reserves or settlement balances held by commercial banks at central banks. There are, understandably, concerns associated with the use of CBDCs. However, interest in CBDCs has risen in recent years. In fact, the People’s Bank of China (PBoC) now leads the world in the development of national digital currencies – this year, screenshots emerged of a “Digital Yuan” interface being piloted at the Agricultural Bank of China (ABC), one of four state-owned banking giants. Moreover, in its 2019 White Paper, the PBoC noted that the “Digital Yuan” or Digital Currency Electronic Payment (DCEP) has potential to replace cash and make peer-to-peer transactions more secure and efficient.[1]

Other major economies such as Japan and the United Kingdom (UK) have also formed working groups to explore the potential use of CBDCs in the foreseeable future. Significantly, the “Digital Dollar” idea, which first appeared in the original form of the “Take Responsibility for Workers and Families Act” in the United States (US), has been re-introduced under the Automatic BOOST to Communities Act (ABC Act). Under the ABC Act, Congress would authorise the Federal Reserve to create “Digital Dollar Account Wallets” to allow US residents, citizens and businesses located in the country to access financial services.[2]

In this regard, the race to create the future of money is already on, with China currently leading the pack in the CBDC race. The focus of this report is, therefore, on the viability of CBDCs. This report will – (1) trace the development of the “Digital Yuan” in China; (2) examine the key takeaways from China’s digital currency – such as, the requirements for a successful digital currency as well as the potential risks of adopting a digital currency; and (3) highlight countries which are primed to start a digital currency.

The Development of the “Digital Yuan” in China

Why did China start planning for the “Digital Yuan”?

One reason why China wants to have its own digital currency is the ability for regulatory authorities to better track how money is used by its citizens and in turn, a revolutionisation of the ability of China’s regulatory authorities to scrutinise the nation’s payment and financial system. As noted by Xu Yuan, a senior researcher with Peking University’s Digital Finance Research Centre, the emergence of a digital currency will enable payment transactions to be made online, making all cash flow in society traceable. As more business activities are now conducted online such that cash flow information and credit data are stored on databases, the credit structure of the overall society becomes easier to determine. Crucially, the database can be checked in real time and can play an integral role in keeping checks against citizens who have committed money laundering, tax evasions or other related offences.[3]

Another equally, if not more, important reason for the development of the “Digital Yuan” is the rise of Bitcoin – China has itself acknowledged that the rise of cryptocurrencies like Bitcoin has spurred a call to action to really take control of the money supply and different currencies that are entering the modern world. As Lucy Gazararian – co-chair of the blockchain committee of the FinTech Association of Hong Kong – notes, the rise of Bitcoin is a real trigger because central banks soon realised that the technology underpinning cryptocurrencies could be modified for the fiat world. Central banks also appreciate that this is an exceptional new innovation that has the ability to upgrade payment infrastructure.[4]

What exactly is the “Digital Yuan” and how does it work?

The “Digital Yuan” is China’s version of a sovereign digital currency and will be used to stimulate everyday banking activities including payments, deposits and withdrawals from a digital wallet. It is set to be a part of the most liquid form of money supply that includes notes and coins in circulation in the society, known as M0, but in a digital form. It will be issued and backed by the PBoC. Once launched, consumers may download an electronic wallet application authorised by the PBoC which can be linked to a bank card to (i) facilitate payments or receipts of digital yuan using a mobile device with merchants or (ii) make transfers with an ATM machine or other users. The money from the linked bank account will then be converted into digital cash on a one-to-one basis. An alternative option which does not require a bank account to hold and facilitate transactions in the digital yuan also exists.

Significantly, unlike other existing online payment platforms such as Alibaba’s Alipay and Tencent’s WeChat Pay, the DCEP system allows transactions to be made even in the absence of internet connection. This function, termed “touch and touch”, enables users to simply touch their mobile devices together in order to make a transfer. This leaves no payment record with third parties or the banking system.

Tracing the development of the “Digital Yuan”

In recent years, the high penetration rate of smartphones, and therefore electronic payments, has resulted in a significant decrease in the use of physical cash. Coupled with the success of e-commerce platforms such as Alibaba, the PBoC began exploring the concept of a national virtual currency in 2014. After China’s State Council included blockchain technology in its 13th Five Year Plan in 2016, the PBoC established in 2017 the Digital Currency Research Institute, which is responsible for China’s digital currency development and testing, to further its efforts in the development of the “Digital Yuan”. In December 2019, Mu Changchun – Director of the Institute, noted that the new sovereign digital currency would be “a digital form of the yuan”. There would be no speculation on the value of the “Digital Yuan” and according to the Shanghai Securities News, it would not need the backing of a basket of currencies.

The coronavirus pandemic has arguably served as a catalyst for accelerating contactless payments, and in turn the effort to move to a digital currency, because of concerns that physical cash can transmit Covid-19. In this regard, as of April 2020, the PBoC confirmed that some state-owned banks are conducting internal trials of the digital currency in four Chinese cities – Shenzhen, Suzhou, Chengdu and Xiong’an – and is considering its usage during the 2022 Winter Olympics in Beijing. The PBoC has also begun selecting the first merchants for testing the DCEP. These include Starbucks, McDonald’s, and other major firms such as ride-hailing company Didi Chuxing, food delivery giant Meituan Dianping and streaming platform Bilibili. The choice behind these entities can be explained by the fact that their users make transactions worth several billion dollars daily. For example, Didi Chuxing has a client base of about 550 million while Meituan Dianping currently has almost 450 million customers and about 6 million companies using it to sell their products. Such volumes can significantly accelerate the popularity and subsequent adoption of the digital yuan.

The goal of China’s pilot programme is to test for the digital currency’s theoretical reliability, system stability, functional availability, process convenience, scenario applicability and risk management.[5] However, it is unclear how long the testing period of the digital yuan will last. Jianing Yu, president of Huobi University, also noted in a conversation with Cointelegraph that China may still be far from completing testing and that in any case, “these current tests are actually still in the research stage, not preparing for immediate launch”. Therefore, as of now, it remains unclear what China’s next step will be. It is also worth bearing in mind that user adoption of any currency is going to take time. However, this does not in any way detract from the fact that we now live in a digital economy and that, therefore, the adoption of a digital currency is only a matter of time. It also remains true that China now leads the world in the CBDC race.

Lessons Learnt from China’s Digital Currency Development

What are the requirements for a successful digital currency?

To successfully launch a digital currency, central banks need to be well-versed with the relevant technology and must have in place advanced technologies, a reliable team of professionals as well as secure and reliable infrastructure. This is not least because the entire economy of the country will be dependent on such a system and it is not impossible that hackers will attempt to penetrate the system in place. In this regard, countries which intend to introduce digital currencies have much to learn from China’s digital currency development. For a start, the PBoC has in place a specialist research team to discuss technical and regulatory issues in relation to the development of a state digital currency. Prominent members of the Digital Currency Research Institute include Mr Mu Changchun – Director of the Institute. Mr Mu’s financial background commands respect in the corporate world and places him in a good position to lead the Institute to launch the digital yuan. Shanghai Securities Daily has itself noted that Mr Mu’s appointment as Director brings hope that the Chinese national cryptocurrency will make an official appearance in the near future.

Further, China’s efforts at testing the reliability of its newly developed digital currency system certainly contributes a great deal to its success. As noted by Matthew Graham, CEO of Sino Global Capital, a private equity firm in Beijing, China has substantial research and development efforts and has placed the project high on its priority list.[6] Moreover, China’s choice of institutions for its digital currency trials is highly strategic. By including commercial giants such as Didi Chuxing and McDonald’s in its trial programme, data collected can better and more accurately reflect areas for improvement in the existing system. This will go a long way in fine-tuning the reliability of the DCEP system which will in turn ensure the success of the digital yuan. Countries seeking to launch a successful digital currency should consider adopting China’s approach towards trialling the digital currency system.

In addition, arguably, the biggest hurdle that any country will face in rolling out digital currencies is getting its citizens to use the very currency. As with all else, change takes time. However, the more necessary the change is, the lower the levels of inertia to change. In this regard, China’s choice of means of integration of the digital currency into the economy is one very important reason for its successful digital currency development – and is something that countries wishing to introduce a digital currency should seriously consider. Indeed, the Chinese authorities have chosen the easiest way to integrate the digital currency into the economy – implementation through the social and budgetary sphere. For instance, as of May 2020, officials working in Suzhou started receiving half of their transport subsidies not in traditional renminbi (RMB) but in digital yuan.[7] Crucially, in order to receive these subsidies, recipients are required to install a special application – an electronic wallet that can be linked to an existing bank account – on their smartphones. Coupled with the possibility of using this new digital currency for payment at popular chains like McDonald’s, Starbucks and Subway in China, the Chinese authorities are ingeniously easing the transition from traditional cash or payment methods to digital currency.

Potential risks of a digital currency

Whilst the introduction of a digital currency could bring a number of potential benefits to payment, clearing and settlement systems, it could also pose several risks and challenges. An initial exploration and experimentation conducted by the Bank for International Settlements (BIS) identified a number of legal, technical and operational issues that central banks and other relevant parties must consider. [8]

First, cyber-security is one of the most important operational challenges for central bank systems. Cyber-threats, such as malware and fraud are risks for nearly every payment, clearing and settlement system. They pose a particular challenge for a general purpose CBDC which is open to many participants and therefore many points of attack. The potential effect of fraud in the context of a digital currency system could be more significant because of the ease with which large sums may be transferred via electronic means.

Second, privacy issues are also another paramount concern. The use of central bank and commercial bank deposits usually provides some level of privacy (for individual banks and agents, respectively). In a similar vein, the use of cash provides anonymity to all users. In stark contrast, according an appropriate degree of privacy to users in a digital environment is a very real challenge. Ensuring sufficient privacy in a CBDC context entails careful and difficult public policy design choices for a central bank. It is therefore no surprise that critics of CBDC suggest that a digital currency could pose a threat to citizens’ privacy when deployed by authoritarian governments – a state-operated payments system would enable the government to track all of its citizens’ purchases.

Third, although not applicable to all countries, there may be legal considerations associated with the development of a digital currency. Indeed, not all central banks have the authority to issue digital currencies and expand account access. The issuance of such authority may require legislative changes and may therefore not be feasible, in the short term at least. Other pivotal, and fundamental, legal questions include whether a CBDC constitutes a legal tender – i.e. a legally recognised payment instrument to fulfil financial obligations – and whether existing laws pertaining to transfers of value and finality are applicable.

Fourth, concerns have also been raised that the introduction of a digital currency could spell bad news for financial inclusion. As Ola Nilsson, a specialist in consumer policy at the Swedish National Pensioners’ Organisation, explained to European CEO magazine, a cashless society may disadvantage those who live in rural areas, the disabled and the elderly.[9] He also noted that a completely cashless society may mean that older people will no longer be able to do things in everyday life that they have always managed before – this includes buying a ticket for the bus or train or even paying for a coffee at a cafe. However, Nilsson has also himself acknowledged the possibility of creating a digital currency that is accessible to all – this is especially feasible if the digital currency is developed with vulnerable groups in mind.

Fifth, central banks must also take account of AML/CFT concerns and requirements if they were to issue a digital currency. Issuing a digital currency which does not adequately comply with these and other supervisory and tax regimes is not advisable. To date, it is unclear how AML/CFT requirements can be implemented practically for anonymous forms of CBDC. Forms of CBDC that can be easily transferred across borders or used offshore are especially likely to present significant challenges in this respect. Therefore, as noted by the Bank for International Settlements, the reputational risk to the central bank from a general purpose CBDC must be considered.

Finally, more generally, the robustness of possible new technologies in ensuring a sound risk management framework is uncertain. Given that central bank services are essential to the smooth functioning of an economy, very robust requirements for reliability, scalability, throughput and resilience are integral. Central banks therefore typically have very rigorous operational requirements for their systems and services. The Bank for International Settlements rightly notes that some of the proposed technologies for issuing and managing CBDC (such as DLT) are still relatively untested, and even the private sector is in the early phase of developing and applying for DLT for commercial use. Many questions surrounding operational risk management and governance need to be answered before deployment can be envisioned.

Countries Primed to Start a Digital Currency


Few countries have embraced the drive towards a cashless society with as much enthusiasm as Sweden. Sweden’s Riksbank data shows that only one percent of the Swedish gross domestic product (GDP) existed in banknotes in 2018. Further, more than fifty percent of banks in Sweden do not have physical cash in their vaults. Payments also usually take place with credit, debit cards or mobile payment apps. For this reason, it does not come as a surprise that a study conducted by Niklas Arvidsson and Jonas Hedman, researches at the KTH Royal Institute of Technology and Copenhagen Business School respectively, found that Swedish retailers could stop accepting cash as early as 2023.[10] These render Sweden one of the least cash-dependent countries in the world.[11] It is therefore only appropriate that the Scandinavian country soon becomes one of the first nations to start a digital currency.

In fact, as of February 2020, Riksbank has been assessing e-krona, a new form of digital currency which aims to take the country one step closer to the creation of the world’s first central bank digital currency. This pilot programme will be in operation for one year, until February 2021. Riksbank notes that the e-krona could eventually be used for banking functions, such as payments, deposits and withdrawals, from a digital wallet.[12] It is clear then that Sweden is well suited to launch a digital currency and that, in this regard, China is hot on Sweden’s heels in the race to create the world’s first CBDC.

The Bahamas

The Bahamas’ digital currency pilot project went live in Exuma on 27 December 2019. Residents of the island were allowed to enrol in the Central Bank of The Bahamas’ “Project Sand Dollar” – they received mobile wallets the Bahamian government sees as facilitating the future of payments on the island chain. As noted by bankers, the “Sand Dollar” is a digital fiat currency – it is a digital version equivalent in every respect to the paper currency.[13] This is a major step toward the Bahamas’ long-term goal of launching a fully-fledged CBDC. John Rolle, the governor of the Central Bank of the Bahamas (CBOB), has also reportedly confirmed that the Bahamian digital dollar initiative will be introduced across all islands in the second half of 2020.[14] Once fully launched, residents can pay retailers through wallet-linked QR codes, with banks moving funds in digital form. The central bank believes this could ultimately cut currency printing costs and transaction fees while enhancing financial inclusion.

While the sand dollar faces restrictive limits from the government – for instance, businesses cannot hold more than B$1 million in their digital wallets and cannot transact more than one-eighth of their annual business through wallets in any given month – the central bank “will vary these limits over time as may be necessary”. It also remains the case that the Bahamas is increasingly ready and well-suited to start a digital currency of its own.


Digital currencies present many advantages and are also a means to prevent cryptocurrencies like Libra, a digital currency put forward by social media giant Facebook, from undermining central banks’ control over money creation. On this note, it is no longer a question of whether governments will introduce CBDCs, but rather when CBDCs will be introduced. For instance, the Bank of France has put out a call for applications from firms interested in experimenting with the use of a digital euro for interbank settlements, while the Dutch central bank has announced that it wants to play a “leading role” in the research and development of both its own CBDC and a digital euro.

Whilst a cashless society will in many ways prove to be a more convenient one, there are inevitably risks associated with a cashless society. Therefore, in developing CBDCs, central banks must engage in careful planning to ensure that the introduction of digital currencies strengthens rather than weakens the financial system. In this regard, China – the first mover in the CBDC world – has set the bar high in terms of successful development of a digital currency. Its success is attributable, in part, to – (i) its careful recruitment of highly qualified individuals; (ii) its strategy in easing the transition from the use of physical currencies to digital  currencies; and (iii) its extensive pilot programme and thoughtful selection of commercial giants as participants in the programme. China’s digital currency development will likely be modelled after by countries intending to launch their own digital currencies.

Finally, countries like Sweden and the Bahamas are already well-equipped and well-positioned to adopt a digital currency of their own. With China’s success in digital currency development, it is also likely that many other countries will gradually begin launching digital currencies of their own. Therefore, there is no reason to seriously doubt that digital currencies will be the future.


  1. CoinDesk 50: How the People’s Bank of China Became a CBDC Leader <>.
  2. ‘Digital Dollar’ Reintroduced by US Lawmakers in Latest Stimulus Bill <>.
  3. What is China’s cryptocurrency alternative sovereign digital currency and why is it not like bitcoin? <>.
  4. ‘An absolute necessity:’ Why this expert says China desperately needs a digital currency <>.
  5. Digital Yuan CBDC Momentum Grows as More Chinese Firms Get to Testing <>.
  6. People’s Bank of China kicks off digital currency trials <>.
  7. How National Digital Currencies Will Change Our Lives <>.
  8. Committee on Payments and Market Infrastructure (Central bank digital currencies) dated March 2018 <>.
  9. The risks (and benefits) of Sweden’s proposed e-krona <>.
  10. Sweden could stop using cash by 2023 <>.
  11. The risks (and benefits) of Sweden’s proposed e-krona <>.
  12. Sweden’s Central Bank Floats E-Krona As Digital Currency <>.
  13. Project Sand Dollar: A Bahamas Payments System Modernisation Initiative <>.
  14. Bahamas Digital Dollar to Roll Out Across All Islands in H2 2020, Governor Says <>.

CLMV – Opportunities

Delving into the CLMV Start-Ups’ Realm of Possibilities

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Mr Jonathan Lau, YLP Analyst

Mr James Tan


The CLMV countries, namely Cambodia, Laos, Myanmar and Vietnam, have traditionally been overshadowed by its more buoyant ASEAN neighbours. However, the pandemic-induced economic doldrums now pose a giant hurdle in ASEAN’s endeavour toward becoming the fourth largest economy in the world by 2050. This is a rallying call-to-action for CLMV, whose growth is a key factor in that goal.

Startups, the seeds from which major corporations sprout, are the linchpin of economic revitalisation and a burgeoning investor hub. With a relatively raw entrepreneurial scene, CLMV has immense potential for growth and should strive to proliferate strong SMEs and local industries within the next few decades.

This report shall thus focus on the startup ecosystems of CLMV. This report will – (1) unpack outstanding features of the CLMV startup community; (2) examine the respective growth obstacles; and (3) highlight promising sectors that CLMV can dive deeper into.


Mr James Tan
Managing Partner
Quest Ventures

Cambodia, Laos, Myanmar and Vietnam, commonly known as CLMV, is an eclectic grouping of long histories and rich cultures. With a sizable combined population of 175.7 million, the market in CLMV is challenging and exciting.

The technology startup scene in these countries has blossomed over the decade. In preceding years, our research and networks on the ground show the rapid growth in the amount of funding, number of startups created, and overall development of the ecosystem.

Even with COVID-19 as an important consideration, we remain bullish on the potential of CLMV. Barring major shifts in political direction, we expect growth in technology startups in CLMV to continue unabated.



Cambodia has had a turbulent history. 40 years on, Cambodia is still reeling from the effects of the Khmer Rouge regime, responsible for the mass killings of millions. Despite its past which has left a significant number of its population in poverty, the country has been striving to escape this state. Its poverty rate has in fact more than halved from 2004 to 2018, with the percentage of citizens under the national poverty line decreasing significantly from 47.8% in 2007[1] to 12.9% in 2018[2]. The economy has primarily been driven by industries such as Agriculture and Garments[3]. Tourism is another leading source of income for the nation as many tourists flock to the country for its magnificent Angkor Wat, contributing 12.1% to the nation’s GDP in 2019[4].

However, the negative impact of COVID-19 on its core sectors has once again highlighted the importance for the country to focus less on traditional sectors that rely heavily on manual labour or external derived demand[5]. Instead, they need to shift their priorities to the digital economy which is often better able to weather heavy storms, and which is largely driven by young budding entrepreneurs in the community.

Startup Community and Ecosystem

1. Co-working Spaces

More than 23 co-working spaces and innovation labs have been established in Cambodia since 2011[6] – a considerable number considering the early stage of the startup ecosystem in the country. In fact, these spaces cater not just to startups, but also to bigger names in the tech community. SmallWorld Realty, a partnership between SmallWorld Venture and Raintree, is one of the newest spaces launched in the country[7]. Its tenants include Microsoft and Grab, thus bringing together opportunities for large collaborations between tech companies and startups. As startup founders continue to grow their business and build their network while working at these collaborative spaces, the startup ecosystem in Cambodia is sure to continue growing and shows no signs of slowing down.

2. Mentorship and Training

Cambodia has a considerable number of incubators and accelerator programmes although its startup ecosystem is still in a rather early stage of growth. The economy is slowly transforming from one heavily dependent on physical labour to one geared towards building skills and knowledge[8], tapping on the youthfulness and vibrancy of its population.

One such accelerator programme available to budding entrepreneurs include the BIO Accelerator Program, launched by the Cambodia Investor Club Association. It provides several months of intense training and mentorship for SMEs chosen to be part of their holistic programme. Entrepreneurs who undergo this programme learn to develop their businesses in a sustainable manner in order to achieve financial independence. SHE Investments has also delivered similar programmes, namely the SHE Incubator and Accelerator. What differentiates them is their specific focus towards women entrepreneurs whom they found are often unable to grow past the micro stage of business[9]. Hence, they aim to help women obtain the same resources and attain the same status as men in this developing economy.

Additionally, a major milestone for the startup community was the launch of the Techo Startup Centre, an incubation centre that aims to further the development of Cambodia’s digital economy[10]. Being government-funded, this signalled the government’s recognition for such innovative efforts and its willingness to dedicate resources to further the development of early businesses. Its location within the Royal University of Phnom Penh also increases its proximity to youths, allowing the community to harness the benefits of its young population.

3. Funding and Investments

Cambodia’s business environment has been known for its openness to foreign companies and investors. The country has designated Special Economic Zones which provide tax benefits on imports and exports, and also permits full foreign ownership of most companies[11]. Although its investment law is already touted to be friendlier than its neighbours’, the country is in the midst of revising its investment law in order to increase its competitiveness and attractiveness among foreign investors[12]. With fewer restrictions and greater protection for investors as compared to other countries, investors will be more incentivised to consider investing in startups in Cambodia.

Its open business environment has evidently reaped benefits, with the country’s investment value increasing from USD 2.9 billion in 2012 to USD 9.4 billion in 2019[13]. The number of publicly-disclosed startup investments has also risen over the years, doubling to more than 10 between the years of 2015 and 2018[14]. This is a vast improvement as startups in Cambodia generally find it difficult to receive seed funding, let alone larger funds[15]. A greater diversity of funding sources has attributed to this rise in investments.

The increase in funding in the last few years has originated from both public and private sources. In the private sector, the USD 5 million Smart Axiata Digital Innovation Fund was launched in 2017 to provide more funding options for local startups[16]. Additionally, Octane, a local venture capital firm backed by Worldbridge Group, closed its first investment fund in 2019 with a total of USD 55 million aimed at tech investments in Cambodia[17]. In the public sector, the government launched a USD 5 million annual fund at the 2019 Cambodia Outlook Conference which aims for “Digital Transformation toward Industry 4.0”[18]. The increase in financial support for local tech startups has thus shifted the country’s focus away from traditional businesses and business models towards those in the digital economy. As the number of funding opportunities increase over the years, startups will be able to gain greater access to capital which will in turn propel further growth and development of the local startup ecosystem.


1. Poor Governance

Cambodia has been criticised for not being a true democracy due to the absence of a credible opposition. Kem Sokha, the former leader of the Cambodia National Rescue Party (CNRP), was arrested in 2017 for treason, and the CNRP was dissolved[19]. This enabled Hun Sen’s party to win all parliamentary seats in the 2018 elections with a one party rule. However, no evidence has supposedly been found against Kem Sokha for the last two years, strengthening the theory that he was wrongly accused[20]. Beyond the conjectured corruption involved are dated political ideologies that may hinder the country from advancing together with global trends. The absence of an effective opposition questions the ability of the ruling party to accept foreign trends and practices, thus suppressing the introduction of new developments and perspectives. This may also instil fear in the locals to introduce new ideas to the community that may not be very welcomed by the government as they may risk being criminalised. These considerations may cause Cambodia to strive towards economic and political progress without any effective advancements, affecting all realms in the community including the startup ecosystem. The lack of a strong governmental structure and concerns of corruption may also in turn deteriorate trade relations and hinder foreign investors from entering the country, as already seen by the European Union’s withdrawal of the Everything But Arms’ trade scheme due to concerns of human rights violations[21].

2. Startups’ Limited Access to Capital and Professional Services

One common problem that startups in Cambodia face is their inadequate access to capital and professional services. While strides have been made to promote and boost the local startup scene, these fundamental resources are required by the startups when developing their business.

The poor access to capital is a problem not only faced by startups, but by businesses in general. With high interest rates, undesirable loan terms, and high collateral requirements, local businesses find it difficult to receive capital financing. This has been highlighted as a problem by the Cambodian government under the Cambodia Industrial Development Policy 2015-2025[22], reinforcing the need to improve the country’s banking system in order to support local businesses and further economic growth in the country. While a new fund dedicated to capital financing for SMEs was set up in 2020 by the Rural Development Bank[23], it specifically targets SMEs in the agricultural sector which has traditionally been the backbone of the Cambodian economy. As a result, SMEs in other rising sectors are still left behind.

SMEs have also had limited access to professional services, which are the key to establishing their businesses within the country’s regulatory framework. Over 60% of founders have struggled to find sufficient information related to legal and tax advice24[24], thus posing an obstacle to their awareness of the latest updates or actions that they are required to take. Several firms have noted the importance of improving startups’ access to professional services. In 2019, the first professional service alliance in the country was established, with a focus on the tech community which consists of many startups[25]. This marked a huge milestone for the startup community which will be able to receive more guidance and advice. To ensure that the startup community is able to continuously receive such crucial support, the alliance can consider bringing more professional services firms on board to expand the capacity that the fast-growing startup scene requires.

Rising Sectors

1. Fintech

Cambodia’s population is becoming increasingly tech-savvy, yet 78% of them remain unbanked and a mere 13% are acquainted with mobile payments as of 2019[26]. As few established foreign players have noticed this under-served market[27], startups can capitalise on this opportunity to meet the needs of the local population. These startups can provide mobile payment solutions and even address the very issue of the limited access to capital that many startups are facing today. Several startups, such as Morakot Technology and Clik have already entered the Fintech sector, carving a name and reputation for themselves. As new Fintech startups are sprouting quickly, founders that aim to address existing problems in the Fintech sector need to take quick action and launch their business soon in order to ride this wave.

2. Agritech

Agriculture made up 20.71% of Cambodia’s GDP[28] and employed 32.3% of the population in 2019[29]. As one of the key drivers of the country’s economy, it is understandable why it has been receiving a considerable amount of attention and resources from the government. Apart from the specific funding provided to Agriculture companies, the Ministry of Agriculture, Forestry and Fisheries has soft-launched a mobile application for the sector, tying it in with e-commerce to match farmers with consumers[30]. There is evidently still a gap in the Agriculture sector in terms of streamlining processes and there remains a lot of untapped potential in terms of the mechanisation of agriculture. Nevertheless, farmers increasingly understand the importance of moving away from traditional manual processes in order to improve productivity[31]. Agritech thus plays an important role in transforming the sector that has supported the country tremendously for it to remain as a driving force for the Cambodian economy.


Cambodia’s open business environment is definitely a strong pull factor for foreign investors and business owners, but changes in its complex political scene may affect foreigners’ perceptions of the country’s long-term stability. The government’s focus has appeared to be on traditional industries, such as Agriculture, Manufacturing, Garments, and Construction. While technology can play a significant role in digitising these industries and transforming them, it will be difficult for startups to enter these industries predominantly occupied by large players unless they are offered more opportunities to obtain the resources needed to compete effectively with these players. Although some of these efforts are targeted towards specific industries, it is heartening to know that there have been more initiatives from both the private sector and the government in the form of accelerators and funding.

Nevertheless, the startup ecosystem, while making significant progress over the years, may be at too early a stage for many foreign companies and angel investors to confidently enter and provide the resources it requires. It still needs greater support from the local community first before more foreign investors and companies are willing to step in and complement local efforts with their own.



A landlocked country with a small population of 7.2 million, Laos is often overshadowed by its neighbours, yet it has had comparable economic growth despite being one of the poorest countries in Southeast Asia. Having been given a status upgrade by the World Bank and transiting from a low income to a lower-middle income economy[32], Laos’ real GDP has been steadily rising[33].

Its small domestic market has raised investors’ doubts on whether the market is large enough to support sustainable growth[34]. To mitigate them, Laos has increasingly engaged in international trade, namely through its entrance into the World Trade Organization (WTO) in 2013. This has allowed the landlocked country to gain access to more trade partners and negotiate for more advantageous trade terms[35], introducing the closed economy to a trove of resources and opportunities. Yet at the same time, this may also expose the country to instability in the international economy that it was previously rather shielded from, especially if it becomes increasingly dependent on foreign consumption and investments. Nevertheless, it is undeniable that Laos has much to gain from greater international trade, and in particular, the startup ecosystem which has benefited both small and large countries all around the world.

Startup Community and Ecosystem

1. Co-working Spaces

Laos has progressively seen a stronger startup support system in its capital city, Vientiane, through the increased number of co-working spaces to facilitate interactions between startups. Modelled closely after other reputable co-working spaces in the world, Tohlao set up a co-working space in Vientiane in 2016, followed closely by Toong in 2019[36]. These spaces provide a conducive environment for intra and inter-party communication between startups, as well as invaluable opportunities for growth. Despite being a relatively new concept to the community[37], it has seen considerable success and support from local businesses.

2. Mentorship and Training

To tackle the lack of education and skills among the Laotian population, appropriate guidance needs to be provided as even startups with the most extensive resources will be unable to flourish without relevant expertise. While sufficient funding is indeed an enabling factor for businesses, mentorship plays a pivotal role in the long-term development of the business.

As part of Tohlao’s efforts to strengthen the local startup community and promote entrepreneurship, Startup Weekend[38], a competition for startups to hear from successful businessmen and develop a business plan, was organised. The winning teams will then be given the opportunity to participate in Tohlao’s startup incubation programme[39], which has birthed successful startups such as Book Delivery, Bizgital and LOCA. Similar programmes will definitely aid the growth of businesses in Laos, where there is still a weak presence of strong incubators and accelerators catered to small companies.

The importance of training and developing future generations of skilled workers has also been recognised. Such training has been particularly catered to the technology sector in order to enable strong growth in the digital economy. One notable training programme is the AC STEM Lab[40], supported by the United States Embassy and multinational technology companies including Facebook. While increasing the pool of skilled labour in Laos, such programmes also attract large conglomerates to its undervalued resources and diverse opportunities.

3. Funding and Investments

The limited investments in Laos has been attributed to the rather nascent stage of the startup scene in the country, where startup founders have little experience and resources. Angel investors thus often overlook the country in exchange for economic hubs in neighbouring countries, at the detriment of the startups in Laos.

Nevertheless, investors are starting to recognise the growth potential of the small country. In 2016, the Mekong Angel Investors Network (MAIN) created a new chapter in Laos, led by the Australian government and comprising investors from regions including Europe and Australia[41]. Although this signals positive change to the startup scene, more investment opportunities need to be created in Laos in order to retain and attract investors who will otherwise take off for more attractive deals in its neighbouring countries. Potential startups in Laos need to tap on their strengths which, unlike many startups in other countries, may not lie in the technology sector, at least not for now.

Potential Challenges

1. Lack of Sizeable Talent Pool

Laos’ small population has, from the start, restricted its talent pool of knowledgeable and skilled workers. This is further dampened by the poor financial literacy and financial inclusion among its citizens. The unbanked population in Laos makes up more than 60% of its total population[42], as they mainly engage in informal financial services. As a result, they are largely unaware of the functioning of the financial markets and the proper processes needed to secure funding for their business.

The language barrier also poses an issue for local startups to secure foreign funding, whose founders may be unable to eloquently present their business plan to overseas investors in English[43] – the dominant language of businesses[44]. This thus reduces their ability to facilitate communications and build relationships with foreign investors whose primary means of communication could be in English. Consequently, there needs to be greater investments in human capital by the local government in order to attract long-term foreign investors to the country.

2. Underdeveloped Technological Infrastructure

The underdeveloped technological infrastructure is exceptionally evident in two areas: (1) internet usage and (2) financial technology (Fintech) solutions.

The internet penetration rate in Laos is one of the lowest in ASEAN – a mere 39% in 2019[45]. This low take-up rate has hindered businesses from harnessing technology to maximise efficiency, and has reduced their ability to raise awareness of their business ideas through social media and networks. A stronger technological infrastructure is needed to support businesses through their conceptualisation and operational phases, and help them compete with similar companies in the global arena.

Fintech advancements in Laos are also scanty, signalling the lack of exploration into the field by individuals and small businesses. The financial services sector in the country is still in its infancy stage, with advancements mainly led by financial institutions. The state-owned commercial bank, Banque pour le Commerce Exterieur Lao (BCEL), partnered with CyberSource in 2013 to offer a secure online payment gateway for merchants and customers[46]. But such developments are few and far between, and may be deemed insufficient to keep Laos up with the pace of global technology advances, contributing to its large unbanked population as well.

Rising Sectors

1. Edtech

Edtech is one sector poised for growth, and whose growth has been accelerated in this COVID-19 landscape. Laos’ neighbouring countries, including Vietnam and Thailand, have implemented several of such solutions including Topica and OpenDurian even before this pandemic. As the adult literacy rate in Laos remains the lowest among the CLMV countries at 58.3%[47], there definitely remains a gap in the education market that startups have the ability to fill although Laos’ technological infrastructure and uptake needs to increase tremendously.

The need for localisation and customisation of this sector raises the barrier to entry to foreign companies, who may also overlook Laos’ underserved market in favour of other larger markets. This represents a good opportunity for local startups as education solutions need to be tailored to local needs. Such needs are best understood by the locals, rather than foreign companies that may not have a good grasp of the market unless they have local staff on the ground. Locals who are looking to set up a business can definitely consider delving into this space with the lack of competition in Cambodia.

2. Agritech

Agriculture is still one of the main drivers of the Laotian economy although it is gradually contributing less to the economy over the years, making up 15.29% of its GDP in 2019[48]. Due to the unpredictability of the weather and other natural variables in the region, Agritech can mitigate the impacts of these variables and help farmers improve their productivity. The use of drones is a cost-efficient way to monitor the condition of crops over vast areas of land, yet this has hardly been implemented in Laos due to low uptake and regulatory restrictions[49]. Farmers in the country make up a large underserved group that startups can definitely target and aid in the process. Should startups be able to roll out solutions that are able to bypass these regulations and raise greater awareness of their benefits, they will definitely be able to reap the potential of the shift from traditional agricultural methods to digitalised ones.


Laos’ small domestic market may be seen as an impediment to growth in the eyes of foreign investors, but its size should not be the ultimate obstacle to its growth. Laos can learn from the successes of small, developed nations like Singapore – whose population is even smaller – in terms of harnessing the full potential of its population through greater dedication of financial and physical resources to its human capital.

In order to further its pursuit for economic growth, Laos needs to contribute more towards startups who may have brilliant solutions to its long-standing problems and which are scalable in nature. Currently, the infrastructure and resources required to create a robust startup ecosystem in Laos are still lacking. There are few available incubators and accelerators that would otherwise immensely benefit the locals in terms of the capital and mentorship they require. Moreover, only 39% of the Laotian population had subscription to internet services as of 2019[50]. A larger proportion of the population needs to have regular access to the internet in order for companies to reach out to them with new technological solutions. Only when these issues are addressed can the startup ecosystem truly flourish.



As the largest country in mainland Southeast Asia, Myanmar is a country known for its long history and rich culture. The country stands to benefit from its large young population where 55% of its population is aged under 30[51], thus granting them access to a large talent pool who can enact various changes in the future and bring about stability to its social structure.

The country has experienced positive GDP growth every year for the past 30 years ever since its liberalisation[52], and it is expected to remain positive at 1.8% in spite of the pandemic’s effect on the global economy[53]. Myanmar’s economy has traditionally been centred around Agriculture, which hires 48.85% of its working population[54] and provides a stable contribution to the country’s GDP[55], although this number is now on a decreasing trend. Its Industrials sector, consisting of manufacturing, mining and hydropower, is another key source of revenue for the country as it harnesses the benefits of its natural endowment.

Startup Community and Ecosystem

While the startup ecosystem is still in its early stages, it has made significant headway in generating acceptance of innovation and entrepreneurship within the community. Digitalisation has played a great role in expediting this progress, with the SIM penetration rate in Myanmar multiplying from 10% in 2013[56] to 105% in 2019[57]. Greater digital connectivity has enabled startups to connect with a larger target audience and expand their reach, contributing to the digital economy in return[58].

1. Co-working Spaces

The first co-working space established in Yangon was Phandeeyar[59]. Since its establishment, the importance of such cost-efficient spaces for freelancers and startups has been recognised. This has led to more co-working spaces being set up over the years to meet the demand for flexible work arrangements and locations. Another similar space is Seedspace Yangon, an entrepreneurship hub opened in 2019 which offers co-working spaces and boosts collaboration among startups and with external partners[60].

2. Mentorship and Training

Many incubators and accelerators have been established in the local community in order to support startups in their early phases. Incubators, such as Impact Hub Yangon and Kanaung Hub, organise workshops for entrepreneurs in order to realise their ideas. Accelerators, such as Phandeeyar Accelerator[61], help startups at a slightly later stage of development by organising various programmes and competitions to provide them with resources to further their growth. The GSMA Ecosystem Accelerator Innovation Fund also provides grants and equity-free funding to the startups selected for its annual programme[62]. Such programmes provide tangible benefits to startups who lack the resources and expertise to grow their innovative ideas, and are particularly important for the emerging economy.

Several facilities in Myanmar also dedicate themselves to the training and development of the population’s skills in order to equip locals, especially youths, with the necessary knowledge and mindsets to launch a successful business. One example is the Myanmar Young Entrepreneurs Association (MYEA) which aims to empower youths to pursue entrepreneurship[63]. The Myanmar Women Entrepreneurs Association (MWEA), which promotes women entrepreneurship and gender inclusivity, recently established the Women’s Entrepreneurship Development Center to further encourage women’s pursuit of entrepreneurship through their ability to balance work and family[64]. It is commendable to note that organisations are putting in immense effort and resources to enhance the entrepreneurial ecosystem in the country while pursuing sustainable development goals at the same time. Some of these initiatives have been set up by foreign companies as part of their corporate social responsibility programme. For example, the Samsung Tech Institute launched by Samsung Myanmar in 2016 provides vocational training to high school students in various technology fields, exposing them to more career options and linking them up with networks of successful entrepreneurs.

3. Funding and Investments

The amount of private investments in Myanmar has been expanding, in the form of private equity, venture capital, and angel investors. The number of private equity deals has been steadily increasing for the past five years, from just three deals in 2015 to 15 deals in 2019, although the size of the deals has largely varied especially in 2016 and 2018 which received mega-deals[65].

Several companies have led these private investments in Myanmar. Delta Capital Myanmar has been at the forefront of the scene since its establishment in 2013 with USD 120 million of assets under management, making it the largest asset manager in the country[66]. Its second fund has had a large focus on economic, social and governance (ESG) investments[67], taking advantage of the increasing popularity of impact investing in Southeast Asia[68]. Venture capital firms have also been reaping the benefits of investments in early-stage companies and startups. Seed Myanmar and EME Asia are two such companies that have concentrated their portfolio solely on Myanmar startups, as they believe in the startups’ deep knowledge of the challenging local market and ability to leverage their networks.

Angel investors make up another group of private investors that has contributed to the accelerating growth of the economy by investing in seed stages of startups. These investments are often made through angel investment networks such as the MYEA Angel Network, or the ASEAN Angel Alliance. Myanmar is in a strong position to benefit from this group of investors as angel investors have begun eyeing the Southeast Asian region for growth opportunities[69].


1. Slow Acceptance of International Trade

Myanmar’s slow acceptance of international trade has largely been attributed to its large domestic market, the main source of its current economic growth. Its exports as a percentage of its GDP, at just 30.4% in 2019[70], is among the lower percentages in ASEAN, including landlocked Laos which arguably has less access to international economies due to its geographical positioning.

Trade is a factor crucial for economies to thrive and will prove to be beneficial in the long run. Given its strategic location, Myanmar should harness its geographical advantage to become a key exporting hub in the region. As the regulations surrounding exports become more relaxed and Special Economic Zones (SEZs) are established, there is greater incentive for both trade and investments. These developments signal that the importance of trade is gradually being recognised in Myanmar, with new bilateral projects and agreements being established regularly. The liberalisation of Myanmar’s economy is quickening, and will soon achieve rapid growth should it be able to sustain its existing momentum and should local companies be able to gain greater traction in foreign markets.

2. Political Instability

Politics in Myanmar has long been rife with corruption, control, and power. Being poorly ranked at 130 out of 180 countries on the 2019 Corruption Perceptions Index by Transparency International[71], Myanmar’s relatively high levels of corruption could pose an obstacle towards attracting foreign direct investments (FDI) to the country, as investors question the legitimacy and transparency of the bureaucracy.

Though significant political headway was finally made in 2015 after half a century, the NLD has seen its support dwindle due to its poor relations with minority groups[72]. While initially revered as a public icon, Aung San Suu Kyi has been criticised for her dealings with the minority ethnic groups in the country. Internal clashes have intensified instead of ameliorating, even requiring interference from the International Court of Justice[73]. Fighting in the Shan and Kachin states, as well as the Rohingya crisis in the Rakhine state, have displaced minority groups and disrupted internal peace – a factor crucial to stimulating the country’s tourism industry. It is likely that these conflicts will have an impact on other aspects of the economy too, including the inflow of FDI. For Myanmar to sustain strong economic support from the international community, it is imperative for it to continue working towards political stability through collaboration agreements between the NLD and the Tatmadaw, and with minority ethnic groups.

Rising Sectors

1. Healthcare

The ongoing pandemic has reinforced the need for reliable healthcare services. Myanmar’s health worker density of 1.49 health workers per 1,000 people[74] is well below the World Health Organization’s recommendation of 2.3 health workers per 1,000 people[75], thus necessitating more resources to be allocated to the sector in order to compensate for its low healthcare coverage.

Several large pharmaceutical companies, including DKSH Group, have already entered into partnerships with the government to embark on programmes that aim to increase access to high-quality healthcare among the local population[76]. Likewise, there have been startups who are developing solutions to back-end issues in the healthcare sector such as poor custody of patients’ medical records and personal data. Klenic Software Co. is one startup that has aimed to protect such information through digital solutions and Software as a Service (SaaS) technology[77], adding value to the support network. With a growing need for a strong healthcare system, startups can capture the opportunity and bridge the gap between the existing healthcare infrastructure and those not covered by the healthcare network.

2. Financial Services

Myanmar’s low financial inclusion has made Financial Services a rising sector. Currently, more than 70% of Myanmar’s population remains unbanked[78], a far cry from the much lower 31% of unbanked global population recorded in 2018[79]. At the same time, the country has had a high smartphone penetration rate of 80%, signalling the potential to gain the population’s acceptance of such under-explored services through the digital realm.

Several companies have tried to bridge this gap in Myanmar, including Wave Money, a joint venture between Telenor, Yoma Bank, and First Myanmar Investments, which allows for quick and secure electronic funds transfer across the country[80]. Myanmar’s Central Bank has also piloted MMQR, which enables the use of QR code payments at local businesses and banks, bringing it a step closer to digitalising payments and becoming a cashless society[81]. Nevertheless, the outreach by existing providers needs to be greater – a gap which can be further narrowed by startups.


With greater liberalisation of the economy and advancements in the political scene, Myanmar is now making its way to become an attractive destination for investors. The nascent startup scene in Myanmar is gaining a lot of attention not just within the domestic economy, but also among the international community. Currently, the economy has a greater focus on the development of early-stage businesses, and the community has benefited from startups who have developed solutions to solve local problems which they have personally experienced. As such early-stage startups grow and prove profitable, investors will be more willing to dedicate capital and resources to later-stage developments in the economy, enabling the ecosystem to flourish as a whole.



Vietnam has achieved immense success over the past three decades, experiencing rapid economic growth and establishing strong relationships with other countries. The introduction of the Doi Moi Policy in 1986 during the country’s economic crisis shifted them from being a communist economy to a “socialist-oriented market economy”[82]. Consequently, their private sector has become a large contributing factor to their economy, and the country’s GDP is projected to grow 2.8% this year in spite of the ongoing pandemic, ranking it the fifth in the world in terms of speed of growth[83].

Its strong growth can be attributed to its healthy relationships with large global economies as it strives towards achieving an open economy. The many foreign agreements signed by Vietnam have enabled its admission into the ASEAN Free Trade Area, World Trade Organization, and the recent EU-Vietnam Free Trade Agreement[84]. Such agreements have allowed the country to enjoy tax benefits, thus promoting the implementation of pro-business regulations and policies in order to attract foreign investment and facilitate trade.

Startup Community and Ecosystem

As one of Southeast Asia’s fastest growing economies, the startup ecosystem has been a great contributor to its dynamic nature. The country has been constantly improving its ranking on the Global Innovation Index, achieving 42nd place out of 129 countries in 2019 and exceeding expectations for its “Lower-middle Income” group[85].

1. Co-working Spaces

Vietnam is increasingly being dotted with startup facilities, especially startup hubs and co-working spaces. They are mostly found in Hanoi and Ho Chi Minh City in order to cover ground in both the North and South of the country. Familiar names in the field include WeWork, Dreamplex, and Toong. UPGen is also another local co-working space that has thrived over the past few years, opening its first workspace in 2016 and 17 more in the following years. In fact, it caters its space to both startups and corporations as it often dedicates around half of each space to an anchor tenant, who will then occupy a greater space as it grows larger over the years[86].

The growth of co-working spaces has been phenomenal, with the sector growing 55% annually from 2013 to 2018, pushing Vietnam into the top 50 global rankings in 2019 for coworking growth[87]. Such a business model has gained significant traction among the Vietnamese, where its youthful population has a strong entrepreneurial mindset and thirst for success. These facilities catered especially to startups and SMEs will provide them with greater flexibility and a conducive environment to exchange innovative ideas.

2. Mentorship and Training

Mentorship to startups in Vietnam have mainly come in the form of accelerators and conferences. These involve different types of exposure, ranging from seminars to hands-on workshops and networking sessions. Techfest Vietnam is a prominent conference organised for the startup community which attracts thousands of attendees, enabling startups to expand their network and outreach[88].

A tremendous amount of support has been provided by the government in terms of building accelerators and forming partnerships with innovation hubs worldwide to encourage and grow entrepreneurship. One fresh example is Grab Ventures Ignite, Grab’s newly launched accelerator programme under their “Grab for Good” development plan, which is partnering with Vietnam’s National Innovation Center among other prestigious names[89]. Saigon Innovation Hub, a government-backed agency, has also facilitated a partnership with Quest Ventures and Enterprise Singapore as part of the Global Innovation Alliance (GIA) network which increases awareness of both countries’ startup ecosystems through exchanges and market access programmes[90]. Such cross-border collaborations will definitely spur startups to explore new frontiers and boost innovation within the ecosystem.

3. Funding and Investments

With many initiatives from both the public and private sectors, Vietnam’s startup ecosystem is certainly experiencing rapid growth and attracting various types of investors. These include private equity firms and angel investors. In the case of angel investors, their investments are made via networks such as the Vietnam Angel Investor Network (iAngel) and Vietnam Angel Network (VAN), or perhaps even through the angel investment reality show Shark Tank Vietnam.

Private equity plays a pivotal role in advancing the innovation ecosystem in Vietnam. With a mix of domestic and foreign players respectively making up 36% and 64% of private equity investments[91]. In Vietnam, between 2017 and 2019, private equity firms had reaped USD 1.8 billion from 139 deals across the country[92]. They are now on par with Indonesia in terms of deal value and their growth is projected to accelerate in the years to come. Key players in private equity include Mekong Capital and Vietnam Investments Group.

There has also been a strong presence by venture capital firms in particular. IDG Ventures Vietnam (IDGVV) spearheaded the development of venture capital in Vietnam in 2004, with its 35 portfolio companies today including notable investments like VNG, Webtretho, and Vietnamworks[93]. Ever since, Vietnam has seen the entry of multiple funds from all over the world, especially in recent years. Silicon Valley-based venture capital fund 500 Startups began its Vietnam chapter in 2016 and was oversubscribed with a fund size of USD 14 million and 42 portfolio companies as of May 2019[94]. Regional venture capital firms such as Quest Ventures, Cento Ventures, and Monk’s Hill Ventures have also been actively involved in investing in early-stage companies in Vietnam.


1. Slow Regulatory Reforms

Vietnam’s economy is fast-growing, yet its regulatory reforms seem to be lagging behind and are still unable to keep up with those of developed countries. Vietnam’s ranking in the Ease of Doing Business under the World Bank’s Doing Business Report has somewhat stagnated for the past few years, hovering around 68th place in 2017 and dropping to 70th place in 2019[95]. Its current economic prosperity is mostly attributed to past economic reforms such as the Doi Moi policy, and current reforms need to work in tandem to support this boom. New regulations need to be consistent and transparent to the masses[96]. It is imperative to continue providing assistance and greater protection for investors and taxpayers in order to entice them to local businesses[97].

2. Poor Enforcement of Intellectual Property (IP) Rights

The enforcement of IP rights is crucial for an economy to continue developing and attracting investors. While more than 300 businesses in Vietnam have made their first moves in legalising softwares, thousands continue to stick with piracy softwares[98] – a red flag for poor enforcement and abuse of rights despite existing regulations[99]. Without strong protection of IP rights, businesses may be deterred from conducting research and development as their new solutions can easily be copied by competitors. This in turn results in a vicious cycle where innovation is hindered, causing the economy’s growth to slow down and plateau. Fortunately, this has been recognised as a problem and the government has released a national Intellectual Property Strategy till 2030 as it works towards sustainable growth and development[100]. Government agencies need to be proactive when enforcing IP rights and also aim to build respect and awareness of the importance of such rights within the community[101].

Rising Sectors

1. Fintech

The Fintech sector in Vietnam is rapidly growing, with Vietnam’s growing middle class contributing to an increase in internet usage and demand for such services. Vietnam’s Fintech Startup Map 2019 shows the many companies in each Fintech segment, of which Payments and Peer-to-peer lending are the two largest segments[102].

However, a whopping 69% of its population remains unbanked[103]. Despite the many Fintech companies in Vietnam aiming to bridge this gap, there is evidently a still a need for more companies to serve the local population in the financial services field. The sector has been receiving strong support from investors, increasing its share of Southeast Asia’s total Fintech investments from 0.4% in 2018 to 36% in 2019[104]. With the strong support from investors and with the government working towards building a cashless society[105], businesses who aim to venture into this sector are thus poised for growth.

2. E-commerce

With the rising smartphone and internet penetration rates in Vietnam, e-commerce is becoming an increasingly common mode of transaction among the local population. The Vietnamese e-commerce market amounted to USD 5 billion in 2019 and is projected to hit a staggering USD 23 billion in 2025, with a compound annual growth rate of 7.1% for its revenue[106]. This has put it as one of the fastest-growing internet economies in Southeast Asia alongside Indonesia[107], presenting a significant opportunity for online marketplaces and local merchants. While international companies such as Shopee and Lazada are large players in the Vietnamese market, local platforms including Thegioididong and Tiki are faring strongly as well by improving their value propositions to customers[108]. The government has also laid out an e-commerce development plan for the nation, focusing on the sector’s growth while also keeping sustainability in sight[109]. Companies that are able to incorporate these goals in their business while keeping costs low and remaining competitive will eventually emerge out top.


Vietnam is on an upward trajectory, showing no signs of faltering. Their startup ecosystem is at a relatively advanced stage as compared to Cambodia, Laos, and Myanmar, and the entrepreneurial mindset is being ingrained in a larger proportion of its population. Vietnam is constantly ahead of its neighbours, and its growth is even expected to overtake several developed economies in the region too.

With its strong human capital and governmental support, more local and foreign investors view it as a vibrant hub and emerging market that is worth exploring. Certainly, failures are inevitable along the way and businesses need time to harvest the fruits of their labour. However, opportunities await investors who are willing to invest in patient capital and who believe in the country’s long-term prospects.


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Impactful Successes in Southeast Asia

Understanding the Successes and Potential of Impact Investing in Southeast Asia

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INSEAD Analysts
Ms Arushi Mehta
Mr Ethan Zhang
Mr Sanya Goyal
Ms Paula van Brakel

Quest Ventures Analysts
Ms Elizabeth Tan
Ms Michelle Quek

Mr James Tan, Singapore


This study is done as part of the INSEAD MBA Private Equity course and in cooperation with Quest Ventures, a VC fund that invests in technology startups that have scalability and replicability in the Digital Economy. It focuses on backing Southeast Asia and Emerging Asia’s startups in the post-seed to Series A stages in Southeast Asia and Emerging Asia. Main Purpose of the Project: Quest Ventures is launching a new sustainable impact fund, which actively invests in early stage, high growth and impact-driven startups in Emerging Asia (comprising Southeast, South and Central Asia). Through this project, we hope to assist Quest Ventures in raising further interest in its impact fund (targeted at $30mm) by providing a research-based study on the attractiveness of impact investing in Southeast Asia. We are looking for companies that have demonstrated track records of achieving dual sustained success of financial and social or environmental returns in the region.


Mr James Tan
Managing Partner
Quest Ventures

This impact research by INSEAD is an informative look at the nascent impact investment landscape in Southeast Asia. In collaboration with Quest Ventures sustainable impact team, the report evaluated investments in the region, their performance and most importantly, their impact.

This collaboration between the analysts of INSEAD, a top business school in Europe, and Quest Ventures, a top venture fund in Asia was, by all accounts, enjoyed by the analysts as they tapped into one another’s experience and perspective. We look forward to more joint collaborations.

Problem analysis

Given that impact investing in Southeast Asia is still a relatively nascent and niche space, there is limited data and publicly available information. Despite this we managed to conduct a research into the following:

  • Which companies have successfully achieved strong financial returns, while remaining authentic to their impact intent?
  • Which countries and sectors are these success cases concentrated in?
  • What are key success factors of such firms?

Methodology and Approach

In our analysis, we have used a combination of approaches entailing both primary and secondary resources. We have conducted market, investing landscape and specific enterprise research to identify a few key success stories in the region. In order to do so, we primarily relied on well-known databases and other publicly available information. However, to substantially and meaningfully address the third issue of drivers of success for these enterprises, we reached out to 12 such companies and spoke to the founders of one.

Key Findings

Impact investing is becoming hot in the past years, and investors only recently started explicitly focussing on impact and financial returns. This is also why the number of impact businesses in Southeast Asia that received Series C+ funding or had a successful exit are still few. Most of the demonstrated successes so far are in Indonesia. Although sectors like Agri are big in Indonesia, it is remarkable that amongst the companies that received round C+ funding or did a successful exit, nearly all are in the tech space (fintech, health-tech or ed-tech).

The examples and particularly the deep dive into the CXA Group case study show how important the value proposition with a sound business model, the right partners and an excellent and driven team are. This does not sound surprising, since these are key success factors in any starting business. However, in similar businesses in other regions like the USA or India, where the space is more mature, companies and founders do not need to struggle as much to hit all criteria to the same extent as in Southeast Asia.

There is an emerging trend towards investing in education and healthcare as the middle class in the SEA countries expands and demands better basic services like education and healthcare. The ICT or tech component is underlying most of these ventures as access to internet and smartphone technology grows in the region.

Impacting Investing in Southeast Asia: An Introduction

The below is a summary of relevant insights of Southeast Asia’s impact investing landscape based on the extensive research done by the Global Impact Investing Network1.

Impact investing relatively new, growing market in SEA

SEA is a diverse region, consisting of 11 countries at different stages of economic development. Although the economic growth in SEA has been strong in recent years and shows great potential in the post-pandemic future, the imbalanced development among the countries faces a wide range of socio-economic challenges. Thus, such an imbalance creates a huge potential for impact investing in the years to come.

Despite its current relatively small size, the SEA’s impact investing ecosystem has developed significantly in the past decade. Since 2007, Private Impact Investors (PIIs) have injected more than USD 904 million through 225 direct deals, while Development Financial Institutions (DFIs) have deployed USD 11.3 billion with 289 deals. Just as the different economic stages, the entrepreneurial activities among the countries vary at a distinct maturity level so that the impact investing remains highly fragmented. Each country faces context-specific challenges.

The challenges can be further decomposed at the level of political freedom of the relevant country. Looser control, such as in Cambodia, leads to more PII investments. On the contrary, tighter control, such as in Malaysia, requires much more creative investment strategies and creates higher barriers for PII to enter and thereby invest. To bypass restrictions and have a stable operating environment, many social investors and enterprises choose Singapore as their home-base.

Large differences between countries – Indonesia ‘longest’ track-record

As the previous reasoning points out, the various stages in the countries brew divergent sectors to focus on. Indonesia has the highest GDP (PPP) in this region and a large and young population. The key sectors in Indonesia currently heavily skew to agriculture and financial services, with a promising future for workforce development, fisheries, education, and healthcare. DFI has traditionally been the major source for Indonesia. DFI activity has both the highest number of deals and the deployed amount in microfinance, commercial banks, and the energy sector.

Because of the long track record of impact investing and the more mature intermediate infrastructure, supply-side opportunities have emerged in Indonesia, which has the only impact-focused angel network in the SEA region. The network strives to fill the funding gap in the country and sets a good example for others to follow.

Early stage investments seem underfunded due to challenges

Like many other investment opportunities, impact investing in SEA faces problems as well. For instance, the seed funding investment does not seem to be widely available for social enterprises. The difficulty can be largely divided into 3 perspectives:

1) Supply-side: poor corporate governance, high cost of deal sourcing and due diligence, and the lack of sufficient local investors, all create a harsh environment to get funding

2) Demand-side: Many social entrepreneurs still see their effort as a charity and rely on grant capital, instead of focusing on organic financial sustainability. Furthermore, the new market does not provide enough network opportunities to connect entrepreneurs and investors. And, many early-stage enterprises cannot even pay for support services such as an incubator

3) Ecosystem: Fund managers currently lack local knowledge to make necessary judgements and, as a result, forbid themselves to invest continuously in the region. Additionally, most of the VCs investing in the region don’t have local offices making it even more difficult to understand the local culture and landscape. Lastly, most of the governments here are outside the rank of “top 100 on the Ease of Doing Business rankings”. These facts work together to disincentivize many investors.

The market is looking for more evidence of ‘double bottom line’ success

Quest Ventures believes that there is immense potential at the intersection of financial stability and social or environmental impact. However, it remains challenging to create more interest in this space from investors and push for more capital. Quest Ventures has asked for our support in a study that underlines the attractiveness of the impact space. The main goal of the study is to attract more investment interest and capital in early stage impact startups by showing successful investments are possible in terms of both financial returns as well as social or environmental impact returns (‘double bottom line’).

GIIN and Quest Ventures also signal that there is a lack of demonstrated success cases: “Although several exits have been disclosed since 2017, the industry needs more examples of success”.

Defining Success: The Double Bottom Line

Looking for the holy grail: good social AND financial returns

“Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”

Website of the Global Impact Investing Network (GIIN)

It sounds like a dream. However, there is more and more evidence that impact and financial returns can be mutually reinforcing, for example shown by the importance of focus on ESGs for corporations. On top of that, the trend in the current world is increased attention for these aspects. But what is a measurable social and environmental impact and what is a good financial return?

Defining impact: broad definition using SDGs, just ‘jobs’ not enough

A complication is that the space of social and environmental impact is hard to define, because of the definition of what this impact is and what it is not. Many agree that measurement of this impact is one of the key factors, which can be very challenging. Greenstone, a provider of non-financial reporting solutions, recently conducted an extensive research on social and environmental impact reporting. They conclude that the application of qualitative techniques would be a safe starting point for many organizations2. In this early phase, organizations should not limit themselves to specific techniques and methods, but rather an individual customized approach should be applied to different projects, programs, investments and activities. It is then important to understand the differences and relationships between outputs, outcomes and impacts of activities for businesses: e.g. number of people trained is an output, number of jobs created an outcome, improvements in community well-being and impact (Figure 1).

Source: Private Equity & Venture Capital Benchmarks: Southeast Asia3

Another difficulty with the definition of impact is, as Claudia Zeisberger, Senior Affiliate Professor of Entrepreneurship and Family Enterprise and Academic Director, Global Private Equity Initiative at INSEAD, puts it, “As a private equity investor in an emerging market, by definition you have impact.” So how to differentiate between ‘regular’ and ‘impact’ investing in these regions? Elizabeth Tan, Venture Partner for Sustainable Impact at Quest Ventures, says that it is important to weigh the intentionality and expertise of any founding team. “We have a hands-on approach in helping our startups go to market and in this case, to scale impact. When considering the latter, we look at which segment their product or service targets and if positive impact is woven in the underlying fundamentals of the business model. The entire process is screened with this lens at every stage.” Quest Ventures measures impact on a case-by-case basis, relating it to the 17 SDGs of the United Nations, because many of the more sophisticated metrics that may exist are difficult to standardize and apply across early stage startups, which may need a more subjective and customized lens to assess impact. What is important is that the founders have a strong intention and drive to make a positive impact. We will use this broad definition of impact with a case-by-case assessment, not just on output but towards the impact, and the input (steering direction). The impact explicitly must go beyond the mass of companies, so just broad ‘job creation’ is not enough.

Defining financial success: growth and successive investments

Many impact investing funds have target returns close to average returns of non-impact funds in the same region. The logic: the positive impact and image will cost effort but will also reinforce financial returns. In the years 2011-15, median return of venture and private equity capital in Southeast Asia varied between 10-30% in the region (Figure 2). According to Bridgestone and their experience, most venture investors seek a 30% IRR on their successful investments4.

Title: Examples of social enterprises with successful series C funding or exit through
M&A | Source: Crunchbase16

However, there is often lack of data to enable measuring successes in terms of return, particularly for early stage investments and over the typical 5-10-year time span. Therefore, we will focus on successful growth of the investments. Growing and being able to attract successive investments is an indicator of the success of a company. If a company can get at least round C funding or exit successfully via M&A/ IPO within 10 years of the early-stage investment, the investment was likely successful for the investors, the business and the magnitude of their impact.

Recent Trends in Countries and Sectors

Microfinance receives most impact capital, growing interest in ICT & Agriculture

The SEA impact start-up landscape is varied as the definition of ‘impact’ itself is quite broad. However, there are some clear observable trends in the space. As mentioned previously, there are two major categories of investors – PIIs and DFIs. The former category includes a range of investors funnelling private capital into impact start-ups, while the latter are government backed financial institutions that provide capital to start-ups to promote development. The top two sectors of investment for both investor types in the region have been financial services and clean energy1.

The financial services sector has received the most impact capital, accounting for roughly 60% of all private capital deployed. Microfinance institutions account for over 80% of the capital deployed in financial services, while some capital has been allocated to insurance and commercial banking for SMEs1. Most of the start-ups in this space either operate in the micro-finance space or work with the rural and poorer regions in their country to provide access to basic financial services. For example, FinAccel is a fintech that provides access to retail credit and unsecured lending across South East Asia.

It is interesting to note the divergence in the sector preference between private and public investing after financial services and clean energy. The private sector prefers Information and Communications Technology (ICT) and Agriculture. For example, ImpactTerra based out of Myanmar is a venture that exists at the intersection of agriculture, ICT and financial services. It is a platform for farmers which offers real-time, personalised information about local crop prices, weather-based advice like flood or drought warnings, and pest risks. The platform also collects data on farmers, such as their location and details about crops, which helps financial service providers deliver financial products that meet their needs and correspond to their specific risks. This enables these farmers to get the capital they need to improve or expand their farms at accessible rates. Another example is EcoZen, an agritech startup based in Kerala, India but targeting the SEA market. It aims to improve farm-to-fork movement of perishable goods by providing solar-based cold rooms at the farm level (The Independent, 2018)

Alternatively, the public sector prefers to invest in manufacturing and infrastructure. This is understandable as both manufacturing and infrastructure are CAPEX-heavy sectors where investment periods might be considerably longer.

While social impact ventures are growing across SEA, we looked at shifting trends in two major countries in the region: Vietnam and Indonesia.

Vietnam taking off, recent trend towards health-tech and ed-tech

Traditionally, private money went into financial services and health care. There are multiple examples of health tech platforms like MediTank which provides a data management platform for medical practitioners to classify and store medical data and Vicare which is a listing and discovery platform for health care facilities, health care service providers as well as testing facilities in Vietnam14.

However, there has been a recent boom of education/ ed-tech platforms. Vietnam has 17 million K-12 students, making it a massive market for ed-tech. Investors are noticing the potential in the country’s e-learning market and a growth of 50% is expected annually. Some examples of ed-tech platforms to watch for are Edmicro, Everest Education, ELSA speak, and Tesse10.

Indonesia further developing, expanding agri-& fintech to also health-& edtech

In a country where agriculture contributes to almost 14% of its GDP growth, it is not surprising that impact ventures and funding have been focused on agriculture/ agri-tech. An example is Vasham, which assists smallholder farms with financing, technical expertise and income security, has created a vertically integrated agribusiness model that can be replicated by smallholder farmers3.

There is no dearth of fintechs in SEA and Indonesia is no exception. There is a boom of fintechs aiming to provide everything from basic banking services to the majority of the population to more complicated lending products to support employment. Along with FinAccel, mentioned earlier, Akulaku which is an e-commerce platform with a specific focus on card-less instalment shopping on products like car loans, bill payment, top-ups, travel and other leisure packages. Cashlez offers a mobile POS sales system, which allows SMEs and smaller vendors to accept card-based transactions (including Visa and Mastercard) on card readers which are connected to their smartphones12.

However, like Vietnam there is an increased preference for health-tech and ed-tech in Indonesia. As these economies develop and the population has access to more resources, the demand for better health care and education is increasing exponentially. It is therefore not surprising that back in October 2018, Indonesia’s Minister of Communication and Information Rudiantara mentioned that both health-tech and ed-tech verticals are set to become the country’s next unicorns11.

Some well-known names in the health-tech space are HaloDoc, AloDokter, PesanLab and Homecare24. In the ed-tech space, enterprises like Ruangguru, PT Zenius, and HarukaEdu have gained substantial recognition14.

However, even as the impact venture activities in the SEA grow, Singapore remains the hub for start-up and funding activity for the region. It is the market of choice for most ventures looking to expand and a lot of VC funding in the neighbouring countries is managed through Singapore.

To summarize, there is an emerging trend towards investing in education and healthcare as the middle class in the SEA countries expands and demands better basic services like education and healthcare. The ICT or tech component is underlying most of these ventures as access to internet and smartphone technology grows in the region.

Successes Stories in SEA

Number of success stories still limited, mainly because space still nascent

Although there has been growth in impact investing firms in Southeast Asia, the market is still largely very nascent and fragmented. The growth of this space in SE Asia is evinced by a rising demand from early-stage (typically Seed and Series A) impact enterprises across the region. In spite of this trend of growth, impact ventures in the region still remain grossly underinvested in and lack adequate visibility. Particular challenges that lead to these are:

  • Lack of adequate demonstrated success in the region: While there are several cases of enterprises that successfully raise multiple rounds of funding, and even manage to raise Series B funds, there are very few demonstrated success stories of firms that have managed to either exit successfully or raise funds Series C and beyond. Part of the reason for this is simply that it is a young space and most of the start-ups have been around for less than a decade. Companies making it up to round C+ have been around for 7.3 years on average (based on our sample). In order to bolster investments in impact enterprises in the region, more data is required and perhaps it may be more relevant to look at evidence on returns and impact performance.
  • High risk perception: Traditionally, impact initiatives and strong financial returns have not been considered to go hand-in-hand. This is because most social enterprise ventures rely on grants and this prevents them from focusing on independent financial sustainability. Further, because social entrepreneurship is so nascent in the region, there is a high-risk perception associated with it.
  • Lack of incentive to invest: The sparse data on returns of social enterprises coupled with the fact that the cost of conducting due diligence on these early stage ventures requiring relatively small investments is very high, dissuades investments in the space.

Yet, in spite of these challenges, a few key sectors in the region have managed to successfully expand (i.e., raise Series C or more) and exit (M&A, etc.). We have identified three such sectors (Healthcare & Wellness, Fintech and Financial Services, Ed-tech & IT) in a sample study of the top three countries (Indonesia, Singapore, Vietnam) with an actively growing portfolio of for-profit social enterprises in SE Asia.

Companies making it up to round C+: 7 examples of success stories

PT Ruma (now Mapan) – fintech in Indonesia

Headquartered out of Jakarta, Indonesia and founded in 2009, PT Ruma is a leading seller of mobile minutes, community-based lending and savings networks in rural areas of Indonesia. At the moment, it has over 3 million members and about 115 branch offices in Java and Bali. Its objective is to enable low-income communities to access products that they couldn’t previously afford by building upon technology that leverages the bonds within these communities.

It is one of the few firms in Southeast Asia that has been able to successfully exit via acquisition by Gojek in December 2017. Prior to its acquisition, Mapan had successfully raised a Series B round of funding from a.o. Patamar Capital. According to Beau Seil, partner at Patamar Capital, the deal is their most successful one. “There is now a chance for Gojek to become the most impactful company in SEA, but the question is do they have that mindset.”

It had several key reasons for its successes, which eventually enabled it to become a strong acquisition target:

  • Backed by strong investors like Omidyar Network and Patamar Capital
  • Measurable and tangible track record of financial and social returns
  • Unique product and niche positioning within region / country of operation
  • Strong team; culture for innovation and commitment to mission
  • Proof of synergies and past collaboration with acquirer – Gojek

Ruangguru – Ed-tech in Indonesia

Ruangguru is a leading education-technology start-up headquartered out of Jakarta, Indonesia. Founded in 2014, by Adams Belva Syah Devara and Iman Usman, the company offers online video subscriptions, a marketplace for private-tutoring, on-demand tutoring services, online mock exams and corporate learning. It has grown to serve more than 15 million students and actively manages more than 300K teachers. The firm raised $150mm in its Series C fundraising effort and has expanded into the Vietnamese market in 2019 through its platform called Kien Guru. The firm’s focus is to expand its products and services in the Southeast Asian region and it further plans on providing artificial intelligence-driven personalized teaching. This Uber-like model for online learning in Southeast Asia has immense potential and Ruangguru, if it continues on its projected trajectory, is well-poised for successful exits whether through acquisitions or an IPO.

Alodokter – health-tech in Indonesia

Alodokter is fully integrated healthcare ecosystem, where patients can connect with doctors, handle their medical records, schedule appointments, access content and maintain their lifestyle. Headquarter in Jakarta, Indonesia, the firm is looking to address the problem of access to quality and unbiased information pertaining to healthcare providers, medical services and doctors. Alodokter is in both English and Bahasa and is backed by Softbank Ventures Korea. It has up to 16mm users and has expanded its service to Thailand under the name Again, with an Uber-like model for the healthcare ecosystem, Alodokter’s biggest challenge was obtaining buy-in from consumers for a combination of artificial-intelligence driven chatbot and real-doctor interaction. It has raised a total of $45.1mm in funds so far with Series C being $33mm. Again, given its focused growth, strong leadership and impact-driven approach, it is another venture that may be well-suited for an exit in the near term.

FinAccel (Kredivo) – fintech in Indonesia

FinAccel is a financial technology company that is disrupting the financial services landscape by providing meaningful and relevant products in retail credit. It is currently focusing on disruption in the unsecured lending space for the underbanked in Southeast Asia through its credit app – Kredivo. FinAccel successfully raised $90mm in Series C funding for Kredivo only 3.5 years into its existence. Further, as of 201916, Kredivo had acquired over a million customers in Indonesia and was noted to be growing at a staggering 300% YoY. FinAccel has already evaluated more than 3 million applications and granted approximately 30 million loans. For further expansion and to promote financial inclusion, FinAccel is also working on low-interest education and healthcare loans. It is projected to expand its users to at least 10 million and gain strong footholds in other Southeast Asian markets like the Philippines, Thailand and Vietnam. With its fundraising success, broad product portfolio and proof of business model, it can be expected that FinAccel has the potential to be a rewarding investment as it may see future exit opportunities.

Akulaku – fintech in Indonesia, Malaysia, Philippines and Vietnam

Akulaku is a financial services provider for the urban working class in the South East Asian market. Although headquartered in Indonesia, Akulaku also operates in Malaysia, Philippines and Vietnam. It is a multinational e-commerce platform that offers online services such as card-less instalment shopping, cash loans, bill payments, etc. It has disbursed around $850mm in loans and has an employee strength of nearly 2,500. So far, it has raised about $220mm in funds, out of which $100mm was raised via Series D in early 2019. Backed by giants like Alibaba, Alukaku has already begun to invest in local banks (PT Bank Yudha Bhakti TbK) in Indonesia and help them digitize7. Through integrating its platform and technology with local banks, not only is Alukaku’s survival guaranteed in the face of increasing competition in the fintech landscape, but also its ability to thrive is practically made certain. It would be unsurprising to see the young enterprise IPO in the near future.

CXA Group – health- and insurtech in Singapore

CXA Group is on its way to become Asia’s leading Insurtech start-up. A one-stop shop, it enables employers to provide employees to proactively manage their health through a self-service platform with access to an increasing range of health, wellness and wealth offerings personalized to the individual’s own health data. By eliminating middlemen such as brokers, etc., CXA allows more efficient use of employer-provided insurance policies, wherein employees can directly draw down on the existing policies provided by their employers and the funds can be accessed via the platform’s e-wallet to make transactions efficient and effective. It serves more than 500 enterprises: servicing around 800K employees in Southeast Asia, Hong Kong and China. The company’s mission is to go global with capturing all of Asia and then expand to North America and Europe as well. It has already acquired two brokerages and raised about $58mm in financing. It is amidst raising a bridge round before raising Series C early next year. They are backed by powerful investors like Gojek’s early investor Openspace Ventures, HSBC, etc. The firm is well-positioned for a successful exit via either an IPO or trade sell in the future.

Pharmacity – health in Vietnam

Pharmacity is Vietnam’s largest pharmacy retail chain and is dedicated to improving the quality of healthcare for each customer. As of March 2020, it has more than 280 stores in the 6 major cities of Vietnam; and the company aims to achieve 1,000 stores across the country by the end of 20218. Pharmacity has witnessed a growth of 127% in sales in 2019 vis-à-vis 2018. For 2020, prior to the COVID-19 crisis, the company had set a revenue target of around $130mm. Backed by private equity firms like Mekong Capital, Pharmacity has succeeded in raising $31.8mm for Series C funds.

In the next chapter we will deep dive in one of the success cases – CXA group.

Successes so far mainly Tech in Indonesia – with clear market need

Although sectors like Agri are big in Indonesia, it is remarkable that amongst the companies that received round C+ funding or did a successful exit, nearly all are in the tech space (fintech, health-tech or ed-tech). According to Beau Seil, Partner at Patamar Capital, this may be due to the scalability. The problem with more traditional vertical integrated companies, like Big Tree Farms, is that they are much slower to grow. These businesses take much longer to scale, and the scale is not anywhere near the same as a tech-company like PT Ruma, reaching thousands of people rather than millions.

Crucial with all businesses seems addressing a true market, that can actually pay for the product or service, not just an idealistic viewpoint like the original underpinning of how many impact companies have started in the past. The philosophy is that by not just focusing on the very low-income population, the businesses are much more sustainable, and the eventual developmental impact is likely higher. These are great business ideas within the area of social impact.


CXA Group is a transforming healthcare and health insurance in SEA

CXA Group is a unique venture that stands at the intersection of healthtech, insurtech, fintech and social impact. It attempts to lower the rising cost of healthcare in SEA by eliminating the traditional one-size-fits-all benefits structure of employer covered insurance. It is digitizing the benefits and wellness value chain and connecting all the players in the wellness ecosystem like health check- ups, screening, clinics, insurance reimbursement, maintenance of medical records, etc. on one platform and eliminating the need for insurance middlemen/ brokers that drive up health costs.

Founded in 2013, CXA Group has grown from just three Fortune 500 clients to having over 500 clients and 350,000 enterprise clients. It can be safely said that CXA is a start-up that has moved into the scale-up stage.

As CXA Group gets ready for its next round of funding, we had an opportunity to speak with founder and CEO, Rosaline Chow Koo who helped us understand the unique challenges a firm like hers faces in this region.

Key challenges around funding, sufficient talent and geographical expansion

Like any start-up, CXA Group faced several challenges in all spheres of the business, be it fundraising, recruiting top talent, expanding, regulation, repeated product iterations and even more recently the consequences of the COVID-19 crisis.

Funding: After investing a very sizable amount from her own savings to start CXA Group, Rosaline admits that fund raising was quite challenging especially for a novice like her. She laughed about how she spent time googling term sheets to understand what to expect. The fact that she had made a massive personal investment ~$10mm to start the firm made it impossible in her mind to let the venture go belly-up. During a very painful 9-month period in 2017-2018, CXA Group came very close to this scenario with funds that would last only 2 more weeks. Thankfully, HSBC stepped in as both clients and investors. While she is more comfortable with fundraising now than her first round, she refuses to pigeon-hole herself in any one specific category or sector, in order to maximize her access to available investors and funds.

“Knowing that product is all you have, and you know that it will work, then you keep going and see it through!”

– Rosaline Chow Koo, Founder & CEO

Talent Resources: Having lived and worked in Iowa, New York, and Los Angeles, Rosaline mentioned that it is generally easier to acquire and retain talent in the U.S. versus in Southeast Asia. Most students are awarded for compliance and risk averse behaviour, making start-ups an unfavourable employment opportunity. However, she did acknowledge that this is changing and the landscape for start-ups is becoming more positive.

Geographic Expansion: Rosaline has a laser sharp focus and wants to capture the Southeast Asia market completely before moving to the rest of Asia and then Europe and North America. However, with a limited team and constrained time she wonders how she will achieve this expansion without overextending herself. Additionally, HSBC now a major client and investor wants her to expand her platform in the UK, Mexico, India and France which puts further pressure on her limited resources. At the same time, she is already exploring opportunities in Thailand, the Philippines, Indonesia and India, while already having presence in Singapore, Hong Kong and China.

Regulation: Trying to simplify healthcare, insurance and banking may sound like a pipe dream but that is exactly what Rosaline is attempting to do with CXA Group. However, there is no denying the fact that all three industries come with heavy regulation that vary significantly based on the country of operation.

Competition and Internal Resistance: At the same time when CXA Group was struggling with funding in 2017, insurance companies had started to build out their own claim-apps. In addition, one of the brokerage firms acquired by CXA had a 68-year old founder, who was extremely resistant to any automation and change. As a result, receipts were being lost and data-entry was a manual process and did not reconcile. Individuals were not being reimbursed for their claims and CXA lost some clients.

Product: As CXA Group transitions from the start-up to a scale-up, the challenge has shifted from that of survival to solving the pertinent question of how to streamline and create a modular product across the different enterprise clients and geographies. The product is already at version 3.0 and CXA Group is now building the product to seamlessly integrate payments, connecting with clinics, testing and screening, disease management – in essence the whole insurtech ecosystem. They anticipate having a completed product by the end of 2020.

Exit opportunities: While she is not actively thinking about an exit yet, Rosaline does wonder where she and CXA will be in the next 10 years. She believes that CXA has the potential to be a unicorn but sees an IPO as a potential exit down the line.

Key success factors: value proposition, partners and team

In the face of insurmountable challenges, Rosaline leads CXA Group to its success. Driving this success are a number of factors that come together to harmonize and balance each other. In addition to its strong value proposition, CXA Group not only found the right partners, but also benefited from a natural competitive advantage of being a first mover. Lastly, and perhaps most importantly, Rosaline created a team and culture that worked together for the success of the business.

Strong value proposition: CXA Group has identified a gap in the market and significantly lowers the cost of insurance for its enterprise clients. By eliminating middlemen and brokers, and further directly connecting the entire ecosystem through a single point, i.e., the CXA product, the firm is able to cut down costs from the traditional 30-35% of fee to only $2. Further, through automation and leveraging technology, the company has successfully reduced the insurance reimbursement window from 90 days to just 7 days. Moreover, the CXA product enables enterprises to tailor healthcare insurance to the wallet and needs of each individual by making available an ever- widening bouquet of options and having each individual choose directly.

Competitive advantage: CXA Group has a clear first mover advantage in Southeast Asia. There is currently no direct competitor for the firm, and it is precisely this unique positioning that Rosaline seeks to leverage and capture value from. In addition, since Fintech, healthcare and insurtech are all very highly regulated industries, the barrier to entry is relatively high. As such, CXA Group has the luxury to be somewhat protected from the threat of imitators and other competitors.

Right partners: Although CXA Group struggled severely for a period of 9 months with respect to fundraising, it did form strategic partnerships and find a fit with their investors. One of their investors is Openspace Ventures, an early backer of Gojek and they have been of immense assistance with respect to technology and building out the micro services for the Group. Additionally, banks like HSBC, serve as both investors and clients and are willing to sign long contracts (~11 years for $25mm). Such strategic alliances enable CXA Group to not only have a strong foundation as an enterprise through providing the firm with access to resources that go beyond the pure funds, but also enable it to traverse the scale-up phase relatively smoothly. CXA Group is currently closing out a bridge financing before raising Series C early next year.

Team and people: Rosaline is a visionary and knows the importance of streamlining leadership at CXA Group. She has a diversified C-suite with a 50-50 gender balance. CXA’s CTO came from Lazada and had scaled up 8 different start-ups before. The Head of HR had worked with Rosaline at 3 different companies before. Similarly, 75 of the firm’s current employees had all worked with Rosaline at Mercer previously and chose to move with her. Over time, CXA Group evolved its hiring-firing to match the dynamic environment of the firm. For instance, individuals who had performed terrifically during the early start-up phase of the Group were either re-staffed or let go. The individualistic workstyle and inability to work with / report to others was non-conducive to the scale-up and growth phase at the firm, which required increasing collaboration.

“If you don’t have the right people, you’re dead. If you do, it’s magic.”

– Rosaline Chow Koo, Founder & CEO

Key Lessons from Growth Successes in SEA

Social and financial impact not seen as trade-off anymore

The underpinning of companies and investors in the impact space is moving from a purely ‘we want to change the world’ towards sustainable and financially attractive business models. Social impact investing is becoming hot in the past years, and investors only recently started explicitly looking for tremendous impact and financial returns. Both should be evaluated, both have their own risks, but impact and financial returns should not be treated as a trade-off. Successes of that are only just starting to show.

Successes so far mainly Tech in Indonesia – with a clear market need

The number of impact businesses in Southeast Asia that received round C+ funding or did a successful exit is still small, but likely many more will follow in the near future. The companies making it up to round C+ have been around for ~7 years on average, based on our sample.

Most of the demonstrated successes so far are in Indonesia. Although sectors like Agri are big in Indonesia, it is remarkable that amongst the companies that received round C+ funding or did a successful exit, nearly all are in the tech space (fintech, health-tech or ed-tech). Crucial with all businesses seems addressing a true market, that can actually pay for the product or service.

Scalability is at the core of sustainability and attractiveness to investors. The digital-based and relatively light capital expenditure enables tech ventures to scale up rapidly in SEA. Business models with such characteristics are easier to achieve financial soundness.

Key success factors sound business model, right partners and team

The examples, and particularly the deep dive in CXA group, show the importance of the value proposition itself with a sound business model, the right partners and an excellent and driven team. This does not sound surprising, since these are key success factors in any starting business.

However, this may not be the case for social enterprises in the US or India. In both countries, the impact market is relatively more mature, and founders do not need to struggle as much to hit all three of the above criteria at the same time. While further investigation into this early hypothesis is required, it seems to be the case that social enterprises in more mature markets have an easier time to raise funding and therefore may get away with less. On the other hand, this would mean that there is still much more potential for successes in Southeast Asia.

In broader research for this report, it is apparent that the elite background of the founders and leadership team allows them to access precious entrepreneur resources such as early funding, government connection, and media coverage. Objectively, the access creates better M&A and exit opportunities for the ventures, thus ensuring continuous funding over different development stages.

Market opportunities looking forward likely in health- and ed-tech

There is an emerging trend towards investing in education and healthcare as the middle class in the SEA countries expands and demands better basic services like education and healthcare. The ICT or tech component is underlying most of these ventures as access to internet and smartphone technology grows in the region.


  1. The Landscape for Impact Investing in Southeast Asia, GIIN, August 2018
  2. Whitepaper ‘Beyond Sustainability Reporting’ by Greenstone, June 2018
  3. Market in Focus: Private Equity & Venture Capital in Southeast Asia, Preqin, September 2019
  4. Risk, Return and VC IRR Benchmarks, article by Bridgestone VC, February 2019
  5. Who are the top EdTech startups in 2019, Tech Collective, January 2019
  6. Kredivo’s parent firm FinAccel raises $90M…, TechCrunch, December 2019
  7. Fintech Akulaku buys stake into a bank, Fintechnews Singapore, March 2019
  8. Vietnam’s Pharmacity raises $31.8 million in a Series C funding round, Vietnam Insider, February 2020
  9. Why the next wave of Vietnamese startups won’t be clones, TechInAsia, April 2019
  10. Vietnam’s emerging edtech startups, TechCollectiveSEA, December 2019
  11. Indonesia’s healthtech sector anticipates its first unicorn,, August 2019
  12. 10 of the Top Fintech Startups in Indonesia for 2019, FinTechNews Singapore, April 2019
  13. StartUp News Asia, Quarterly Archives, Q2 2019
  14. HealthTech Startups in Vietnam, Tracxn Explore
  15. EdTech Startups in Indonesia, Tracxn Explore
  16. Crunchbase, consulted in March and April 2020

Impact Investing Framework for Early Stage Venture Capital

An approach for emerging Asia

Download full PDF (2 MB)
Download full PDF (2 MB)


Ms Khor Qianyi, Senior Analyst
Mr Zhou Yang, YLP Analyst

Mr James Tan


Impact investing is an area that is quickly gaining traction all over the world, with more than 450 investors allocating US$1.3 trillion to impact investing worldwide1. Seeking the dual goals of profit as well as social impact, it is a market based approach to resolving critical problems faced by communities worldwide – from access to education to poverty alleviation. By leveraging the power of the market, impact investments achieve outcomes that would have been enormously costly if attempted by traditional methods of philanthropy. Take d.light design for example, a startup that only had a solar lantern prototype when the Acumen Fund first invested in them, which has to date brought lighting to over 100 million people2.

While there have been many frameworks already crafted to guide the process, it is tenuous to apply existing frameworks directly to early stage investing due to the diversity of portfolio as well as limitations on quantitative data available. Moreover, there are many iterations of different frameworks, so impact measurement and reporting remains fragmented across different organisations. This report seeks to survey existing methods available and piece relevant metrics to guide impact investing in the different phases of early stage venture capital.


Mr James Tan
Managing Partner
Quest Ventures

With more than US$1.3 trillion allocated to impact investing worldwide, the world is seeing an influx of capital that is increasingly comfortable with measuring successes and returns not by financial metrics alone but by a combination of that and other factors. The dual goals of profit and social impact are now broadly termed the double bottom line. While the financial element – profit – has clear measurement guidelines such as the IFRS or GAAP, the social impact element does not. In fact, many impact measurement frameworks are available and the world has not settled on a definitive one to use. To the detriment of meaningful projects, this means that when they fund raise across the globe, their definition of social impact success has to be explained ad nauseum.

This report aims to change that.

We fundamentally believe that if the measurement of success is correct, then the inputs will be correctly deployed. Conversely, if the measurement of success is wrong, then the inputs will be wrong. When outcomes are measured in lives and the betterment of lives, then getting the measurements correct could not be more important.

We are therefore “open sourcing” our investment measurement framework with this publication and welcome inputs from all interested parties to refine this. We are excited that we now have a measurement framework tailored to emerging Asia based on our experience in this region. We look forward to its implementation and continued refinement in many investments from here on now.

Overview of the Impact Measurement Process

The three main reasons to measure impact are firstly to guide investment decisions, secondly to determine and monitor how impactful the investments actually are and lastly to report to stakeholders in the impact fund. Different methods are used to serve each of these purposes at different phases of impact measurement. In the report “Measuring the “impact” in impact investing”, Ivy So & Alina Staskevicius of Harvard Business School accurately divided the process into 4 phases. Starting with Estimating Impact, followed by Planning Impact and Monitoring Impact, then finally Evaluating Impact3.

Impact Measurement Cycle. Source: Harvard Business School
Impact Measurement Cycle. Source: Harvard Business School


Firstly, estimating impact involves performing a thorough due diligence on the startup that the fund is investing in. The due diligence process is similar to traditional investing, but with an additional responsibility of analysing the potential impact of the investment. For early stage investing, there will not be an abundance of quantitative data that can be provided in the due diligence process so other objective standards have to be referenced. One standard that we have found to be useful is the Nesta Standards of Evidence4, which will be analysed in further detail in a later part of the report. This is the phase of impact measurement that will guide investment decisions.

Secondly, planning impact involves devising specific metrics for data gathering. This will depend on the portfolio of the fund, and its investment thesis. Once again for early stage investing there will not be much data initially, so this process is rarely used to guide investment decisions. However for startups that the fund has made an investment in, this phase will be relevant in monitoring its progress towards its impact goals, as well as in reporting to key stakeholders. While there are many different metrics available, we have found the IRIS catalogue of metrics by Global Impact Investment Network (GIIN)5 particularly useful in determining the areas of impact to monitor at a portfolio level. The IRIS standards provide a wide range of metrics, of which the most relevant ones to individual funds can be picked to form its own metrics. For example, a fund that specifically targets impact in the bottom of the pyramid sector can choose relevant metrics as such.

Thirdly, monitoring impact will involve data collection based on the metrics that were determined in the previous phase. Data collection would involve enforcing periodic impact reporting based on a template as provided by the fund. This phase is important for the fund to keep track of the progress of its investments, to ensure that its portfolio is in line with its initial mission. This data would also be useful in impact reporting to key stakeholders in the fund, and to justify the investment decisions that were made.

Lastly, evaluating impact involves a deeper analysis of the data collected. The purpose of this phase is to evaluate whether there has been real impact from the investment, taking into account factors including whether the impact outcomes would have been achieved with or without the investment into the startup.

These four phases will be further discussed in section 5.

Importance of measuring impact

Impact measurement and management (IMM) is an integral part of impact investing. If an impact fund has no protocol to track the impact of investments made then it is akin to a traditional fund not tracking their profit/loss. IMM allows impact investors to keep track of the progress towards its impact objectives. Consistent management of impact tracking directly shows what kind of investments work and what does not. Over time it allows the fund manager greater ability to discern the investments with better impact value6, and this is particularly important for early stage investing, when fund managers have to make decisions even when quantitative data is scarce.

Another purpose of IMM is to allow clear reporting of the progress of the fund. Investors into impact funds usually have their own impact targets as well, and when clear reporting standards are observed, it builds trust with investors. If this is communicated effectively, through yearly reports or other forms of outreach, it demonstrates the competency of the Impact Fund, which would naturally come in handy during the next capital raise phase.

Survey of existing frameworks

IRIS by Global Impact Investing Network (GIIN)

The IRIS catalogue of metrics provides a wide range of metrics which can be used to quantify the level of impact achieved in environmental and social factors. It originated from the GIIN, and is largely built upon existing industry accepted metrics, compiled together for fund managers to access7. It aims to increase the consistency of impact reporting methods, and to bolster the credibility of the impact investing sector as a whole.

In general, such methods involving assigning metrics and scoring the investee based on it can be referred to as Mission alignment methods8. Such methods track how the execution of a project measures against its mission goals over a period of time. They are relevant in the planning impact and monitoring impact phase of the impact process.

The IRIS framework is the closest we have towards a widely accepted standard for impact investing. According to a study published by GIIN in 2020, 65% of impact investors surveyed use the IRIS metrics in the impact measurement process9. One reason for its widespread adoption is that the diversity of metrics catalogued allows it to be adapted and used by a wide variety of funds with different impact objectives. A curated set of metrics also allows the impact fund to view, at a portfolio level its progress towards impact goals. It also allows the early stage investor to compare the growth of its portfolio companies using standardised yardsticks. For instance, a fund makes an investment of USD 500,000 into two different companies, and receives their impact report after a period of 1 year. One company reports that it created 100 jobs, while the other reports that it played a role in supporting 300 jobs. Due to different understanding of the terminology, it is difficult to compare the results of the 2 companies. It is also imprecise to add the 2 values together to gauge overall portfolio performance. This is where the IRIS metrics come into relevance, with its catalogue of metrics with standardised accounting methods.

Logical Framework Approach (LFA)

The logical framework approach is a general project management framework that is widely adopted internationally. It covers all phases of the project cycle, from design to implementation and monitoring and finally to evaluation, which makes it useful for impact measurement and management.

Logical Framework Matrix. Source: Sustainable Sanitation and Water Management Toolbox
Logical Framework Matrix. Source: Sustainable Sanitation and Water Management Toolbox


The Logical framework is able to communicate the essential elements of a complex project clearly and in simple terms for anyone to pick up10. Usage of such a framework by early stage startups is extremely beneficial in the growth stage. While using the LFA gives companies an efficient tool to clarify their goals and track progress, the measurables and outcomes are often unique to each startup, and cannot be collated with the results from other portfolio companies to give a portfolio level measurement of impact.

Thus while the LFA is a viable tool to track impact at the company level, additional frameworks are required to support such data in order to provide a portfolio overview of impact performance.

Nesta Standards of Evidence

The Nesta Standards of Evidence is a rough framework developed to gauge the levels of confidence in the evidence of an impact initiative, on a scale from 1 to 5. It was modified from the standards used in Greater London Authority’s Project Oracle11 to better fit the demands of venture capital.

The Nesta Standards of Evidence12
The Nesta Standards of Evidence12


In general the Nesta framework supports the strengthening of evidence to allow investors to be more certain that the intended impact outcome of investment is achieved. As a company moves up along the levels, more extensive data collection as well as external validation is expected. When a company reaches level 5, there is sufficient evidence that the business model is able to deliver strong impact at multiple locations – this means that it has achieved impact scalability, a key signal that venture capitalists look for13.

The Nesta Standards is useful for early stage venture capital in two phases: the estimating impact phase, as well as planning impact phase. Before committing an investment into a company that claims significant impact value, the investor can assess the evidence based on the Nesta scale to ascertain the strength of its claims. For a company to which an investor has already committed capital, the Nesta standards can guide the next steps in scaling impact planning.

However, at higher levels on the Nesta scale, more complex testing requiring external specialist assessment would be required. This is costly, and in many early stage startups not financially viable. Investors should consider whether to fund such assessments based on their priorities and cheque sizes.

Phase 1: Estimating Impact

Phase 1 of the impact investing process is where thorough due diligence is done on the potential investee to assess profitability and impact. As for the profit dimension we are looking for companies that are able to provide strong potential of generating risk adjusted market rate returns. We do not consider at all companies that have no promise of that, firstly to be responsible to our investors and secondly we do not intend to support ineffective business models that could bring more harm than good to the markets we want to grow. As for the impact dimension, we have found the Logical Framework Approach and the Nesta Standards of evidence particularly relevant, and have designed a simple matrix that draws on both frameworks to aid in decision making.

Graph of standards of evidence against potential impact. Source: Nesta Standards of Evidence
Graph of standards of evidence against potential impact. Source: Nesta Standards of Evidence


Companies that fall under the Impact Stars group have achieved a relatively high score on the Nesta scale, at 3-4. Based on their logframe, they have also demonstrated a potential to deliver high levels of impact in their respective areas. These are the prime targets of many venture capitalists, as they boast both high potential impact as well as the evidence to achieve it. However, few early stage startups will have the bandwidth to provide such robust standards of evidence, and we expect deals coming in from group A to be relatively scarce.

Safe bets on the other hand, while able to provide robust evidence for its impact, does not have an impact plan that can reasonably scale. We will still consider investments in this group, as they do have some degree of impact but we will have to look deeper into how closely linked it is to the fund thesis. The ability to administer such standards of evidence is also reflective of the financial ability of the company, which is a positive indicator for the profit dimension of the investment.

We expect most deals to fall under the Potential Impact Stars group where the company has fulfilled at least a level 1 on the Nesta scale, but provides an ambitious and realistic business plan with enormous impact upside. As with all early stage investments, it is understandable that there is not much quantitative evidence of either impact or profitability, which is why we are open to companies which have only achieved level 1 or 2 on the Nesta Scale. An example of a company that falls under this group would be a company with pioneering business models that have the potential to deliver sector level change. Due to the unprecedented nature of their business model, they usually have difficulty gathering evidence of their impact at the early stage. The company could be the first movers in a market with inadequate regulatory frameworks, consumers that are suspicious of the intentions and value of their product and a lack of industry specific talent. As the company ventures down this path, its efforts to de-risk the business pave the way for many future companies to follow, and while its own impact may be limited, the eventual scale of their impact brought about by future companies can be monumental. A prominent firm that has achieved this would be Grameen Bank with their pioneering microfinance model. These kinds of businesses are identified by Omidyar Network as “Market Innovators”14, and due to its high-risk nature, is where a huge funding gap lies. However we do expect them to move up the Nesta scale at an appropriate timeframe with the aid of our investment.

Common deals consist of companies with no significant impact plan, as well as weak evidence to prove they can achieve what little they have planned. We generally do not pursue investments in this group, save in exceptional situations where we are confident that the company is able to generate significant levels of profit.

Phase 2: Planning Impact

In the planning impact phase, the fund needs to devise the metrics which will guide the data gathering process for the firms. In this phase, it is important to ensure that the reporting criteria is not unnecessarily tedious, which would exhaust significant time and manpower resources and could prove to be a distraction from running the business. The fund also has to work on the appropriate reporting period, which can differ from startup to startup depending on the stage that the startup is at. There are two main frameworks which come into play in this phase – the Logframe and the IRIS metrics. It is important to note the distinction in the purposes served by the two frameworks – while Logframe is more applicable to planning impact at a company level, the IRIS metrics are more suited to providing a portfolio level overview of the fund performance.

Portfolio Level Planning – Usage of the IRIS Metrics

As the IRIS catalogue provides a comprehensive list of industry appropriate metrics, it is very helpful in guiding fund managers to come up with their own fund specific set of metrics, modified to suit the investment thesis of the fund. As our fund seeks to address problems faced by the Base of Pyramid in Southeast Asia, we have curated a set of metrics that we have found to provide the most accurate picture of our progress towards our goals. Our selection of cross-sector metrics, or metrics which can be applicable to any industry, is listed below. A mixture of IRIS metrics and Quest designed metrics are included, with metric IDs starting with “Q” denoting a Quest designed metric. The sector specific metrics covering education, healthcare, housing, agriculture, environment and financial services can be found in Annex A. These sectors are selected as we consider them most relevant to our impact mission – solving the problems faced by the Base Of Pyramid population in Southeast Asia. It is our hope that they can serve as a guide for funds with similar goals.

Cross-Sector IRIS Metrics adopted by Quest
Cross-Sector IRIS Metrics adopted by Quest


Company Level Planning – Logical Framework Approach

We rely on the Logical Framework Approach to plan impact in a more nuanced manner, at the individual company level. The company is expected to plan out their own logframe (Figure 2), and cover their impact plan at different levels, from the overarching goal, to the immediate purpose, then to the outputs required for the purpose and subsequently the activities required to produce the outputs. This allows the fund to have a more complete picture of the impact objectives, as a list of metrics may not be able to fully capture the level of real impact that is being delivered by the portfolio companies.

Specifically, at the planning impact phase we are looking at the second column “Indicators of Achievement”.

Logical Framework Approach
Logical Framework Approach


Phase 3: Monitoring Impact

Monitoring impact is a tricky task – we need a clear and standardised reporting framework which ensures accountability to our investors as well as guide us in future investments. Yet at the same time, excessive reliance on a checklist metric system can result in an overly narrow perspective on the performance of the company. To overcome this dilemma, we adopt two tiers of monitoring, one at the company level, another at the Portfolio level. At the company level we use the Logical Framework Approach to arrive at a more in-depth monitoring of the challenges and successes of each company, while at the portfolio level we use the IRIS metrics to provide a standardised overview of the performance of our portfolio.

Portfolio Level Monitoring

The metrics that decide the focus of monitoring has been curated in the previous phase, planning impact, and this phase will involve the collection of data based on those metrics. Typically this is done by providing the portfolio companies with a reporting template based on the metrics. While the cross-sector metrics (Table 1) are applicable across industries, the rest of the metrics are industry specific. Companies are only required to fill in a report on the industries relevant to their company.

In general, very early stage startups can take years to have a significant impact, so the timeline for reporting has to be adjusted as appropriate to the company. This is particularly so for our potential impact stars, which endeavour to bring brand new business models to the market.

As the reporting metrics are standardised, the individual reports can be simply added up to form the Portfolio level report, which can then be analysed to provide an overview of impact performance.

Company Level Monitoring

At the company level, we continue to monitor the impact progress of the company towards the goals, outcomes, and its indicators of achievement as outlined in the Logframe. This provides us with a more precise outlook on the company, covering areas which are unable to be captured by a general checklist. At this phase, it is also important to carefully analyse the sources and means of verification as outlined in the third column of the logframe.

Impact Monitoring Framework
Impact Monitoring Framework


Phase 4: Evaluating Impact

In this final phase of the impact investing process, we attempt to evaluate whether our investment has made a real change – whether the impact would have been achieved without our investment. Such evaluations involve experimental or quasi-experimental methods, which provide stronger justification of evidence of impact, and at the same time moves the company up on the Nesta Scale.

Experimental methods involve the use of Randomised Control Trials (RCTs), whereby a randomised control group, insulated from the effects of our investment is used as a counterfactual to assess the real impact of our investment. Other methods which utilise different counterfactuals are considered quasi-experimental, and are generally used when isolating the conditions for a randomised control group is not feasible, too costly or unethical, such as when random groups of people are denied access to healthcare15.

Both experimental and quasi-experimental methods are costly and manpower intensive – with experimental methods being the costlier of the two. It can seem hard to justify the relevance of this final phase in the impact investing process, especially for early stage startups which forms the focus of our thesis, but we maintain the stance that this phase is necessary, and will be beneficial to the fund in the long run.

Such methods build up our evidence of impact, bringing us higher up on the Nesta Scale, which is the evidence framework that we use to guide our companies’ impact assessment. Due to the high rigor of the experimental and quasi-experimental methods, it allows both ourselves, as well as our investors a greater level of confidence in the good work that we are doing. This would also serve us well in securing future funding to expand our impact.

That being said, investing in early stage startups can sometimes require up to years to see a degree of impact that justifies such a costly evaluation by external assessors. There is no need to rush to this phase, and the company should be allowed space to grow before we arrive here.


This framework has been crafted based on extensive research on existing Impact Measurement and Management (IMM) frameworks, as well as drawing on 9 years of experience in growing along with the startups we invest in. We are grateful for the resources provided by the Harvard Business School, the Global Impact Investing Network, the Omidyar Network as well the Acumen Fund from which we gleaned valuable insights that shaped the development of this framework. This framework is by no means a definitive rulebook for early stage impact investing, but we do hope that it demystifies the whole process, and lowered the barrier to entry for future early stage impact investors.


  1. PRI, Impact investing market map. Retrieved May 13, 2019, from
  2. D.light, About Us. Retrieved February 14, 2020, from
  3. Ivy So & Alina Staskevicius, Measuring the “impact” in impact investing, Harvard Business School, 2015.
  4. Nesta, Standards of Evidence for Impact Investing, 2012
  5. IRIS+ System | Standards, Retrieved from
  6. GIIN, A guide for impact investment fund managers. Retrieved from
  7. IRIS, Getting started with IRIS, 2013.
  8. I. Soh, A. Staskevicius, Measuring the “Impact” in Impact Investing, Harvard Business School, 2015.
  9. Rachel Bass et al., State of Impact Measurement and Management, GIIN, 2020.
  10. World Bank, The Logframe Handbook, 2013
  11. Investment & Performance Board, Project Oracle, 2013. Retrieved from
  12. R. Puttick, J. Ludlow, Standards of Evidence: An approach that balances the need for evidence with innovation, Nesta, 2013
  13. R. Puttick, J. Ludlow, Standards of Evidence for Impact Investing, Nesta, 2012
  14. M. Bannick & P. Goldman, Priming the Pump: The Case for a Sector Based Approach to Impact Investing, Omidyar Network, 2012.
  15. Ivy So & Alina Staskevicius, Measuring the “impact” in impact investing, Harvard Business School, 2015.


1. Sector Specific Metrics (Education)

2. Sector Specific Metrics (Healthcare)

3. Sector Specific Metrics (Housing)

4. Sector Specific Metrics (Agriculture)

5. Sector Specific Metrics (Environment)

6. Sector Specific Metrics (Financial Services)

7. Sector Specific Metrics (Energy)


Singapore Insurance Innovation and Digital Benchmark

The insurance industry and its digital transformation

Download full PDF (6 MB)
Download full PDF (6 MB)


Goh Jun Wei, YLP Analyst
Khor Qianyi, Senior Analyst

Professor Paris de l’Etraz, Madrid
Mr James Tan, Singapore
Ms Jenell Lau, Tokyo


The 2018 Applied Innovation Institute Singapore Insurance Innovation and Digital Benchmark is Singapore’s first benchmark to measure a company’s ability to cope with disruptive innovation. In our first release, we examine and benchmark 25 insurers with consumer insurance products that operate in Singapore.


Professor Paris de l’Etraz, PhD
Chairman of the Board
Applied Innovation Institute

Welcome to the inaugural edition of the Applied Innovation Institute Singapore Insurance Innovation and Digital Benchmark, a ranking that combines more than 80 data points to benchmark a company’s progress towards key industry innovation goals against its peers. This ranking allows us to develop a more coherent understanding of the insurance industry in Singapore, and allow us to develop key quantitative benchmarks towards innovation in leading corporates around the world. Taking on a retail-first perspective, we explore the progress of insurers in Singapore in developing consumer focused innovations.

As one of the world’s leading FinTech and InsurTech hubs, Singapore is the perfect place for insurers around the world to develop their innovation initiatives. A small and connected nation, it is an incredible test-bed for the development of new insurance technologies and models. From the blockchain to peer-to-peer insurance, risk-management platforms to big-data driven products, Singapore startups have done them all.

Here at the Applied Innovation Institute, we pride ourselves on bringing together global leaders in industries, government, and academic organizations to help each transform to address competition, disruption and innovation through education, consulting and partnerships.

In a world where disruption is the only constant, we believe that it is even more important for corporates to understand the incredible challenges that lie in their strategy roadmaps. With the average lifespan of an S&P company dropping from 67 years in the 1920s to 15 years today, we cannot emphasize the importance of developing an innovation model that works not just to boost your bottomline, but places you at the forefront of disruption.


Mr James Tan
Managing Partner
Quest Ventures

The 2018 Applied Innovation Institute Singapore Insurance Innovation and Digital Benchmark is Singapore’s first benchmark to measure a company’s ability to cope with disruptive innovation. In our first release, we examine and benchmark 25 insurers with consumer insurance products that operate in Singapore.

In this benchmark, we look primarily at a company’s ability to cope with impending innovations such as direct-to-consumer (DTC) sales, data-driven risk-underwriting, mobile awareness and presence, and a service-first understanding of consumers. We then separate these criteria into three categories: online, social and innovation. The weightage of these categories in our comprehensive score are as follows:

This weightage allows us to develop a proxy for understanding an insurer’s ability to cope with disruptive innovations. An insurer that better understands the importance of its web presence, social media presence and innovation efforts will be able to better understand and compete with the hundreds of startups in the region.

To produce the ranking, more than 80 data points were recorded in 2017 and analyzed to develop a more coherent understanding of innovation in corporations. Here at Quest Ventures, we work with startups extensively and have applied the same standards that we use to evaluate startups in this benchmark. This allows us to develop an objective quantification of innovativeness in corporates.

In our benchmark, we also weighted the online experience of insurers relatively heavily as we believe that the distribution model of insurers is likely to undergo a fundamental shift in the next few years. We believe that a strong DTC insurer must have a comprehensive online platform that is reaching users well. This means a DTC insurer must perform well in all traditional ecommerce metrics.

By analyzing these metrics, we are able to provide a coherent understanding of an insurer’s ability to develop its web properties into quality DTC sales channels. We measure the quality of an insurer’s website and the value of various digital acquisition funnels to derive our online ranking. NTUC Income, for example, performed exceptionally well in this metric. It ranked on the first page of Google Singapore’s non-personalized search results in 7 of 7 relevant categories.

During our research, we realized that the majority of insurers were severely lacking in social media. Some were non-existent on social media. The act of localizing social media profiles by global insurers is rare. We found this to be extremely troubling, especially considering the recent shifts in distribution trends.

Many insurers have also abandoned active engagement social media platforms. In our research, only 9 out of 25 insurers have a Twitter account, and only 2 of the 9 Twitter accounts are active. Active engagement on social media platforms are exceptionally important as alternative sales and support channels. These channels are opportunities waiting to be exploited by insurers.

Our social media ranking is primarily the product of engagement rates. We recognize the importance of engaging one’s audience and believe that relative rates suggest more about an insurer’s social media performance than absolute numbers.

At Quest Ventures, we firmly believe that the future of insurance is mobile. A recent AXA Digital Lab study showed that 44% of all millennials are comfortable purchasing insurance directly through their mobile phones. What it doesn’t illustrate is the fact that this number will continue to grow as users continue to familiarize themselves with mobile insurance purchases. This sentiment was echoed in a recent survey conducted by Forrester. The fact remains that users who research insurers and insurance plans online are more likely to purchase insurance online. It is only logical, by extension, that users who research insurers and insurance plans on their mobile phones are also more likely to purchase insurance through their phones. With mobile phones becoming the preferred computing device, insurers need to be prepared with a comprehensive mobile strategy.

Some of the most innovative solutions we have seen from insurers combine sales and claims channels into a feature-packed application. Other insurers have also leveraged on the data collected by smartphones to incentivize policyholders to live healthier and safer lives, reducing underwriting risk and allowing insurers to better tailor their insurance products.

One of the most pressing concerns for insurers is the rapid development of new insurers with alternative business models. Unfortunately, few of the insurers in our benchmark have successfully captured the extensive potential for disruption by these startups. Our analysis indicates that companies typically figure out innovation over time, but they falter greatly in the face of disruption. With thousands of startups around the world hot on the heels of incumbent insurers, understanding disruption today is more than just an insurance policy for insurers.

NTUC Income: Overall First in the 2018 Applied Innovation Institute Singapore Insurance Innovation and Digital Benchmark

Mr Peter Tay
Chief Operating Officer
NTUC Income

We are delighted to be ranked first on the Applied Innovation Institute Innovation and Digital Benchmark. It is a testament to our strength as Singapore’s leading digital insurer and we are heartened by the recognition particularly with our lead position in innovation and online. Our impetus for innovation and digitalization has always been customer-centricity as we strive to offer our customers choices when they engage with us.

We understand that customers are accustomed to quick gratifications from online transactions that are often supported by a seamless user experience. As such, we are constantly challenging ourselves to ideate insurance propositions that play to the way customers access, engage and use information digitally these days.

To sharpen our offerings and engagements with our customers, we have also made calculated decisions to embark on and leverage specific customer engagement strategies and channels.

With an agile mindset, we are set to tweak our digital strategies and tactics to enhance customers’ experience with us constantly. We look forward to re-imagine our collective future via insurance.


NTUC Income

Key Innovation(s)

Direct to Consumer, Online eClaims Processing, ‘Drive Master’ Application, ‘Orange Health’ Application, ‘Accident Reporting’ Application, and ‘Orange Travel’ Application


Our Perspective

NTUC Income is one of Singapore’s largest home-grown insurers and for an incumbent, a surprisingly innovative and nimble player in the market. In Singapore, it runs an equity-free accelerator program, the ‘Income Future Starter’ to identify breakthrough founders and work with disruptive startups. Income runs a dedicated Digital Transformation Office, a key pillar of Income’s Goal 2020 roadmap to bring innovation as a digital insurer, and make insurance simpler and more accessible.

We were particularly impressed with Income’s online eClaims platform. While it has not been deployed for all insurance products and does not accommodate all types of claims, existing deployments — e.g. Income’s online travel insurance claims platform — were well executed. Income has recognized the importance of digitalization and is leading insurers in developing a comprehensive online presence. Income has a strong search presence, placing them on the first page of Google Singapore’s non-personalized search results in 7 of 7 relevant categories.

Our research shows that Income has the most number of frequently updated mobile apps on the Apple Application Store – 4 – compared to other regional players. With direct purchase of general insurance available through its website and mobile apps, Income has clearly made a push for the mobile-friendly millennial generation.

Income has also made a relatively large push in the InsurTech space, combining big data and behavioral science to reduce underwriting risk and improve the user experience. ‘Drive Master,’ for example, awards drivers for safe driving behavior. ‘Orange Health’ actively rewards healthy living, and Income’s ‘Accident Reporting’ application was the only accident reporting application among regional insurers.

Income also leads regional insurers in social media engagement. With a dedicated ‘Travel Made Different’ blog and relevant content on its Instagram accounts, Income is generating quality engagement. However, Income can benefit more from active social media engagement to further drive DTC purchases. While it owns a Twitter account, it has not been managed since October 2015. Like the majority of other insurers, it also lacks a Snapchat account, a key engagement platform for millennials.


Key Innovation(s)

Direct to Consumer, ‘MyAXA’ Application, ‘AXA Drive’ Application, and ‘My AXA Health’ Application


Our Perspective

AXA is the leader amongst global insurers in our benchmark, and it isn’t surprising why. With numerous AXA Labs scattered across Asia, a startup studio (Kamet) which allows AXA to build autonomous startups, a corporate venture capital arm (AXA Strategic Ventures) that has invested in some of the most innovative InsurTech startups, and AXA Partners & AXA Digital Partnerships to engage startups and culture engineer, AXA has a comprehensive winning innovation strategy.

AXA’s suite of well-developed and well- thought-out applications, has helped AXA develop a strong online presence. This is further reinforced by AXA’s online search presence, where AXA is placed on the first page of Google Singapore’s non-personalized search results in 6 of 6 relevant categories.

Our research shows that AXA has a comprehensive suite of mobile applications that furthers its innovation ambitions. The ‘MyAXA App’, for example, allows users to file claims on mobile, view policies and make travel insurance purchases. While there is substantial room for improvement, with users complaining of poor performance and insufficient policy information, it is clear that AXA is actively attempting to address user concerns. Of the 6 negative reviews on the app, AXA has responded to 5 of them requesting for a follow up. The ‘AXA Drive’ App, for example, collects driver data and changes user behavior while reducing underwriting risk. The ‘My AXA Health’ Application allows users to locate nearby specialist clinics and even allows users to live chat with doctors through an integration with MyDoc.

AXA is leading insurers in Singapore when it comes to social media engagement. It actively manages its Facebook, Instagram and Youtube platforms. However, like most other insurers, AXA can benefit more from active social media engagement to further drive DTC purchases. As AXA’s Twitter account was not localized for Singapore, we were not able to factor that into our benchmark. This is because we strongly believe that localization of active engagement platforms allow companies to better tailor their user engagement strategy. AXA, like all of the other insurers in our benchmark, also lacks a Snapchat account, which is key to engaging millennials.


Key Innovation(s)

Direct to Consumer, Online eClaims, ‘Aviva EzSnap’ Application, and ‘Aviva LMS’ Application


Our Perspective

Aviva has been investing heavily in innovation, committing £100m to exceptional start-ups by 2020. Aviva has numerous innovation labs (Digital Garages) scattered across the globe, accelerator partnerships to identify breakthrough founders, and a corporate venture capital arm (Aviva Ventures), Aviva has committed itself to innovation in today’s increasingly disruptive economy.

Aviva has made an incredible effort in its push for millennials with a well established web presence. With a suite of well-developed and well-thought-out applications, coupled with a digital-first and service-first approach, Aviva allows users to make purchases and manage their policies directly online. Aviva also has a strong search presence, placing them on the first page of Google Singapore’s non- personalized search results in 6 of 6 relevant categories.

Through the ‘Aviva EzSnap’ and ‘Aviva LMS’ applications, advisors are able to provide a better experience for their clients. Though improving the client-advisor experience is commendable, Aviva can benefit from further developing Direct to Consumer (DTC) support. Its mobile eClaims functionality (ClaimConnect) is restricted only to corporate customers. Further, while Aviva had a mobile travel insurance application, it is not a native application. Aviva has also yet to introduce innovations such as the Aviva ‘Safe Drive’ Application into Singapore. We believe that by developing better mobile applications, Aviva has the potential to provide a more seamless customer experience, reducing customer friction and improving customer satisfaction.

While Aviva has created engaging content through the money Banter online blog, it can better leverage its content to engage its customers. Aviva can benefit more from further developing its social presence. While Aviva maintains a Facebook page, it does not have an Instagram account. Aviva is also completely absent in active engagement through Twitter and Snapchat. Again, platforms such as Twitter and Snapchat are key to engaging millennials; active engagement platforms are essential to a DTC insurer.


Key Innovation(s)

Direct to Consumer, ‘AIA Healthcare’ Application, ‘AIA Vitality’ Application, ‘AIA eCare’ Application, and LifeMatters Campaign


Our Perspective

AIA has made an incredible effort in its push for millennials with a well established web presence. With a well-developed a suite of well-thought-out applications with a digital-first and service-first approach, AIA allows users to make purchases and manage their policies directly online. AIA also has a relatively strong search presence, placing on the first page of Google Singapore’s non-personalized search results in 2 of 4 relevant categories.

Through the ‘AIA Healthcare’ application, AIA allows users to access their policy information directly through their mobile phone. However, AIA is still in the process of digitizing their systems. For example, to change one’s email address in the ‘AIA Healthcare’ application, a user still needs to download a form, print it out, fill it up and send it back to AIA. Clearly, AIA is still in the process of updating their systems. That being said, they have made substantial strides compared to other insurers. ‘AIA Vitality,’ for example, rewards customers for living healthier lives. This could potentially reduce underwriting risk and allow AIA to collect valuable customer data to deliver new and customized products in the future.

Like the majority of other insurers, AIA also has room for improvement in the social space. While AIA actively manages and updates its Facebook and Instagram accounts, its Youtube account is rarely updated. We also believe that AIA can benefit more from active social media engagement to further drive DTC purchases. Platforms such as Twitter and Snapchat are key to engaging millennials.


Key Innovation(s)

Direct to Consumer Model, Online eClaims Processing (TiqConnect), and ‘sMiles by Etiqa Insurance’ App


Our Perspective

Etiqa has made an extraordinary effort in its push for millennials with a well established online DTC platform. While Etiqa has developed a suite of well-thought-out applications with a digital-first and service-first approach, its web presence still has more room for improvement compared to other DTC startups. While Etiqa appeared in page 1 of Google Singapore’s non-personalized search results for 4 out of 6 relevant categories, its keyword search rank does not place it in the top half of the page. We are concerned that Etiqa’s push into DTC insurance is hampered by its less than ideal acquisition channels.

Through the ‘Etiqa TiqConnect’ service, Etiqa is one of the few insurers in Singapore that provides a comprehensive eClaims service. With settlement of general insurance claims, such as travel insurance claims, in less than a day, Etiqa is leading the charge in Singapore for rapid online eClaims. Etiqa’s push for millennials continues in the mobile space. The sMiles by Etiqa Insurance’ application attempts to change driver behavior for the better and collects crucial data to reduce underwriting risk on Etiqa’s end. However, we found it to be slightly concerning that Etiqa has yet to develop mobile applications that aids its DTC insurance push. Further, apps such as the ‘Etiqa Auto Assist’ application that provides drivers on-demand help have yet to be made available to Singaporean drivers.

Like the majority of other insurers, Etiqa also has room for improvement in the social space. While Etiqa actively manages and updates its Facebook and Instagram accounts, Etiqa’s Youtube account is rarely updated. We also believe that Etiqa can benefit more from active social media engagement to further drive DTC purchases. Platforms such as Twitter and Snapchat are key to engaging millennials.


Key Innovation(s)

Direct to Consumer Model, Online eClaims Processing, ‘AIG On the Go’ Application, and ‘AIG Assistance’ Application


Our Perspective

AIG’s has developed a comprehensive online DTC portal and claims platform. With a clean, easily navigable and localized website, AIG has clearly recognized the importance of developing a coherent web presence. However, AIG’s SEO efforts have room for improvement. AIG only ranked in the first page of Google Singapore’s non-personalized search results for 2 of 5 relevant categories.

That being said, AIG has made a commendable effort in the mobile space. The ‘AIG On the Go’ application induces drivers to drive safer and reduces underwriting risk. The trove of data collected will also assist AIG in the development of more personalized insurance products in the future. The ‘AIG Assistance’ application, for example, provides up to date risk indicators about countries around the world and emergency support available in other nations, improving the customer experience. AIG has a number of relatively innovative applications that couldn’t be used in Singapore though. For example, the ‘Rapid Rater’ was not available in Singapore and could not be factored into our benchmark.

While AIG has a relatively strong social media presence in the US, we were not able to take into account AIG’s other social media accounts as they were not tailored for Singapore. For example, AIG’s Twitter account only responds between 9AM and 5PM eastern standard time. Like most other insurers, AIG does not have a Snapchat account. For global insurers, it is important to note that engagement strategies should be localized to specific geographies. Locally targeted social media accounts would better add value to customers and provide a more coherent engagement experience.

FWD Singapore

Key Innovation(s)

Direct to Consumer Model, Online eClaims Processing


Our Perspective

FWD’s strength is its strong web presence. As one of the only few regional insurers with a comprehensive online eClaims service, FWD is leading the race when it comes to online DTC insurance. Its easily navigable website and user friendly interface coupled with its strong SEO efforts and commendable ad displays have made it one of the best, if not the best online DTC insurer in Singapore. FWD has a relatively strong search presence, placing it on the first page of Google Singapore’s non- personalized search results in 5 of 5 relevant categories.

Unfortunately, despite its strong online presence, FWD has room for improvement in the mobile space in Singapore. Key innovations such as the ‘FWD Max’ Application which changes consumer health behavior and the ‘FWD Drivamatics’ Application which collects driver data to better quantify risk have yet to be introduced in the Singapore market. As such, we were not able to include these innovations in our Innovation and Digital Benchmark.

FWD also has room for improvement in social media engagement. Without consistent posts across its social media platforms, FWD risks not engaging the millennial market — any DTC insurer’s primary target market. Interestingly, FWD does not have an Instagram account for the Singapore market despite running accounts for other markets in East Asia. FWD, like the majority of other insurers, does not have a Snapchat account as well. FWD, especially as it is a DTC insurer, can benefit substantially from active social media engagement to further drive purchases.

Tokio Marine

Key Innovation(s)

Direct to Consumer Model, Online eClaims Processing, and ‘TM iSwift’ Application


Our Perspective

By building a comprehensive suite of web applications that allows policyholders to purchase and manage their insurance, Tokio Marine has done a commendable job at digitizing traditional insurance processes. However, Tokio Marine has room for improvement on its customer acquisition channels. For example, in our research, Tokio Marine only ranked on the first page of Google Singapore’s non-personalized search results in 1 of 7 relevant categories. With the impending shift in traditional distribution channels for insurers, insurance companies need to build a more comprehensive online presence to better attract leads.

Tokio Marine has made a decent mobile push to engage with its policyholders and build better sales processes for its agents. The ‘TM iSwift’ app, for example, provides easy mobile claims for users and allows policyholders to locate nearby clinics; such a service-first mindset improves the customer experience.

However, Tokio Marine has yet to develop a DTC sales channel on a native mobile application. We cannot emphasize how important it is for an insurer to have a dedicated mobile sales channel. We believe that there is tremendous opportunity for Tokio Marine in the mobile space.

Like the majority of other insurers, more could be achieved by Tokio Marine in the social space. While Tokio Marine updates its Facebook page relatively frequently, it does not manage a Youtube channel or Instagram account that is targeted at Singapore. Localization is key when it comes to social media engagement today. That being said, we commend Tokio Marine’s commitment to Twitter. Active engagement platforms are key to engaging and relating with customers and are essential to a DTC insurer.


Key Innovation(s)

Online eClaims Processing and Manulife Move Application


Our Perspective

Manulife Singapore’s lack of a push into the online DTC space is perplexing when Manulife Malaysia launched its online purchasing platform last fall. That being said, Manulife is one of the few insurers that offers an online claims process. While not the most comprehensive, it is certainly commendable when insurers take steps to digitize their processes. We were also relatively concerned by Manulife’s poor search presence. Manulife did not rank on the first page of Google’s non- personalized search results in 3 of 3 relevant categories.

We were particularly impressed with Manulife’s ‘Move App’ that was available on the iOS Application Store. The Manulife ‘Move’ program rewards customers for living healthier. It leverages on the data collected by connected devices to reduce underwriting risk and improve policyholder behavior. Manulife has also built out a mobile CRM for its agents. However, Manulife has yet to build out a DTC sales channel on a native mobile application. We cannot emphasize how important it is for an insurer to have a dedicated mobile sales channel in a mobile-driven age. We believe that there is tremendous opportunity for Manulife in the mobile space.

Like the majority of other insurers, Manulife has room for improvement in the social space. While Manulife is doing an incredible job on Instagram2 Youtube and Facebook, posting and engaging with users actively, Manulife does not have an account on any active engagement platform. Manulife would benefit greatly by building out a presence on Twitter and Snapchat. Active engagement platforms are key to engaging and relating with customers and are essential to a DTC insurer.

Sompo Japan

Key Innovation(s)

Direct to Consumer, Online eClaims Processing, and Sompo ‘Drive’ Application


Our Perspective

Sompo has made an extraordinary effort in its push for millennials with a well established online DTC platform. While Sompo has developed a suite of well-thought-out applications with a digital-first and service-first approach, Sompo’s web presence was hampered by poor search optimization. Sompo did not rank on the first page of Google Singapore’s non-personalized search results in 6 of 6 relevant categories. We are concerned that Sompo’s push into DTC insurance is hampered by its less than ideal acquisition channels.

Sompo is one of the only few insurers in Singapore that provides comprehensive eClaims service across multiple product lines. The Sompo ‘Drive’ application attempts to change driver behavior for the better and collects crucial data to reduce underwriting risk on Sompo’s end. However, Sompo’s DTC purchase experience has substantial room for improvement. Unfortunately, other Sompo innovations such as the Sompo ‘HealthCare’ app, which connects users to doctors directly through the application, have yet to make their way to Singapore shores.

Like the majority of other insurers, Sompo also has room for improvement in the social space.

Sompo actively manages and updates its Facebook account, generating quality engagement for its policyholders and prospective customers. However, Sompo is relatively weak at other social media platforms. Sompo’s Youtube account is rarely updated. Sompo doesn’t have an Instagram account either. Sompo would also benefit greatly by building out a presence on Twitter and Snapchat. Platforms such as Twitter and Snapchat are key to engaging millennials. Active engagement platforms are essential to a DTC insurer.

1 We recognize that FWD has since launched international health and home insurance in early 2018. We look forward to factoring FWD’s foray into new insurance categories into our benchmark the following year.
2 While Manulife has an Instagram account, it was dormant in 2017. As such, Manulife’s Instagram efforts was not factored into its social score. We look forward to factoring Manulife’s Instagram efforts into our benchmark the following year.

Private Aviation in Southeast Asia

Are the opportunities worth the challenges?

Download full PDF (0.4 MB)
Download full PDF (0.4 MB)


Mr Chang Jun Hua, Analyst

Mr James Tan, Singapore


There are many reasons which drive the demand for private jet ownership and charter. Some see it as a status of wealth, while others appreciate the flexibility private aviation services provide for their holiday itineraries or business schedules. Private jets also provide access to a far larger number of airports which are unable to accommodate larger commercial airliners – bringing passengers closer and faster to their destination. Neither do passengers have to risk getting stuck in long security lines or flight delays. Increasingly, private jets are also used to serve as private offices in the sky which raise productivity. For instance, NEXA Advisors’ most recent study on business aviation and the world’s top performing companies concluded that companies using business jets were likely to outperform non-users on revenue growth, innovation, employee satisfaction and market share1. With a variety of reasons justifying the consumption of private aviation services, coupled with rising global wealth, demand is likely to only rise.


Mr James Tan
Managing Partner
Quest Ventures

This horizon scanning report on aviation by Quest Ventures on the opportunities in Southeast Asia’s private aviation is the result of cross sectional research and analyses done on the vibrant private aviation sector. Our evaluation concludes that Asia’s large population and wealth is in a good position to tackle flexibility issues and empower efficient private travel. However, regulations hamper. Unless political will aligns with consumer demand, not much would change.

A new era for the private aviation industry will likely arrive once ASEAN governments commit to liberalising their airspace and airports, building and upgrading airport facilities and having a regional agency coordinating air traffic and setting implementable safety standards.

Until such conditions present themselves, new entrants would have to work within the operational constraints which perpetuates inefficiency. They would also have to compete against experienced operators and brokers who have eased such inefficiencies by establishing strong working relationships with various stakeholders around the region.

Market Trends and Insights

According to Wealth-X, the typical global jet owner is 63.6 years old, with an average net worth of US$1.66 billion. They spend about 1.0% of their net worth on private aircraft, with an average value of US$16.4 million per plane2. Operating it, however, would set you back another US$700,000 to US$4 million3. Those who have decided that plane ownership is out of their price range, but still want to enjoy its benefits may then opt to charter a plane. According to Singapore jet charter service provider, Paramount Business Jets, Light Jets4 start at US$2,200 per hour. Mid-Size Jets start at US$2,800 per hour. Super Mid-Size Jets start at US$3,800 per hour, and Large Cabin Jets start at US$4,500 per hour5. Brad Stwewart, CEO of XOJets, a private jet charter company, says that his clients spend several hundred thousand dollars on consumption of private aviation services each year – with net worths around US$30 million to US$40 million6.

While these figures may seem outlandish, new business models which allow for jet-sharing may just make private jet travel accessible to ordinary High Net Worth Individuals7 (HNWIs). As such, while it is unlikely that ordinary HNWIs may purchase their own plane or frequently charter entire private jets, we will include the growth of HNWIs in our analysis of overall future demand for private aviation services.

Growing Wealth

It is generally thought that a global increase in population of HNWIs and Ultra High Net Worth Individuals8 (UHNWIs) will generate growing demand for private jet orders and on-demand private jet charter9.


According to a Cap Gemini SA report, although growth has been modest, global HNWI wealth has continued to hit new record highs, with Asia Pacific overtaking North America as the top wealth market in the world10.

Global HNWI wealth is projected to nearly triple in size from 2006-2025 to surpass US$100 trillion by 2025, with China and Japan leading the pack – both registered double-digit increases in both the HNWI and UHNWI populations.

As such, Asia Pacific (APAC), and by cautious extension, Southeast Asia (SEA) is likely to remain a strong market, with the APAC region accounting for two-fifths of the world’s HNWI wealth over the next decade11.


Excluding Latin America which has faced disappointing growth, global UHNWI wealth has grown more than the other wealth segments over the last few years. The ranks of Asian UHNWIs are set to expand by 66% over the next decade, compared with 27% growth in Europe12.

However, the results of The Wealth Report Attitudes Survey13 conducted by Knight Franks, which was based on responses from almost 900 of the world’s leading private bankers and wealth managers provide an important caveat.

The survey revealed that only 15% of UHNWIs use private aviation for the majority of their business and personal flights. Latin Americans were the biggest users, with 40% opting to go private. In Asia, just 9% of UHNWIs routinely travel on non-commercial flights.


A 71% surge in the number of Asian billionaires14 over the next decade will take the total to 832, nearly neck and neck with the US, where the population by then will be 840. Europe is forecast to be home to around 569 billionaires in 2025.

New Innovations

Hardy Sohanpal of international charter operator Global Jet Concept, believes that private jet numbers are likely to rise as the desire to travel efficiently with maximum privacy becomes more of a priority for corporations and private individuals.

Sohanpal adds that, “The introduction of new apps and charter models that are competing to become the Uber of the airways is also likely to attract those who shuttle frequently between cities travelling first or business class.”15

That is exactly what founder of JetSmarter, a digital/mobile private jet marketplace, Sergey Petrossov plans to do. Talking about the common underutilization of jets which have to fly routes empty to reposition itself, Petrossov explains that “those empty seats and flights can be offered to travelers for less than the typical price of chartering a jet and for a fee that may be at least in the same ballpark as the cost of a first class ticket.”16

JetSmarter, which allows members to book individual seats on private jets would also make flying on a private jet far more affordable. For example, it costs US$12,000 to charter a small 4 seater from New Jersey to Miami on a weekday, according to PrivateFly. A JetSmarter member would pay US$2,000 to book a seat, and other members can hitch a ride at no charge. Membership costs US$15,000 for the first year.

However, such business models are currently unavailable within SEA.

Despite the finding that just 9% of Asian billionaires travel by air privately, the expected increase in wealth across Asia and SEA is still an indicator that demand for private aviation services will only rise. With business models like jet-sharing drastically reducing the cost of private air travel and making it more accessible to the ‘merely rich’, demand is only set to grow. However, the question remains as to whether Asia, and consequently SEA, is able to keep up with the forecasted rise in demand.

The SEA Aviation Environment

To accommodate the forecasted increase in demand for private aviation services, there has to be appropriate increase in the capability and capacity of the aviation operating environment. Yet, surmounting challenges remain as we survey the existing conditions of SEA’s aviation environment.

Poor Regional Airspace Navigation Coordination

The US has the Federal Aviation Authority (FAA), which issues and enforces aviation safety regulations, operates air traffic management and air navigation facilities, as well as research and development for safer and more efficient systems17.

The European Union (EU) has the European Aviation Safety Agency (EASA), which develops common safety and environmental rules, monitors the implementation of standards and provides the necessary expertise, training and research for Member States18, while Eurocontrol coordinates the region’s air traffic control19.

Unlike the more developed US and European market, the Association of Southeast Asian Nations (ASEAN) has no regional regulatory body overseeing aviation safety or coordinating air traffic control20. This results in air traffic within the region not operating as efficiently and safely as it can be.

Poor state of Air-Traffic-Control Technology

Some traffic controllers in Asia still rely on information radioed in from pilots and other airports, manually entering the information and calculating aircraft spacing. This takes more time and occupies more mental capacity.

Even if countries like Singapore, Malaysia, Thailand and Indonesia modernize their air traffic management systems, connecting all these systems across Asia presents a further challenge. Countries are at different stages of development and governments have no incentive to cooperate21.

According to the Wall Street Journal, Asia has become one of the world’s most-trafficked areas for planes, and is set to become even busier, thereby further challenging local airlines, airports and air-traffic controllers to keep the skies safe.

Poor Airport Infrastructure

A PwC report22 on the state of Asia’s airport infrastructure found that most major Asian hubs are already operating above their planned capacity whilst even secondary hubs are starting to experience capacity strains. This has resulted in a rapid escalation of delays since 2010.

With the exception of airport passenger queues and security checks, private jets would not be exempt from long queues for take-offs, circling above the runway prior to landing, and an increasing scarcity for take-off and landing slots.

The WSJ reports that nations such as Indonesia and the Philippines have not invested enough in airport facilities to keep up with the demand, especially in second-tier cities. Some runways, adapted from old military airfields, are too short or are badly designed for good drainage, and some lack modern landing navigation systems or proper runway lights23.

Shortage of Aviation Professionals

There is an expected shortage of qualified and experienced aviation professionals (pilots, mechanics and engineers) in the future, which would likely drive up labour costs and reduce operational flexibility.

Boeing, one of the largest aircraft manufacturers in the world, projects that the Asia-Pacific region will need 216,000 new pilots in the next 20 years, more than in any other part of the world, accounting for 40 percent of the global demand24.

Business Models

Private Jet-Buying Market

Market Insights

Jet orders are forecasted to be a US$248b industry from 2016-2025, with Asia-Pacific taking 10% of total orders25.

While the US (12,717), Mexico (950) and Brazil (786) are the top three nations by some margin when it comes to fleet size, JETNET’s figures show numbers are rising fast in Asia. Hong Kong (+535%), Taiwan (+367%), China (+347%) and Macau (+300%) all feature in the top 10 list of locations where growth has been fastest over the past 10 years. China, with 277 jets, now claims eighth position in overall ownership levels26.

Richard Koe, Managing Director of industry analyst, WINGX, has also remarked that it would not be unusual for firms with a turnover of US$50m to have its own plane, further validating the demand for private jet orders. He adds that the Chinese market is set to see strong growth as the government begins to recognize the importance of business jets as a competitive tool to support corporations pursuing regional trade opportunities.

Demand for private jets in SEA is growing as indicated by Dassault Falcon senior vice-president of international sales Jean-Michel Jacobs, who sees rising demand in SEA compensating for China’s economic slowdown. “We have a lot of inquiries and deals in process… about twice as much activity as we had two years ago,” he told The Straits Times in 201627.

Private Jet Charter Market

Market Insights

On-demand jet charter, which allows use with no commitment and a pay-as-you use structure, remains the most popular option for clients in the industry28.

Typical jet charter clients tend to be casino operators, Fortune 500 companies and MNCs. As demand rises, clients would typically want to ensure operators have international-level qualifications: IBAC’s IS-BAO stage I,II,III, Wyvern Wingman, ARGUS Gold or Platinum or the Flight Safety Foundation’s (FSF) BARS audit29.

Jet charter demand in Asia tends to spike during public holidays (Chinese New Year and Western holidays), World Economic Forums (G8, G20, ASEAN meetings), ASEAN meetings and major sporting events (Super Bowl, World Cup, Olympics). It then tends to slow during the summer where charter demand shifts to Europe and the US30.

As touched on previously, infrastructure status, airspace limitations, and regulations remain the biggest challenges when operating a charter throughout the region. Many landing and takeoff slots are tightly regulated with long application processes. Further compounding operating conditions are unfriendly cabotage31 rules, aircraft overnight parking restrictions and long lead times for permit requests.

Hong Kong, Macau and Singapore are the most charter-friendly locations in the Asia-Pacific region as they are known for their free-market, efficient-regulation and respect of liberties. Despite a chronic shortage of parking space and take-off slots, Hong Kong remains the most convenient, efficient and preferred destination for charter clients due to its central location in APAC32.

For a glimpse of the application process, the extensive list of documents to operate a single charter flight in APAC can be found in Annex B. Aviation governing bodies in each country can also change the rules and requirements without prior notice at any time. This can affect not only the local charter market, but any foreign-registered aircraft chartering a jet into the particular country.

Traditional Jet Charter Operators and Brokers

Charter operators charter out their own or a partner network’s fleet to clients, while brokers are intermediaries who reach out to a network of operators, get a quote, mark it up, and sell it to clients. Operators usually carry out brokerage services as well.

The most common business models of traditional jet charter operators are on-demand charter, jet cards and memberships.

Luxaviation Asia (Singapore based, SEA operations)33

Began charter operations out of Singapore in 2014, catering to the whole of SEA. Operates more than 260 aircraft according to the most stringent safety standards. Provides brokerage services around the world, aircraft management, flight solutions and support34. Quotes only available upon request.

Asia Jet (Hong Kong based, international operations)35

Full service company which offers on-demand aircraft charter, Jet Card membership, consultancy and aircraft management services. Both the Black Card and Corporate Card offer access to the entire Asia Jet and global network fleet. Instant quotes available on site. A test search for a round-trip flight from Singapore’s Changi International Airport to Vietnam’s Tan Son Nhat International Airport begins at US$31,850 for a turboprop, and US$46,850 for a heavy jet.

Javajet (Jakarta based, Asia operations)36

Specialises in private jet charter in Asia. Quotes only available upon request.

Fractional Operators

Fractional operators buy private jets and then sell shares of the jets to several owners. Each shareholder then receives the right to fly the jet for a fixed number of hours.

Executive Jets Asia (Singapore based, Asia operations)37

Offers 6 shares per jet with one share costing US$800,000 for the Hawker 700 or US$1.2m for the Hawker 800. Each share entitles the owner to 70 hours of free usage of the aircraft, with an additional nominal fee of US$100,000 per year, from the first year onwards. Jet will be sold at the end of 5 years, with equal sharing in the sales proceeds.

NetJets Inc (US and Europe)38

A subsidiary of Berkshire Hathaway, NetJets was the first ever private jet charter company to come up with the fractional ownership model. The smallest share you can purchase is 1/16 interest, which gives you 50 hours of flight time a year for a cost of approximately US$550,000 with additional monthly management fees of US$9,600. The largest share possible is ½ interest, or 400 hours of flight time at an approximate cost of US$4.4 million with monthly management fees of US$60,000. Occupied hourly fees which covers fuel, maintenance, catering costs US$1,950 an hour. NetJets owners sign up for a two-year, two-and-a-half-year or three-year commitment, depending on the size of the aircraft, and NetJets has a guaranteed buy-back option after that commitment is up39.

NetJets also offer a pre-paid Marquis Jet Card which allows clients to buy 25 hours of flight time. A single year starts at US$119,000 for a light jet, excluding taxes and additional surcharges.

Jet Charter/Sharing Mobile Apps

According to JetSmarter CEO Petrossov, the average private plane has less than 30 percent load factor40 during trips, while 35 percent of trips are completely empty41. Jet Charter or Jet Sharing apps seeks to eliminate this inefficiency by providing a mobile platform which matches this excess capacity to demand. It also seeks to bypass traditional charter brokers by letting customers book a flight directly from plane owners/operators through the app. As a result, prices tend to be lower, making private aviation more accessible to a wider market.

APAC apps

JetSteals (India based, India, Dubai, New York operations)42

India-based mobile app is the first online marketplace for private jet and helicopter empty legs. Book a trip and finish the transaction online. Allows booking of individual seats. Traction appears slow, there was only a single sold-out listing on the site when this author visited on 9 June 2017.

Super First Class (China based, China operations)

No website available from Google search. Empty legs booking app which only functions in Chinese. Allows users to not only book individual seats and finish payment online but also request customized charter services by submitting an online order. However, government payment limitations only allow clients to pay 20,000 RMB or less via UnionPay and 50,000 RMB or less via Alipay or WeChat (two popular e-payment platforms in China)43.

International apps

Victor (London-based, international operations)44

On-demand private jet charter that allows you to compare, book, and manage jet charters. Unique selling point is that it discloses operator and aircraft details, which allows for transparency and complete financial protection. Nothing stops the user to bypass the app and go directly to the operator to ask for a competitive quote. From a consumer’s standpoint, the app serves as a good directory to all available options. Could open regional HQ in Hong Kong.

JetSmarter (US based, routes mainly between US, London, Dubai, opening up routes this year to India, HK, China, Brazil, Mexico)45

First started in 2012, JetSmarter is currently valued at US$1.5 billion after closing its US$105 million Series C round in December 201646. Investors include rapper Jay Z and the Saudi Royal family. Has four services, normal private charter, shared charter, JetDeals, which are spontaneous last-minute, one-way flights, and JetShuttle, which offers shared, scheduled flights between major cities. Currently charges members an annual fee of US$11,500 plus a one-time initiation fee of US$3,50047.

However, there are some limitations to fully “uberizing” the private jet market. Real-time on-demand jet charter or sharing would be tough as the majority of so-called charter fleets in Asia-Pacific are owner aircraft. This means that charters would still be subject to “owner’s approval”, which could potentially cause the upset of deals at the very last minute. There is also a challenge to provide accurate real-time availability, quotes and confirmations without a seamless integration and agreement between all players in the market.

Jet sharing apps also currently do not provide the experience of knowing the strengths and weaknesses of each operator – something experienced brokers can provide.

Status and Operational Challenges of major SEA countries

Operational challenges and regulation restrictions affecting the jet-charter industry in selected ASEAN countries.


As of 2016, Indonesia has 53 business jets with 16 being chartered out commercially.

The average lead time to receive landing and overflight permits is 3 days.

Infrastructure and Safety Issues

Airports have not kept up with the rise in passenger traffic – Soekarno-Hatta International Airport, designed for 22 million, is expected to receive 61 million by the end of 2017. While this stress might be alleviated by the expected completion of a new terminal and third runway48,49, other airports around the country are likely to remain operating way above designed capacity.

According to a 2015 PwC report50, Indonesia’s airport sector is expected to invest US$1.9 billion in 2017, and US$3 billion by 2025, growing at a rate of 5.8% per year. However, as the investment level required is beyond state-owned operators, Angkasa Pura I and II, government support for foreign or domestic private investors would have to be present to facilitate this growth. Provided investments continue pouring in, progress can be made for the expansion and redevelopment of airports in addition to refurbishment of air traffic control assets and ground handling51.

Private jets operating between popular airports would hence have to contend with such congestion and unexpected delays.

Unfriendly regulations52

The largest challenge remains the legal decree passed by the Indonesian Government in October 2015. Strict overfly cabotage rules prevent any private jet charter operator from conducting flights within Indonesia unless they are domestically registered53. Consequently, there has been increased demand for local charter solutions at higher prices.

In 2007, audits conducted by the International Civil Aviation Organization (ICAO) detected 121 loopholes in the Indonesian air safety oversight system54, leading the US and EU to ban all Indonesian aircraft entering their respective airspaces. The situation has since improved, with the EU lifting the ban for a handful of operators (Garuda, Mandala, PremiAir, Airfast, Air Asia, Citilink, Lion Air, Ekspres Transportasi Antarbenua, Batik Air55), and the FAA lifted the ban for all Indonesian operators in 2016.

In general, government regulations, poor airport infrastructure and a bad reputation for safety hinders Indonesia from being a global player in every aspect of the private jet aviation industry.


As of 2016, Malaysia has 49 business jets, with 8 used for business jet charters. The only Malaysian-registered jet run by Berjaya Air. The average lead time to receive a permit is 72 hours.

Grey market charters56 are more prevalent and unofficially tolerated in Malaysia57. The result is legitimate charter operators finding it tough to compete with the ad-hoc availability and friendlier prices from private jet owners, thereby depressing charter business opportunities.


As of 2016, Singapore has 65 business jets, with 11 used for chartering. The mid-size, large, and long-range categories make up over 91% of this fleet, suggesting a need to fly mostly long distance. Average landing permit lead time is 7 working days while overflight permit lead time is 2 working days.

Generally charter friendly. All business jets based in Singapore are foreign registered, as the local aviation registry, the Civil Aviation Authority Singapore (CAAS), caters more to commercial aviation58.


As of 2016, the Philippines has only 4 jets available for commercial charter. The average permit lead time is 3-5 days.

Landing and overflight permits are mandatory for all charter operations in the Philippines.

The Philippines government has plans to ban general aviation (non-scheduled, non-airliner aircraft) from the Manila Airport. All landing permit requests must come with a local business contact, with applicants having to provide an abstract of charter agreement, purpose of operations, type of aircraft, relationship of passengers and more.

Helicopter charter within Philippines’ thousands of small islands are an increasingly viable market amidst tight regulations imposed on private jet charters59.

In general, cumbersome administrative requirements and airport bans present friction for the private jet charter economy.


As of 2016, Thailand has 37 business jets with 18 available for charter. Thailand had 727 UHNWIs and 24 billionaires in 2015. The average permit lead time is 3-5 days for landing permit and 2-3 days for an overfly permit.

“A 2015 International Civil Aviation Organization (ICAO) ruling putting the Thai registry under close scrutiny due to safety concerns has affected the local commercial charter operators. No new routes are being approved or aircraft are being allowed to fly to certain international destinations during this period, as local charter operators are put into the same category as low cost airline carriers.”

Foreign registered aircraft being chartered into Thailand requires a long lead time as the Civil Aviation Authority of Thailand (CAAT) will not issue landing permits without arrival or departure slot approvals and parking approvals. Chiang Mai International Airport and Phuket International Airport will not allow overnight parking, although pick up and drop off is permitted, while Don Mueang International Airport has a maximum parking time of 48 hours.

In general, unfriendly rules, regulations, and long lead times for permits prevent smooth and flexible operations by private jet charter operators. Scarcity of experienced business jet pilots is also an issue.

Future Outlook

Although current challenges remain large, it has been said that Asia’s large population and wealth is in a good position to tackle flexibility issues and empower efficient private travel60. This author, however, takes a more skeptical position that unless political will aligns with consumer demand, not much would change.

While organizations including ASEAN and APEC working with the International Civil Aviation Organization (ICAO), the International Business Aviation Council (IBAC) and the Asian Business Aviation Association (AsBAA) continuously raise the importance of improving transportation regulations in an effort to implement efficient solutions, success so far has been largely muted.

In the words of Jeffrey C. Lowe, Managing Director of Asian Sky Group, “The charter market in the Asia-Pacific region has yet to reach the size and scope necessary to provide cross benefits and industry wide stimulus. Like the business aircraft market itself in the region, charter is in its infancy and has yet to mature. This is also the case in terms of the charter products available i.e. membership programs and charter tools such as mobile applications. For example, most apps in the region do not provide live fleet updates or have the ability to confirm the flight and pay online, but rather are reduced to a messaging service where the user must “request a call back”.61

Before one attempts to jump in on the opportunity to provide better private charter services or introduce comprehensive jet-sharing solutions in Asia or SEA, one would have to seriously consider the challenging operational conditions that currently plague the region. Any player seeking to capture a slice of the SEA private aviation market would require deep knowledge and extensive networks to navigate and work with the multiple stakeholders involved. Having to contend and coordinate between multiple clients, private jet owners, airspace and safety regulators, governments, airport services, aircrew, competitors and even the weather itself exposes one to an incredibly huge amount of uncertainty and risk.

A new era for the private aviation industry will likely arrive once ASEAN governments commit to liberalising their airspace and airports, building and upgrading airport facilities and having a regional agency coordinating air traffic and setting implementable safety standards.

Until such conditions present themselves, new entrants would have to work within the operational constraints which perpetuates inefficiency. They would also have to compete against experienced operators and brokers who have eased such inefficiencies by establishing strong working relationships with various stakeholders around the region.

Annex A

Light Jet

Typical Flight – 800 to 1,500 miles

These aircraft have interiors comparable in size, comfort, and luxury to those of stretch limousines. They are quite economical for regional and medium-length flights, typically having a range of around 1500 miles nonstop. Light jets may seat 6 passengers comfortably and 8 or 9 at maximum capacity. External baggage space may be small, making it difficult to bring skis or large golf bags. However, you will certainly enjoy the flight as light jets are typically outfitted with excellent in-flight entertainment centers, a mini-galley, and luxurious leather and hardwood interiors.

Mid-Size Jet

Typical Flight – 1,500 to 3,000 statute miles

The term refers both to the jet’s cabin and its exterior and engines. With a larger cabin comes grander, roomier seating and more space to move around. Interior features are similar to light jets, but have more layout options, such as spacious divans, and provide stand-up space. At least 8 passengers can be seated on midsize jets, and some can even accommodate 12 or 14. Most all come with a private lavatory behind a solid door. Midsize jets also offer greater capabilities, including a wider range – on average 2100 miles or about 4 to 5 hours. Some even offer nonstop coast-to-coast flight possibilities.

Super Mid-Size Jet

Typical Flight – 1,500 to 3,700 statute miles

These aircraft provide features on a level between standard midsize and larger jets. Seating capacity is on the high end of typical midsize jets (10 to 18), but with even roomier stand-up cabins, many luxury amenities seen in heavy jets, and often a full galley. Some luxury options include a private lavatory with dressing area, spacious internal/external luggage compartments, and advanced entertainment and information centers. Super-midsize jets operate with the efficiency of midsize aircraft and the greater range and speed of heavy jets, making them suitable for coast-to-coast or international flights with a small to moderate size party.

Large Cabin Heavy Jet

Typical Flight – 2,000 to 5,000 statute miles

Known as the kings of private jet aircraft, heavy jets have got it all – the biggest interiors, most luxurious amenities, and longest nonstop range. They can carry anywhere from 8 to 20 passengers and as much luggage as you could possibly need. Interiors can be arranged to accommodate practically any configuration, from full galleys to private offices and bedrooms – not to mention plenty of regular seating in spacious comfort. Full-size lavatories with dressing rooms are standard, and service is best-managed by the inclusion of a flight attendant in the regular crew. These aircraft can be employed for coast-to-coast or intercontinental flights ranging from 6 to 12 hours nonstop.



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  2. Private Jets and Ultra Wealthy Individuals – Wealth-X Study. (n.d.). Retrieved from
  3. Parker, T. (2020, January 29). The Economics of Private Jets. Retrieved from
  4. Description of different jet classifications can be found in Annex A.
  5. Singapore Private Jet Charter Flights, Prices and Aircraft for Hire. (n.d.). Retrieved from
  6. (n.d.). Retrieved from
  7. HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.
  8. UHNWs are defined as those having investable assets of US$30 million or more, excluding primary residence, collectibles, consumables, and consumer durables.
  9. Asian Sky Group: Asia-Pacific Business Jet Charter Report Summer 2016
  10. (n.d.). Retrieved from
  11. (n.d.). Retrieved from
  12. The Wealth Report 2020. (n.d.). Retrieved from
  13. Knight Frank: The Wealth Report 2017 (n.d.). Retrieved from
  14. Individuals with a net worth in excess of US$1 billion.
  15. Knight Frank: The Wealth Report 2017 (n.d.). Retrieved from
  16. Skift Website: JetSmarter Is the Latest On-Demand Private Jet Company to Raise Millions (n.d.). Retrieved from
  17. Federal Aviation Authority Website (n.d.). Retrieved from
  18. European Aviation Safety Agency (n.d.). Retrieved from
  19. Eurocontrol Website (n.d.). Retrieved from
  20. CNBC: Southeast Asia’s aviation boom shows a patchy safety framework (n.d.). Retrieved from
  21. Wall Street Journal: Five Major Risks to Flying in Asia (n.d.). Retrieved from
  22. PwC: Airport infrastructure in Asia Coping with the demand surge (n.d.). Retrieved from
  23. Wall Street Journal: Five Major Risks to Flying in Asia (n.d.). Retrieved from
  24. The San Diego Union Tribune: Rapidly-growing Asian airlines race to find qualified pilots (n.d.). Retrieved from
  25. JetCraft 10 Year Market Forecast 2016 (n.d.). Retrieved from
  26. Knight Frank: The Wealth Report 2017 (n.d.). Retrieved from
  27. Straits Times: Private jet makers upbeat on S-E Asia amid China slowdown. Retrieved from (n.d.).
  28. Asian Sky Group: Luxury Chartering Jan 2017 . (2017, January 1). Retrieved from Charter Launching EN.pdf
  29. Asian Sky Group: Luxury Chartering Jan 2017 . (2017, January 1). Retrieved from Charter Launching EN.pdf
  30. Asian Sky Group: Luxury Chartering Jan 2017 . (2017, January 1). Retrieved from Charter Launching EN.pdf
  31. Cabotage, “formally defined as “air transport of passengers and goods within the same national territory.”Aircraft Owners and Pilots Association Definition
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  33. Luxaviation Website. (n.d.). Retrieved from
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  38. NetJets Website. (n.d.). Retrieved from
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  40. Load factor is a measure of how well an airline is utilizing its capacity and is used to assess how efficiently an airline operator is filling seats in return for fares.
  41. CNBC: JetSmarter partners with XOJet to offer more flights, as the sector comes under pressure. (2016, September 20). Retrieved from
  42. JetSteals Website. (n.d.). Retrieved from
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  44. Victor Website. (n.d.). Retrieved from
  45. JetSmarter Website. (n.d.). Retrieved from
  46. Crunchbase, JetSmarter (n.d.). Retrieved from
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  48. Bloomberg Technology: Why Indonesia Remains One of the World’s Worst Places to Fly (2015, December 7) Retrieved from
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  50. PwC Report: Indonesia’s airports sector expects investments of up to US$25bn in 10 years, double the present level due to 4.8% expected increased air traffic growth. (n.d.) Retrieved from
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  53. Asian Sky Group: Luxury Chartering. (n.d.). Retrieved from 9c27c67263eed/1488186944080/Luxury+Charter+Launching+EN.pdf
  54. Indonesia Investments: Ban on Indonesia’s Airlines Entering US Airspace lifted (n.d.). Retrieved from
  56. The informal renting of jets which are usually unregulated and tend to compromise on safety and legality
  57. Air Charter Service: GREY MARKET CHARTERS, AND WHY YOU SHOULD AVOID THEM (n.d.). Retrieved from
  58. Asian Sky Group: Luxury Chartering Jan 2017. (2017, January 1) Retrieved from
  59. Asian Sky Group: Luxury Chartering Jan 2017 (2017, January 1) Retrieved from
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  61. Asian Sky Group: Asia-Pacific Business Jet Charter Report Summer 2016. (2016) Retrieved from

Market Analysis: Video Gaming

Battling for customers

Download full PDF (0.5 MB)
Download full PDF (0.5 MB)


Mr Aaron Lim, Analyst

Mr James Tan, Beijing


Estimated to total US$86 billion in 2016 and growing at an annual rate of 6.7%1, the global video gaming market is not only large but growing rapidly. These figures hint at the attractiveness of investing in the space, and investors who succeed in identifying the next big thing will reap tremendous profits. However, the video gaming ecosystem is extremely complex and not all areas are favorable. In order to identify segments with the most potential for venture investment, this report delineates the video gaming value chain, and analyzes its segments across three criteria: 1) competition, 2) market, and 3) exit opportunities. Segments with fewer competitors are preferred to segments with more competitors; large and growing markets are preferred to small and stagnant ones; segments with more exits are preferred to segments with fewer exits. Through the analysis, two segments: 1) cloud gaming, and 2) game monetization have been selected.


Mr James Tan
Managing Partner
Quest Ventures

This market analysis report on gaming by Quest Ventures is a timely look at the ecosystem of video gaming. It looks at emerging technologies and where consumer preferences are likely to head, the key players in specific segments and the market opportunities that they are tapping into.

Estimated to total US$86 billion in 2016 and still projected to grow at a quick clip, the global video gaming market is attractive to investors. This is a complex market and navigating it and determining where to play our bets remain both a science and an art. On the one hand, statistics point towards strong emergence of handhelds and mobile gaming. On the other hand, we believe that communal gaming – esports – will bring on a different level of experience and demand on producers.

Cloud gaming

The market for cloud gaming services is growing quickly and estimated to increase fivefold in users to reach US$460 million revenue by 2015. With no market leader and fewer than ten competitors in the market, there is potential for new ventures to establish themselves. In addition, the recent acquisition of Gaikai by Sony, and establishment of Shinra Technologies by Square Enix signals industry confidence in cloud technology. However, past examples have highlighted the shortcomings of a B2C approach due to the high cost of Internet bandwidth. With Internet prices unlikely to fall soon and uncertain consumer demand, venture capital firms should instead concentrate on cloud gaming startups with B2B plays.

Game monetization

Although gaming specific numbers are unavailable, global revenues from mobile in-app advertising and payments approximated US$15 billion in 2013. With games accounting for 66% of total app revenues2, the market for game monetization software appears to be extremely large. However, the space is very crowded and competitors include both gaming specialists and app monetization generalists. Nevertheless, unlike other apps where traditional methods are appropriate, games have unique requirements that generalists do not offer. Furthermore, even though there are many competitors in the space, current solutions are generally targeted at developed economies. Emerging markets with large gaming populations that have bad access to first world payment solutions are thus underserved. Hence, investing in game monetization startups focused on emerging markets has potential.

Gaming Value Chain

The video gaming value chain consists of five distinct layers:

  1. gaming experiences
  2. distribution channels
  3. publishers
  4. enabling technologies and
  5. game developers.

On one end of the spectrum, high capital costs of producing gaming experiences increases barriers of entry and entrenches current incumbents. As a result, gaming experiences represent the most consolidated layer. On the other end of the spectrum, free development tools allow almost any individual to become a game developer. Hence, due to the low barriers of entry, game developers represent the most fragmented layer.

Gaming Experiences



There are only major three console players in the market namely: 1) Microsoft, 2) Sony and 3) Nintendo. They cater to different categories of consumers with Nintendo targeting casual gamers with the Wii priced at $99, while Microsoft and Sony both target the hardcore crowd with the Xbox One and PS4 priced similarly at around $500. These three players dominate the marketplace, and although there were attempts by other console makers such as Ouya to enter the fray, such alternative consoles failed. Some reasons cited for the failures lie with the poor selection of games, developer support and limited capabilities3.


Although consoles were banned in China until Jan 2014, grey market sales numbered at least 1.2 million units yearly from 2002 to 20094 from the three major players. This is low in comparison to US sales, which constituted about 20 million in 20085. The recent lifting of the console ban might boost sales, but with Chinese consumers accustomed to playing PC games and the growth in mobile, consoles might have a hard time finding a space in the already crowded gaming market. Global unit sales of fourth-generation consoles (Xbox One and PS4) is estimated to be around 18 million units in 20146. At a price of approximately $400 per unit, consoles sales were around $7 billion in 2014.

Exit opportunities

Ouya recently announced a partnership with Xiaomi to bring their games into China7. However, this deal does not appear to involve the console itself, but rather Ouya’s software which might be installed on Xiaomi’s new TV setup box. There have been no recent exits for console startups. Thus opportunities seem scarce, but this might be because there have not been many new console startups.

Notable companies



Sony with their PSP systems – $240 and Nintendo with their DS systems – $120 onwards dominate the handheld market. Similar to the console market, Sony targets hardcore gamers while Nintendo targets the casuals. In addition, Nvidia recently launched a new video gaming handheld – the Nvidia Shield Tablet & Portable that is priced at $199. It was well-received with critics praising the new handheld as well-built and powerful8. Sales figures have not been released, hence it is still too premature to determine the reception among consumers. There are also more niche players in this space such as the GCWZero9 which was crowdfunded, and iReadyGo a Chinese handheld can also be used as a phone and costs RMB200010.


Dedicated gaming handhelds are undoubtedly facing pressure from smartphones, and sales have plunged as a result11. Chinese companies have tried to innovate in this area by combining the two features. There have been flops in the past, notably Nokia’s N-gage gaming phone12. However, with technological improvements and Chinese appetite for mobile gaming there might be some potential in this area. Quarterly sales of Nintendo’s 3DS in 2014 numbered around 2m, suggesting that yearly sales volume is around $1 billion.

Exit opportunities

Exit opportunities are not very clear.

Notable companies

Cloud gaming


There is much more competition here than in the previous two categories. In this sector, there is no clear market leader and a variety of business models that range from B2C (Onlive, Gaikai) to B2B (Playcast, G-cluster). On one hand, B2C companies operate on a subscription model, with users paying a subscription to access and play games. The value proposition offered to consumers is that they can rely on the cloud to provide processing power instead of owning the hardware themselves. On the other hand, B2B companies partner with entertainment providers such as TV networks to offer games to their viewers, either on-demand or on a subscription basis. Firms compete on technological prowess (i.e. latency) and game selections. Chinese startups are also active in this scene, with companies like Cybercloud and Gloud already active in the marketplace.


It appears that B2C business models do not work very well due to the lack of infrastructure and high cost of bandwidth for end consumers. Onlive faced challenges initially due to their focus on consumers13. “The company had deployed thousands of servers that were sitting unused, and only ever had 1,600 concurrent users of the service worldwide.”14 This suggests that there is not much consumer need for such cloud gaming products. B2B business models do appear to work better. Gaikai focused on partnerships with companies, getting their services and games onto existing distribution channels, instead of directly marketing to consumers or relying on a proprietary service platform.15 According to Sega’s managing director, the market for cloud gaming services is estimated to be around $460 million in 2015.16 In addition, user installed base is expected to increase fivefold to nearly 150 million in 2015.17

Exit opportunities

There seems to be potential in exits for cloud gaming companies. Sony recently acquired Gaikai for $380 million in 201218. Shortly after the acquisition, Gaikai services started appearing on the Playstation systems as Playstation Now, allowing users to stream old PS games on newer systems19. This suggests that cloud gaming companies make good tech acquisition targets, and with the video gaming industry trying to diversify product offerings, it might be a good time to invest.

Notable companies

Virtual Reality


Competition in the virtual reality (VR) space is pretty stiff with both large and small companies in the fray. The most famous company is Oculus20, whose main product is the Rift – a VR headset that costs $350. Cheaper alternatives also exist such as the Carl Zeiss’s VR One21 that costs $99. However, technical capabilities differ greatly between the two with the Rift using an internal display while consumers can use their own smartphones as a screen with the VR One. Although the majority of the population is familiar with VR headsets, there are many different types of VR products. Leap Motion and Nimble VR both developed a product that allows users to “bring their hands into the virtual world”. Virtuix developed a full-body machine that allows users to use their whole body to “step into the virtual world”. In China, ANTVR22 was recently successfully backed on Kickstarter, raising $260,000.


The market for VR is extremely nascent, with no consumer VR headsets in the marketplace right now. Samsung’s Gear VR which is developed in partnership with Oculus seems poised to be the first consumer-grade VR headset to be launched in Fall 201423. Although reception among critics have been positive, real consumer need for such headsets still has not been established. In addition, Leap Motion only secured approximately 500,000 units in first year sales at a price point of $80, having predicted sales of 5m units24. Results suggest that there is low consumer need in the area, with first year sales volume of Leap Motion at only around $40 million.

Exit opportunities

Although Oculus was acquired by Facebook for $2bn, this is the exception rather than the norm, with no other VR companies being publically acquired in recent years.

Notable companies

Gaming portals


The gaming portals space is crowded with many different sites that serve a variety of HTML5 and Flash games to their users. These sites generally do not develop their own games, but instead share ad revenue with game developers in order to acquire content. Monetization for both developers and the platform also comes in the form of selling virtual goods and microtransactions. Some sites including Kongregate, Gameforge and 17173 offer social elements like leaderboards and badges to get their gamers to spend more time on the platform. Although many portals serve games directly on the web or mobile, others like QQ Games require gamers to first download a general QQ client before they can play. In addition, some sites like Kongregate offer sponsorships to developers for their games, as long as the developers include a link back to the gaming platform site25. Chinese platforms and American platforms differ significantly in terms of site layout and focus. On the one hand, Chinese portals seem to act more like distribution channels, mostly requiring gamers to download specific game clients, with home pages reflecting such a focus. On the other hand, American portals focus on immediately getting users to start playing games, as can be seen from their home pages. In addition, in China, many large Internet companies are in the space and it might be difficult for a startup to enter the market.


The market for gaming platforms seem positive, and recent statistics from Gamestop’s annual report show that Kongregate has 3 million monthly unique visitors26. The report also mentions that the majority of the site’s revenue comes from microtransactions. Gameforge also reports high number of users and the same trend in microtransactions driving revenues27. Information for other platforms were difficult to acquire, but the longevity of gaming platforms (since the 1990s) suggests that there is demand for these services among consumers. Kongregate revenues were estimated to be around $4-10 million in 201028 and Miniclip’s is estimated to be around $30 million in 201029, suggesting that the total yearly revenue from this market might be around 100s of millions. With the lack of offerings and quality in the casual browser game portal in the Chinese market30 and the potential latent demand, we should further investigate this category.

Exit opportunities

Kongregate was acquired by Gamestop in 201031, Ijji was acquired by Aeria Games in 201032. This suggests that are opportunities to be acquired by companies who are in the game industry, but want to diversify their revenue streams.

Notable companies



The PC space is relatively fragmented with many different companies competing for market share. However, it is important to note that specialty gaming PC companies do not generally manufacture their own parts, but source components from hardware manufacturers like AMD or Intel. Value is created by configuring component parts to optimize performance in games (e.g. overclocking). Competition is stiff, and companies in China produce both gaming desktops and notebooks.


PC gaming is still the dominant money maker in the Chinese gaming market, attributing for $8.7 billion in revenues in 2013 as compared to $1.8 billion from mobile games33. With such high demand for PC games, there is undeniably demand for the hardware that supports these games. A study by JPR estimated the worldwide PC gaming hardware market to be about $21.5 billion, with enthusiast and performance PCs accounting for 70% of market share.34

Exit opportunities

Voodoo, an American gaming PC company was acquired by HP in 200635. Recently, in November 2014, Ngame closed a $10m Series A, led by Fortune Capital. These show that there might be opportunities for gaming PC startups to raise additional VC funding or to be acquired by larger PC manufacturing firms.

Distribution Channels



The competition for digital distribution of games occurs on a global scale and across 4 verticals: PC, console, handhelds and mobile. For online PC games, firms like Steam (Valve) and Origin (EA) dominate. These companies offer both English and Chinese versions of their sites, although the sites are not fully translated36,37. In China, large gaming companies such as Sina, Netease do not have an online distribution arm offering their consumers options to directly download PC games. Instead, they either redirect to the relevant gaming websites or to other distributors like Steam for downloaded PC games38. This lack of interest could be attributed to the fact that most popular English client games might not have Chinese versions. Furthermore, locally developed Chinese games generally do not distribute through stores such as Steam or Origin. In addition, extremely popular locally published games such as World of Warcraft (Blizzard Activision & Netease JV) also have different distribution strategies. For console games, online distribution is often vertically integrated. Console and handheld manufacturers offer their gamers the option to directly download games via the Sony Playstation Store, Nintendo eShop and Xbox Live. For mobile games, digital distribution is mostly conducted through app stores with Google, Baidu, Tencent and Apple all in the space.


Digital distribution has been gaining traction quickly as Internet penetration improves globally. In the US and EU, aggregate digital distribution has been growing at a 33% CAGR, while in China CAGR is projected to be 10% over the next 3 years.39 In addition, a report by DFC Intelligence states that digital PC sales represent 92% of all PC game sales worldwide. The market for digital distribution seems to be burgeoning and overtaking physical sales extremely quickly. Research by NPD Group estimates the global market for digital distribution to be around $7 billion in 201340. However, the lack of content in China suggests that foreign business models of distribution companies might not work.

Exit opportunities

In 2013 Linden Lab acquired Desura for an undisclosed amount in a bid to diversify41. In addition, online distribution startups might be attractive to large Chinese Internet companies due to their lack of digital distribution capabilities.



Competition in the offline distribution occurs across a variety of retailers, both specialty and non-specialty.


Offline distribution is contracting, and a large shift to digital distribution is occurring. Even distribution of console games which has traditionally occurred offline is moving online42. Hence, the market for offline distribution appears to be in decline with the NPD Group expecting double digit declines YoY for physical games43.

Exit opportunities

Exit opportunities are unclear.




In China, there is substantial competition for mobile publishing with both large Internet companies like Tencent and independent houses like CMGE (San Guo Zhi), Yodo1 (Cut the Rope), iDreamSky (Fruit Ninja), Chukong (Where’s My Water) competing for market share. All companies with the exception of CMGE are full-service publishing platforms that help Western developers localize, monetize and distribute their games in China. CMGE on the other hand concentrates on locally developed mobile games. Tencent (Candy Crush Saga) is also a mobile gaming publisher, partnering with King to bring Candy Crush to China exclusively through its Weixin/ QQ platforms. Other publishers who do not have vertically integrated distribution channels work with a variety of partners to distribute the mobile games that they publish.


As the appetite for mobile games in China increases, so does the number of foreign developers wanting to tap into the market. However, it appears that the market is already saturated with many players that court both local and foreign mobile game developers. Furthermore, hit game developers already have established relationships with mobile publishers in China. As publishing is a B2B business, startups wanting to offer such services have to tap existing relationships in order to succeed. In addition, knowledge and partnerships with various distributors are important in order to succeed as a publisher. These reasons seem to suggest that it would be difficult for a new player to enter the mobile publishing business. One possible way to circumvent existing relationships is for publishers to identify relatively unknown developers that have games with potential and publish them, entering at an earlier stage of the process and taking on more risk. A positive example would be iDreamSky, whose revenues grew from $3.1 million in 2012 to $40.7 million in 2013. The explosive increase suggests that there is still a lot of potential for growth in this segment.

Exit opportunities

In 2013, Yodo1 raised $5m in Series A round led by Singtel Innov844.



The competition for PC publishing in China is high with many large companies in the fray. Foreign companies usually operate via joint ventures (JV) with Chinese publishers to bring their games into the region. One notable example is the NetEase and Activision Blizzard JV, which allowed NetEase to gain substantial revenues through the World of Warcraft franchise45. Regulations make entering the Chinese market with a regular (i.e. non-web) PC game extremely difficult, and developers have go through a stringent approval process46. Rampant piracy results in Western games often being localized through unofficial language add-ons47.


As a result of piracy and regulations, we see that most foreign PC game developers who enter the market are MMORPGs that combat piracy through subscription or freemium models. As a benchmark, Perfect World’s online game operating revenues were $401 million in 2012. However, this number includes both the publishing and development arm.

Exit opportunities

Exit opportunities are unclear.



In the past, console game publishing was vertically integrated with the console manufacturer. However, manufacturers such as Microsoft have recently introduced self-publishing programs to empower developers to create more content for consoles48. This has spawned independent publishers such as Devolver Digital who might not provide financing to developers but instead help developers navigate the publishing process49. In China, console game publishing is extremely nascent, with authorities only recently lifting the 14 year ban on consoles in September 2014. Hence, there are few competitors in the market50. With the launch of Xbox One in China, Perfect World, Snail Games and Tencent are a few of the publishers working with foreign console game developers to bring their games to the region.


The market for console game publishers seem attractive. Although official sales numbers have been low so far, there is a booming console grey market in China with an estimated 2-3 million units sold at retail prices in 200951. Furthermore, there are few local developers of console games as a result of the ban. Thus, it appears that there is a huge need for publishing and localization services in order for foreign developers to tap into this market. However, there are both business and regulatory risks in the console industry. Firstly, gamers are unaccustomed to playing console games52. Secondly, there are regulations surrounding the type of content that console games can have53. Although there are both business risks and regulatory risks, the potential of the market combined with developers’ need and lack of competition makes this an attractive sector to investigate.

Exit opportunities

There have been no exits in the past. However, there is potential to be acquired by gaming companies looking to move into adjacent industries, or even for IPOs in a similar vein to iDreamSky.

Enabling Technologies – Software & Middleware

Game development


There is a lot of competition in game development software and middleware. This segment can be broken down into: 1) full-suite game engines and 2) specialized game engine modules. On one hand, full-suite game engines such as Unity combine different modules (physics, artificial intelligence, audio, etc.) into one platform, and provides developers with a comprehensive solution. On the other hand, specialized game engines such as the Havok physics engine provide developers with a single function that can be combined with engines from other providers. Besides differences in functionality, game engines also span a spectrum of platforms and genres. Niche game engines such as RPGMaker and Arcade Game Studio provide solutions for developers intending to create games in those genres. Platform specific engines such as XNA for the Xbox, provides developers an environment for creating platform specific games. Pricing models for game engines include one-time fee, subscription, licensing and free. Firms offer both open source (Cocos 2d-x), licensed (Unreal Engine), one time fee (Unity), and free (XNA) solutions to game developers.


The market for game engines consists of both established and independent game developers creating games for various platforms. In recent years, development tools have become more accessible to independent developers as gaming companies attempt to expand the games available on their platforms. The availability of such tools lowers barriers of entry into game development, which is a potential reason behind the increasing number of developers54. The low barriers and growing popularity of mobile games appear to suggest sustainable demand for niche gaming engines that cater to the mobile development crowd. However, although there seems to be demand for engines, the presence of established players in the market combined with the difficulties a startup will face in creating a proprietary engine makes this segment a difficult one to enter. Exact revenues of game engine companies are unavailable. However, Unity Technologies, with 45% market share, announced that revenues grew 130% year on year55.

Exit opportunities

Game engine companies have been acquired by companies in the same industry but adjacent verticals. One example is the acquisition of Corona a 2d mobile game engine developer in 2014 by Fuse Powered a mobile payments firm for an undisclosed sum. In the same year, Bitsquid, an interactive engine was acquired by Autodesk for an undisclosed sum.

Game monetization


Although game monetization may occur across a variety of methods, one-time payments are relatively straightforward to implement – developers/ publishers charge a single fee to provide gamers access to their games. This section will instead focus on middleware that aid freemium games in monetization. There are two main ways to monetize a freemium game: 1) in-game ads, and 2) in-game payments. Both types of firms generally operate on a revenue-sharing basis with game developers.

The space for in game advertisements is very fragmented with no dominant player. These companies generally do not cater only to games. Instead, they offer solutions for products with ad inventory to sell/ manage. Companies such as Vungle and Beachfront specialize in newer formats such as video ads, while mature formats such as interstitials and static banner ads are offered by companies such as Fusepowered and Playhaven. Bigger companies like Airpush offer multiple ad formats. Ad monetization companies mostly compete via proprietary algorithms that aim to optimize revenue from inventory. Mo9 is a unique Chinese business that allows players to pay after consumption of virtual goods.

In game payments are generally controlled by the distribution channels. For example, Apple and Google both offer in-app payment SDKs that developers must use when integrating in-app payments for apps that are distributed in their app stores. These SDKs are secure ways for consumers to make payments using specified methods. For 3rd-party app stores without payment restrictions, developers have the option of integrating solutions from companies such as Fortumo and OKPay. These companies offer payment solutions such as carrier billing or bank transfers that might not be offered by Google or Apple’s payment SDKs.


Likewise, the market for mobile monetization can be broken down into two categories: 1) in-game ads and 2) in-game payments. A report by IDC and App Annie estimates the revenue generated by in-app ads to be around $8 billion in 201356, and in-app payments in iOS App Store to be around $7.7 billion (author’s estimate)57. With games accounting for 66% of total app revenues58, the market for game monetization software appears to be large. As freemium models gain traction, revenues from both categories might grow further in the near future. However, rates differ across regions, with India estimated to experience the highest growth at 8.7x from 2013 to 2017. The popularity of ad formats also differs across developers, with newer formats gaining popularity in 2014.

Exit opportunities

There appears to be opportunities in exits for game monetization companies with Science Inc. a holding company acquired Playhaven a in-app advertising company in September 2014 for an undisclosed amount. Yahoo acquired Flurry for $240 million in 2014.

Video Game Analytics


Competition in video game analysis is high with both: 1) video gaming analytics specialists and 2) analytics generalists. On one hand, specialists such as Ninja Metrics and Unity focus more on user analytics and often provide such capabilities out of the box. On the other hand, generalists such as Google Analytics and Mixpanel require more configuration for video gaming applications. These companies generally operate on a subscription basis, and charge according to the amount of data being processed by the software, usually calculated via MAUs (Monthly Active Users).


The size of the video gaming analytics software market is uncertain and there is a lack of research in the space. However, since there are approximately 200m video gamers in the USA59, and DeltaDNA charges $1,800/month for analyzing 500k MAUs, a conservative estimate for the global video gaming analytics market would be below $500 million.

Exit opportunities

Exit opportunities are unclear for specialist companies. However, for generalist companies there appears to be interest in the market. Generalist company, Flurry was recently acquired in June 2014 by Yahoo for $240 million.

Game Developers



Competition in mobile game development is extremely stiff, with both established companies and independent developers in the space. Both production values and genres of games vary widely. Likewise, cost for mobile game development range from tens of thousands to millions of dollars60. In addition, although business and monetization models differ widely, there has been a shift to freemium models. A study by IDC and App Annie showing that freemium business models receive the most revenue followed by in-app advertising models61.


Mobile has undoubtedly boomed in recent years, and is projected to double in revenue from $17.5 billion in 2013 to reach $35.4 billion by 201762. However, despite the growth, it is important to note that successes are rare with 92% of all Chinese mobile games losing money63. Investing in mobile game developers are thus a risky affair, but with potential for huge payoffs.

Exit opportunities

Successful developers with breakout games might go on to be acquired by larger companies. For example, in 2012, $210 million acquisition of Funzio by Gree, $325 million acquisition of Playcrab by Ourpalm. Recent years have also seen successful mobile game developer IPOs, including: 1) King – maker of Candy Crush Saga, 2) Forgame – maker of 风云天下, 3) Ourpalm – maker of 3D Ultimate Racing.


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Accelerating to Success

China’s Startup Incubation Landscape

Download full PDF (0.7 MB)
Download full PDF (0.7 MB)


Mr See Wei Jie, Analyst

Mr James Tan


This report covers the expansive Incubation scene in China. With its status as a global economic powerhouse, there has been a surge in the number of incubators there, each with their unique characteristics. With the in-depth analysis provided within the report on these features and how they impact the startups within the incubator, readers will get a better understanding on the type of incubators and the startups suited to join each one.


Mr James Tan
Managing Partner
Quest Ventures

With more than 1,000 incubators across China, it is timely to take a look at this phenomenon, its evolution and achievements.

A spurt of new accelerators modeled after the US-based Y-Combinator, and an increase in venture capital funding, have sparked interest in many universities, corporations and investment firms in the accelerator model. In what is very much still virgin territory, the definition of accelerator is up for debate. We attempt to end the debate on the definition in this report.

Some of the new accelerators have grabbed the spotlight. We dive into their programming, their model, and their results. The report concludes with what we believe to be the key ingredients contributing to the success of any accelerator model.

In time, will China have a competitor to Y-Combinator?


Ever since the concept of seed accelerator sprung up in 2005 in Silicon Valley, it has been an avenue for serial entrepreneurs and investors to connect and shape startups into a scalable and viable business. An accelerator derives the majority of its characteristics from an incubator, thus we would like to start off by introducing the concept of incubation and acceleration.


There are no definite definitions of what an incubator is, according to the National Business Incubation Association, “a business incubator is an economic development tool designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services. To put it simply, we define incubator as:

“An organization that complements an entrepreneur’s lack of business skills by providing the assistance to fill the knowledge gap they need to develop a successful business and product.”

There are five primary services/assistance that business incubators offer to start-ups, they are (1) Financial Consulting Service, (2) Management Assistance, (3) General Business Assistance, (4) Professional Business Assistance and (5) Physical Services. As a result of these services that startups can tap on, incubators have become a popular option for technology startups on a global scene. The rise of startup incubators can be attributed to a myriad of factors ranging from government initiatives to private investors looking at developing their portfolio. More importantly, this trend points to a higher level of venture capital activity in a highly competitive technology industry.

Types of Incubators

There are two types of incubators in general, namely (1) Non-profit and (2) For-profit. We understand that in the US, 25% of incubators are for-profit while 75% are non-profit. As the name suggests, non-profit incubators are normally owned by governments or universities while for-profit incubators are owned by privately owned with the purpose of making profits. We can further classify incubators into the following:

After a brief introduction about the concept of incubators, we will move on to discuss more about accelerators.


Before we start on this section, we need to ask ourselves one question. Are accelerators any different from incubators? Essentially, incubators and accelerators share common features of providing an environment to serve the needs required from a startup and also only accepting startups with potential commercial viability. We want to point out one major difference between an incubator and an accelerator, which is the length of the program period. Normally, an accelerator will only house a start-up for up to 6 months.Before we start on this section, we need to ask ourselves one question. Are accelerators any different from incubators? Essentially, incubators and accelerators share common features of providing an environment to serve the needs required from a startup and also only accepting startups with potential commercial viability. We want to point out one major difference between an incubator and an accelerator, which is the length of the program period. Normally, an accelerator will only house a start-up for up to 6 months.

The Rise of Accelerators

In 2005, Paul Graham proposed the idea of a seed accelerator by setting up Y Combinator. The accelerator is a short-term program (usually from 3-6 months) where startups are housed in an accelerator and given the support they need. The support may include working space, legal and banking services, mentorship programs, networking opportunities in return for a small proportion of the startups equity. The idea of a quick short-term program, with an aim of accelerating the growth of startups, became very receptive. Startups saw this as a chance to become big and obtain the facilities and support they required to grow.

Grey Area: Differences between An Incubator and An Accelerator

It is necessary to dedicate a section to discuss the differences between an incubator and an accelerator. We believe that the distinction between an incubator and an accelerator is important as the concept of incubation and acceleration tends to be used interchangeably at times.

During our own research process, discussions were held to strengthen the understanding of the concept of incubation and acceleration.  Before we start on this section, you might want to think about how you differentiate an incubator from an accelerator? We will share our thought process in this section and list down some questions that we asked ourselves during the course of our research process.

1) Does an acceleration program need to provide a common working space for companies participating in the program?

2) Is an acceleration program not providing for common working space considered an accelerator?

3) If an incubator offers an acceleration program, are they now considered an accelerator?

A Third Dimension

After going through those questions, I hope you roughly get an understanding of how to differentiate an incubator and an accelerator. From our point of perspective, we believe there is a third dimension to be added to the concept of incubation and acceleration, and this third dimension is an acceleration program. What do we mean by an acceleration program? We start off by putting out this equation called the Accelerator Equation:

Accelerator = Incubator + Acceleration Program

This is the equation that will differentiate an accelerator from an incubator. However, when we say differentiate, it doesn’t mean that an accelerator is different from an incubator. An accelerator is essentially an incubator running an acceleration program. There are two single components on the RHS of the equation, incubators and acceleration program. You can be an incubator just by itself or an organized acceleration program just by itself. But in order to be an accelerator, you need to have both components, incubator and acceleration program.

Acceleration Program

We have discussed what is an incubator and what is an accelerator. So this section will touch on exactly what is an acceleration program? In this section, we will discuss the acceleration program as a single entity, which means that these types of programs do not provide for a common working space for its participants. Thus, this will exclude those acceleration programs that are managed by accelerators.

Acceleration programs are normally hosted by companies with the primary motivation of marketing their products to participants. Examples of such programs in China include the IBM Smart Camp and Microsoft’s “Cloud Accelerator Program”. Most commonly, common working spaces are not provided, however, valued-added business services will be provided for participants.

In the next part of this report, we will take a look at the startup scene in the U.S, in particular the incubator scene. With the US as the benchmark, we can relatively gauge the direction of where China’s incubator scene is heading towards. For the purpose of this report, we will generalize incubators and accelerators under the broad term of incubator.

A Case Study On US Incubators/Accelerators Scene

Silicon Valley has housed more billion dollar companies than any other startup ecosystem anywhere else. Hence, we find it appropriate to devote a section of our report to discuss and analyze the various aspects of the ecosystem in Silicon Valley that we feel are applicable in China’s context. In particular, we will discuss in-depth about Silicon Valley’s prominent accelerator, Y Combinator.

A quick look at the funding sources for startups in the US (Figure 1) shows that Incubators/Accelerators make up about 11% of the funding sources. This means that one-tenth of startups in the US are funded by incubators and accelerators. This is a healthy percentage and we will use this figure as a comparison figure to evaluate China’s incubation landscape.

As expected, the percentage of Self-funded and Family & Friends stands at 35%, this underlines the importance of bootstrapping in the path of entrepreneurship. However, this also outlines the importance of networks. If the entrepreneur is not equipped with wide personal networks, bootstrapping will not be able to provide the network that incubators/accelerators will provide. By performing a simple linkage of incubator/accelerator and potential investors, we can say that around 64% of total funding sources are linked to incubators/accelerators in the US. This figure will be referred to in the later section of the report. The percentage of related funding sources of incubators/accelerators indicate the importance of incubators/accelerators in the US startup scene.

Y Combinator

In this section, we will look at one of the most popular accelerators in the world, Y Combinator. They are the pioneer of the term “Accelerator” and invest seed money in nascent startups and assisting to turn their ideas into companies. Founded in 2007, Y Combinator assists promising startups in exchange for their equity (in the range of 2-10%). Being one of the most popular accelerators, it is estimated that only 65 out of 1000 applications are selected to participate in the program (Barrehag et al, 2012).

Following is a brief summary of Y Combinator’s accelerator program presented in a table:

Since 2005, Y Combinator has funded over 460 startups with prominent ones such as Dropbox for example. With the great success following this new model of startup funding, there is an increasing incubator trend in the US. We will take a closer look at this trend in the next section.

Incubators Trends

According to statistics from National Business Incubation Association (NBIA), there is a growing incubator trend during the timeframe of 2002-2011 in the United States. The total number of incubator programs in the US has grown by approximately 47% from 2005 – 2011. About 463 of the 1400 incubators estimated were from the technology sector.

To Use Incubators or Not?

It is estimated that about 4% of startups are in incubator programs in the US. NBIA-funded research indicates that startups taking part in incubators program nearly double the survival rate of those that did not participate in an incubator program (Markovich, 2012). According to Bloomberg, incubated startups’ survival rate after 5 years stand at 87% as compared to 44% for startups that didn’t use incubators (Bloomberg, 2010).

As seen from the statistics, 87% of incubated startups survived after 5 years as compared to 44% of startups that had not participated in any incubator programs. On an absolute figure, the number of surviving non-incubated firms is higher than the number of surviving incubated firms. However, it is of no doubt that incubators will greatly increase the probability of survival. There are of course doubts cast over this overly optimistic figure and effectiveness of business incubators that we thought would be interesting to point out.

A study conducted by Amezcua of the Whitman School of Management questioned the effectiveness of business incubators opposed to that of the statistics released by NBIA (Blanchard, 2012). According to Amezcua research, 42% of incubated firms failed by 3.63 years in his sample size of 655 incubated firms and only 4% managed to exit their incubator.

Factors Contributing To Effectiveness of an Incubator

According to our understanding, Amezcua is not undermining the effects of a business incubator but trying to point out that claims that incubators are highly successful are overstated. We acknowledge this fact and also want to point out that one study is not definitive of business incubators’ effectiveness in general. However, Amezcua’s research serves to point out the importance of several factors contributing to the success of firms going through an incubator/accelerator program. We have identified factors skewing the result of any research studies on the effectiveness of an incubator/accelerator:

Role of US Government

With the United States having one of the oldest and largest incubation systems, it would be interesting to give an overview of the role the US government plays in the US incubation/acceleration scene. Governments globally view business incubators as a tool to foster new ventures primarily to achieve the objectives of job creation and economic development (Aruna Chandra T. F., 2009).

In May 2012, the Obama Administration announced a $26 million Advanced Manufacturing Jobs and Innovation Accelerator Challenge to accelerate “innovation-fueled” job creation and economic prosperity (U.S. Department of Commerce, 2012), this is an example of how the US government participated in the incubation and acceleration scene in recent times. The US government’s involvement in the incubators/accelerators scene is mainly through funding under various levels (federal, state and local) (Aruna Chandra T. F., 2009). Most commonly, the source of the funding will decide the strategic focus and selection process of the respective incubators/accelerators. In the case of government funding, the incubator will be more inclined to achieve the main objective of economic development.

After going through briefly on the incubation/acceleration scene in the U.S., we will move on to the next section of the report to focus on the incubation and acceleration scene in China.

China’s Incubators Landscape

Ever since the implementation of the Torch Program by the Ministry of Science & Technology (MOST) in 1988, the number of Business Incubators (BIs) increased from 100 at the end of 1988 to more than 1000 incubators nationwide by 2011 (智妍数据研究中心, 2012). It is also estimated that the number of high technology incubators is above 900 with 346 owned by the Chinese government. China had undergone two major phases of business incubator growth from 1988 till present. The first phase lasted for a period of 10 years during which the government only provided “physical resources, such as land and buildings, along with access to governmental sources of risk capital with little or no emphasis on value-added services, such as business consulting or networking” (Aruna Chandra C.-A. C., 2011). The second phase marks the development of increasingly specialized and industry-specific incubators with a focus on serving high-tech enterprises and entrepreneurs by providing a wider range of services from low to high value-added service (Yan Z. , 2004). Following the second phase of incubation growth in China, there are currently several major types of BIs in China. We will discuss the different types of incubators in China in the next section.

Types of Incubators in China

There are several types of business incubators in China and we have summarized it into a formatted table as follows:

Source: (Yan Z. , 2004), (Aruna Chandra C.-A. C., 2011)


Incubator Business Model In China

After looking at the different types of business incubators there are in China, we will now discuss the different types of business models that a business incubator in China can adopt.

“Incubation + Seed Funding” Model

This model represents those incubators situated in university science parks leveraging on the university’s background, reputation, alumni connections and deal sources. With the university science parks’ resources, the incubators under this model are able to identify startups in a particular rising industry with high technological advancements. From the identified list of prospective start-ups, the incubators will provide seed funding and incubation services in exchange for equity stake in the prospective start-ups. Examples of start-ups that IPO-ed under this type of incubation model include Highlander (海兰信)、Sumavision (数码视讯) etc.

“Angel Funding + New Product Innovation” Model

Innovation Works (创新工场) is the perfect representative of the “Angel Funding + New Product Innovation” model. We will discuss Innovation Works in greater detail during the later part of the report. Incubators under this model will usually invest in the form of angel investments in startups in the sectors of mobile Internet, e-commerce, cloud computing and other new digital media. Normally, incubators under this model will group together a management team of angel investors and managerial professionals who had prior experiences in high-tech firms such as Google, IBM etc.

“Centralized Platform + Union” Model

This type of incubator model focuses on bringing all the startups in a particular industry together. With all the relevant companies in a particular location, incubators under this model provide all the facilities and professional services particularly in the research & development area. This forms a self-sufficient ecosystem in a way under this type of incubator model and once the scale becomes bigger, the entire ecosystem may form a union for that particular industry. HuiLongSen International Business Incubator (汇龙森科技企业孵化器) is one such incubator adopting this business model.

“Mentoring + Equity Stake” Model

The critical factor of this incubation model is the management team of the incubator. The management team is made up of qualified professionals acting as a mentor for a particular startup. On top of mentoring, the mentor will hold equity stake in the startup that he or she is mentoring. This will align the mentor’s interest together with that of the startup, be it facing the possibilities of failures and losses and reaping the benefits of a possible successful venture. An example of an incubator adopting this model is 博奥联创科技企业孵化器. A few successful firms coming out of this incubation model includes Lepu Medical (乐普医疗) and Sanyouhuizhi Bio-Tech (三友汇智).

“Demo-day Competition + Angel Investment and Mentoring” Model

This model focuses on organizing events to attract participants to pitch their day. To put it simply, it is a direct demo-day for aspiring startups. Most commonly in the form of a competition, participants will pitch about their ideas and lay out their business plans. Successful participants may garner possible angel investments or mentorship. One such example of this model is by Lenovo where a fund of RMB 400m is set up to organize “联想之星创业CEO特训班”.

China’s Incubator Trend

As mentioned previously, there is an increasing incubator trend in China and we expect it to stay this way in the near future. The number of Business Incubators (BIs) in the Science and Technology sectors increased from 131 at the end of 2000 to more than 1000 incubators nationwide by 2011.

Source: China Torch (2012)

Spring of Private Incubators in China

There is limited data on the number of private incubators. Out of the limited data we found, there are two sides being presented based on the secondary research materials that we benchmarked against. The first research study shows that there are only a handful of private incubators (for-profit) in China. This signifies the risk-adverse model in contrast to the American model as a typical conservative Chinese government venture fund still couldn’t accept the idea of 10-20% success rate of portfolio companies (Harwit, 2002). Another source stated that about 30% of the incubators in China are private incubators (Yan L. , 2012).

We have taken into account the time period of the studies conducted, and have incorporated some assumptions in the following analysis. In a span of 10 years, the number of private incubators has grown at an astonishing pace. By assuming that about 10% of incubators in 2002 are private incubators and 30% in 2012, the number of private incubators has grown at a CAGR of 37% during the period of 10 years. If we moderate the growth rate to 10% till 2017, there should be about 500 private incubators by then.

The increasing trend of private incubators only serves to reinforce the integration of incubators, venture capital and profit motivation. De-aligning the incubators from the public hand will only allow the incubation system to move towards a more risk-tolerant model without being restricted by obligations of careful handling of government’s fund. We believe that as private incubators play an increasingly major role in operating and financing incubators, China will begin to reap the full risk and reward benefits that private capital flows can offer. In the later section of this report, we will be discussing in-depth on some of the private incubators in China.

Incubators’ Efficiency Level in China

We define incubators’ efficiency level as the incubators’ ability to advance the startups to the next level in terms of garnering funding. Funding can come in the form of Series A funding and to the most optimal case of Initial Public Offering (IPO). We have managed to gather some brief information to give a better understanding of how incubated firms in China are performing and these statistics will serve to indicate the effectiveness of Chinese incubators.

From the charts, we can see that only 1.47% of the total number of firms incubated in China managed to exit. The exit statistics pale when compared against the percentage of firms that exited after going through accelerator programs abroad.

This data includes both for-profit and non-profit incubators and due to limited data, it is generally hard to segregate the effectiveness of for-profit and non-profit incubators at a macro-level. However, we will perform a micro analysis at a firm level for a selected few private incubators in the later part of the report. We will move on to discuss the role of China’s government in the incubation scene to further evaluate the incubation scene.

Role of China’s Government

Comparatively, government involvement in the incubator scene is very high in contrast to the role of the US government’s involvement in the incubator scene. The Chinese government is very influential in the aspects of organization, funding and strategy for the incubators (Scaramuzzi, 2002). Research has shown that government involvement is negatively co-related with incubators’ market orientation and entrepreneurial proclivity (Aruna Chandra T. F., 2009). This means that with higher government involvement in an incubator, related investors will tend to be more risk-averse and tend to make less risky investment in their client firms. This is supported by the fact that incubators in the southern regions (Shenzhen etc.) tend to embrace risk more than their counterparts incubators in the northern regions as a result of higher government involvement with arm’s length financial relationship with their incubatees (Aruna Chandra T. F., 2009). We have come up with a simple matrix to signify this relationship.

From the simple matrix, we can see that not just in China’s context, as the government’s involvement in an incubator increases, the benefit gained from potential government subsidies is higher at the expense of the higher potential opportunity costs involved with less risky investments. Moving forward, there is definitely an increasing trend of moving towards a private/mixed ownership incubator structure. We reiterate that there is a need to move forward in this direction. Even for incubators currently funded by the government, their investment thesis shouldn’t be bounded and built around the objective of not losing the government funding. This would only promote the current lack of risk in contrast to the West. Rather than being obliged to avoid “losing” the government resources, incubators should start to embrace risk and increase start-ups’ access to funding.

With little international academic literature covered in the field of accelerators, we feel that it will be interesting to include a section to discuss what an acceleration program is and also the progress of acceleration programs in China.

Accelerator’s Model for China in the Future?

An accelerator derives most of its characteristics from a typical business incubator. Acceleration programs developed from a conventional incubation program as a new way of incubating technology startups in particular (Lisa Barrehag, 2012). We hold the viewpoint that soft start-ups, such as web or mobile related products, are more suitable than any other industries for an accelerator model as it is not as stigmatized as an incubator model. Thus, as the number of acceleration programs increases, most of them will still be concentrated in the field of web or mobile related products requiring relatively lower development costs. We will list out some of the key characteristics of an accelerator model below:

  1. Highly Competitive Open Application
  2. Preference for small teams over single entrepreneur
  3. Short and fixed-duration program
  4. Program participants “graduate” in batches

Network and connections to investors are critical aspects for long-term success for startups, as such; one of the main objectives of an accelerator is to ensure that a startup that graduated from its program secure funding from investors. Only with funding will the startup be able to further develop their product after the accelerator program (Christiansen, 2009). An increasing number of startups require more than just value-added services from Phase 2 incubators in China. They want programs tailored to increase their possibility of securing funding. Thus, there is an increasing demand for accelerators programs in China, which brings us to the point of the possibility of going onto the next phase of incubation, seeing the rise of accelerators model in China in the future.

Accelerator’s Trend in China

With limited information on privately held accelerators, we would be discussing China’s accelerator trend based on the data provided by government organizations. There are two phases involved in the accelerator scene in China as well, Early Phase (2000-2005) and Development Phase (2006 -2009). During a span of 9 years, China became the second biggest country in terms of the number of business accelerators with 23 in total after the US (47 business accelerators) (HE Kefang, 2012).

Source: (HE Kefang, 2012)


Looking at the data, we can see an increasing trend of business accelerators. As seen from the chart, from 1 accelerator in 2000, the number has increased to 23 in 2009. This represents a CAGR of 41% and if this growth rate remains for the next 5 years, the number of accelerators in China will reach 45 by 2018. As a result, we believe that there is a huge potential for the commercialization of accelerators in China.

Geographic Distribution of Accelerators in China

Not surprisingly, the accelerators in China are congregated in the Northwest and Southeast regions as shown in the figure above (HE Kefang, 2012). This could be due to the fact that technological resources are easier to access in these regions as compared to the central regions, which lead to higher demand for accelerators. Out of the 23 accelerators in China, 10 of them are located in Zhusanjiao, Changsanjiao and Zhongguanchun area. In a way, this reflects the economic development strategy that is implemented by the Chinese government; primarily focusing on certain areas.

We have covered the incubation and acceleration scene at a macro level. In our next section of our report, we will proceed to analyze China’s incubation and acceleration scene at a micro level. We intend to perform an in-depth analysis on selected incubators and accelerators in China.

Accelerators and Acceleration Programs in China

In this section, we will take a look at some of the incubators in China and give our thoughts and analysis on each of the incubators or accelerators. In this section, we will present our evaluation on these incubators based on metrics that we have derived (Appendix 1).

Innovation Works (创新工场)

Innovation Works was established by Dr. LEE Kai Fu in September 2009 to encourage entrepreneurship among the young Chinese people community. At the point of initial introduction, they represent a novel type of business model incorporating elements of Angel Investment, Business Incubators and Mentoring. As of September 2012, Innovation Works has invested in 50 startups, with 18 of them garnering Series A funding and 1 securing Series B funding (上方文Q, 2012). We present a brief summary of the Innovation Works Acceleration Program.

The figure above indicates the relative effectiveness of the Acceleration Program in Innovation Works. Being one of the more popular accelerators in China, these figures will be utilized later on to evaluate the rest of the incubators.

Accelerator Cycle

This section will touch on the cycle of the acceleration program in Innovation Works. The analysis will provide an understanding of the process of the six months program.


For the secondary research materials that we have gathered, Innovation Works does not have a fixed cycle for an acceleration program. Any application sent in to their designated email will be considered. This is a typical source of deal flow for a venture capital firm and Innovation Works seems to be heading towards a VC direction.

Since its inception in 2009, Innovation Works had received more than 5000 applications and only invested in 50 out of these applications (上方文Q, 2012). This translates to a mere 1% acceptance rate into its acceleration program. However as compared to Y Combinator’s acceptance rate of 6.5% (Chapter 2.1), one might be inclined to think about the huge disparity in the acceptance rate. Does the 5.5% difference signify the opportunity cost lost due to lesser tolerance for risk? This ties in with our previous discussion of a lower risk tolerance level in China. However, it would be unfair to say that Innovation Works is risk-averse as the low acceptance rate could be due to a lack of ideal business plans fitting their investment thesis.

In the team aspect, we feel that Innovation Works can improve by increasing its acceptance rate into its acceleration program as 50 incubatees in 3 years is certainly too little to satisfy a growing market in China.

Innovation Works targets startups in the area of mobile internet, e-commerce and cloud computing (百度文库, -).

Innovation Works is looking for startups whose founders are equipped with some experience in the field relevant to its product offering. The founder can be a first-time or serial entrepreneur, but the team must be able to display knowledge and a clear vision of how the business should progress within a certain time frame.


Like any other acceleration program, Innovation Works provides a common working space and valued-added services such as funding, business plan optimization, technology guidance, marketing, human resources and legal assistance. But the main drawing point of Innovation Works’ program is its network.

Being backed by an elite group of investors including Fortune 100 companies and prominent venture capital funds, this provided a solid network for participants in Innovation Works’ program. We feel that intangible services like networks are critical in today’s incubation and acceleration scene as it determines a startup’s possible exit routes and potential additional resources. In this aspect, Innovation Works’ program definitely offers participants one of the most important services; networks.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the accelerator program, such as the details of startup financing and the networks of Innovation Works.

Financing the Startups

In the most recent interview with China Business Journal, Lee Kai Fu responded to this question by stating that Innovation Works normally take a 15-20% equity stake in participating startups. (YANG, 2012). As compared to the equity stake Y Combinator is taking, Innovation Works tend to be taking a higher equity stake. The higher than average equity stake as compared to conventional angel investors might put off some entrepreneurs and this represents some opportunity costs.

Networks and Mentors

Innovation Works selection procedure means that startups would have their existing networks should any problems be encountered. However, Innovation Works has a strong full time employee base who will be there to assist the startups whenever necessary.


Innovation Works started out as a fresh concept of combining elements of angel investment, business incubators and mentoring. Today, one may be more inclined to think of them as an investment firm after the closing of their second fund, Innovation Works Development Fund II.

Even with a fund, if the acceleration equation is adopted, Innovation Works is considered as an accelerator as it provides common working spaces and value-added services (incubator) and offers an acceleration program for its incubatees.

There are some slight concerns over the higher-than-average equity stake and low acceptance rate. Even with these slight concerns, for an accelerator, Innovation Works has performed very well in terms of providing the incubatees with the most important resources, the network to grow. This is definitely an area that other business incubators or accelerators find hard to emulate.

Chinaccelerator (中国加速)

Based in Dalian, Chinaccelerator is founded by Sean O’Sullivan and Cyril Ebersweiler. Chinaccelerator launched its first acceleration program in 2010 and there are 23 startups across three batches to date. The program will normally take place between August to October annually.

Accelerator Cycle

This section will touch on the cycle of the acceleration program in Chinaccelerator. The analysis will provide an understanding of the process of the three months program.


What is the percentage of successful applications for each program cycle?
Chinaccelerator will take in about 5-10 startups for every batch annually (Chinaccelerator, 2012).

What industrial sectors are targeted for their incubation/acceleration program?
They are targeting web-based and software startups with a preference for disruptive technology solutions with a small amount of startup capital (Chinaccelerator, 2012).

Who are they looking for?
They are looking for founders with an idea to create an impact in the current technological state. The team must be equipped with the necessary business and technical skills to move the product offering forward (Chinaccelerator, 2012).


What are the benefits of the program?
Chinaccelerator is banking on its wide network of mentors as its main drawing point. The main benefit that is constantly being emphasized is the connections and advice garnered from intense mentorship during the program. A quick look at their corporate webpage shows that Chinaccelerator did not even raise up the benefit of value-added services like legal services etc. Just like Innovation Works, the tendency to market your accelerator with your network must depend on who your backers are. Chinaccelerator is a member of Techstars network and Global Accelerator network.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the accelerator program, such as the details of startup financing and the networks of Chinaccelerator.

Financing the Startups

In terms of equity stake, what is the average equity stake taken in the incubatees?
Batch 1: CNY 40,000 for 4 – 8% equity stake (Chinaccelerator, 2012).
Batch 2: USD 10,000 for 4 – 8% equity stake (Lim, 2011)
Batch 3: USD 12,000 for 5 – 8% equity stake (Chinaccelerator, 2013)

From the three batches, it seems that funding size has increased while equity stake demands stayed the same. This just means that either valuation had gone up or Chinaccelerator decided to invest in companies that are slightly more mature.

Networks and Mentors

From their webpage, Chinaccelerator has about 60 mentors giving guidance to their startups. However, most of the mentors are not based in the accelerator itself but stay connected virtually with their mentees.


Apart from the mentorship and network that Chinaccelerator is marketing itself on, there are no prominent areas that Chinaccelerator is marketing itself on to help the startups. Important intangible services like networking and mentorship sessions may be, but there could be a little bit more emphasis on value-adding business services.

Also, there are concerns over the geographic location of Chinaccelerator. Locating it in Dalian might not be the most strategic in the long run. Certainly, start-ups can focus solely on their startups throughout the program and also there are technological resources in the area. However, as more and more batches graduate, will graduates of Chinaccelerator’s program stay on at Dalian or would they move on to Zhong Guan Chun in Beijing? There is a higher possibility that the startup will move on to Beijing in order to be closer to the more developed startup ecosystem in Beijing. This points out the problem of accessibility to alumni resources in the future. For example, if Chinaccelerator requires certain help from a certain alumni based in Beijing, would Chinaccelerator find it easier to get help from their alumni if they were based in Beijing rather than Dalian?

Tisiwi (天使弯创投)

Tisiwi was founded in 2010 by Pang Xiaowei. Tisiwi currently manages two venture capital funds and is based in Zhejiang. They are planning to invest around USD 80m in the Internet sector for the next 5 years (Tisiwi, 2012).

There are two types of products offered by Tisiwi, pure angel investment and acceleration program termed as 聚变 program. We will focus on Tisiwi’s acceleration program. The program is held twice per annum during spring (March – May) and autumn (August – October). The length of the program is three months and held in Zhejiang. Below is a brief summary of the program:

Accelerator Cycle

This section will touch on the cycle of the acceleration program in Innovalley. The analysis will provide an understanding of the process of the three months program.


Tisiwi will take in 10 startups for every cycle, the actual number of applications cannot be determined (Tisiwi, 2013).

Similar to the previous two accelerators, Tisiwi focuses on the TMT sector and only invests in startups with product offerings in the area of mobile internet, online gaming and e-commerce for example (Tisiwi, 2013).


Tisiwi provides common working space and intangible services like networking sessions, sharing sessions and mentoring hours on top of regular business services provided. Tisiwi’s main marketing point revolves around being part of the Tisiwi’s family throughout the 3 months program. There’s a particular component that is being highlighted in Tisiwi that previously discussed accelerators failed to bring to attention, which is the interaction between current and previous batches of the acceleration program.

Tisiwi termed this component as entrepreneurship debug and it involves discussions on the difficulties the current batch is facing. This also serves as a session for the startup to update on their progress. This is certainly an important component program that differentiated Tisiwi from the other competitors in the market. (Tisiwi, 2013).

Accelerator Organization

In this section, we will touch on the different building blocks that make up the accelerator program, such as the details of startup financing and the networks of Innovalley.

Financing the Startups

In terms of equity stake, what is the average equity stake taken in the incubatees?
The equity stake required from Tisiwi stands at 8% with an infusion of approximately USD32,000 capital (Tisiwi, 2013).

Networks and Mentors

Tisiwi has a mentor base of around 30 people experienced in the technology sector. From the mentor base, most of them are Chinese entrepreneurs.

Networks with investment firms are not restricted to early-stage VC firms but also include firms such as IDG that invest in later-staged startups.


From the discussion of Tisiwi, it definitely stands out as one of the accelerators who differentiated itself from the list of accelerators in the industry. Differentiating themselves by marketing on a provision of a collaborative environment is definitely a strategic choice. By encouraging interaction between current and previous batches, participants in their acceleration program might gain perspectives they would never have if such sessions had not been organized. This is one aspect that Tisiwi performed well.

Innovalley (创新谷)

Founded less than a year ago in June 2012, Innovalley envisions becoming the next powerhouse in the accelerator business. Based in Guangzhou, Innovalley is founded by ZHU Bo, who IPO-ed NeTrue in the US and founded Cgogo in China (Baidu, 2013). The acceleration programs are organized twice annually during Spring (April – June) and Autumn (October – December).

Accelerator Cycle

This section will touch on the cycle of the acceleration program in Innovalley. The analysis will provide an understanding of the process of the three months program.


There is no clear indication on the number of applications received, but what we do know is that the number of startups for each acceleration cycle is 20 (Innovalley, 2013).

Innovalley focuses solely on the TMT and mobile internet sector.

The product can be early-stage but there must be an existing prototype and team structure.

The team size can range from 3 – 10 people and they are required to move to Guangzhou for the duration of the acceleration program.


Innovalley offers value-added business services such as legal services and human resources needs etc. The program also includes networking and mentoring sessions. However, Innovalley stressed that the mentoring component is a one-to-one physical mentoring with a subject matter expert in a particular industry. This proves to be a differentiating factor for Innovalley as most accelerators host virtual mentoring.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the accelerator program, such as the details of startup financing and the networks of Innovalley.

Financing the Startups

It is not stated how much equity stake is acquired for approximately USD 24,000, but it is estimated to be in the range of 5 – 10%.

Networks and Mentors

It is expected that Innovalley’s network will consist of Chinese entrepreneurs in the mobile technology sector.


From an operator’s perspective, it can be clearly seen that Innovalley is targeting startups in earlier stages. Unlike Innovation Works, more focus is put forth on mentoring as seen from the physical one-on-one mentoring component in Innovalley’s program. Even with a physical mentoring program, it does not mean that the program is superior. What makes Innovalley stand out is that their team is built around experienced entrepreneurs who have been through the path of entrepreneurship and experience exactly what their program’s participants are experiencing now. This aspect is definitely one that Innovalley can pride itself on.

However, by focusing on earlier stage startups that solves niche problems, Innovalley might be limiting itself to potential opportunities.

Microsoft Cloud Accelerator (微软云加速器)

Microsoft Cloud Accelerator is the first accelerator in China set up by Microsoft APAC in July 2012. The main objective of this accelerator is to enable Microsoft to play a bigger part in the startup ecosystem and also to encourage participants to utilize Microsoft’s platform such as their Windows Azure cloud services. The program lasts for 4 month. LIN Weiqian currently manages Cloud Accelerator and has 21 years of experience in the IT sector.

Accelerator Cycle

This section will touch on the cycle of the acceleration program in Microsoft. The analysis will provide an understanding of the process of the 4 months program.


There will be 15 successful participants in each cycle of Microsoft’s acceleration program (Microsoft, 2013).

Although there is no specific sector mentioned, a look at their previous batches of participants suggest that the program is targeting startups providing their services on the Internet (Microsoft, 2013).

They are looking for start-ups with a technical expert within the founding team. The product offering has to be innovative and the firm has to utilize cloud services from Microsoft.


Although no monetary funding will be provided, the acceleration program will provide a common working space and intangible services such as mentoring, networking sessions and access to potential funding.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the accelerator program, such as the details of startup financing and the networks of Microsoft.

Financing the Startups

There will not be any equity stake taken in the incubatees.

Networks and Mentors

Leveraging its network, Microsoft’s acceleration program provides a mentorship base consisting of thought leaders, entrepreneurs and in addition technological experts within Microsoft APAC.


An acceleration program by Microsoft is definitely a signal of intent to play a more integral part in China’s startup ecosystem. The main objective of this accelerator program is to associate Microsoft with entrepreneurial activity in China, as such, more startups will consider to utilize Microsoft’s products in the future and also open up a market of new paying customers. We believe that in terms of intangible services like mentoring and network, Microsoft Accelerator definitely provides one of the best stepping stones to expand a startup’s network. Initially, there are concerns that the lack of incentives by taking equity stake in the participants may stop Microsoft from going ‘all-out’ to help the startups in the program. But this concern is erased with the incentives of a potential market of new paying customers.

We have just gone through some accelerators in China, we will move on to discuss the various acceleration programs in China which don’t provide an incubation space, hence, they are termed as acceleration programs.

IBM SmartCamp China (创业家全球训练营 -中国)

IBM SmartCamp China is a program bringing together the brightest startups in China. SmartCamp is a platform for IBM to engage with entrepreneurs and startups. It starts with the selection process in a region and the region winner will compete against other winners at the overall SmartCamp competition in the USA. The winner of the SmartCamp program will be able to embark on a three months accelerator program tailored to the team’s needs.

Acceleration Program Cycle

This section will touch on the cycle of the acceleration program. The analysis will provide an understanding of the process of the 2 days program and also the benefits of it.


For IBM SmartCamp 2012, there will be only 7 successful participants from China out of a list of 30 startups (IBM, 2012).

SmartCamp targets early-stage and growth-stage IT companies focusing on providing IT solutions to energy, healthcare, telecommunication sectors etc. (IBM, 2012).

Startups can be early-stage or growth-stage. Most importantly, the product offering of a startup must have a product form and not just an idea. As competition is high, IBM SmartCamp is looking for startups with a vision aligned with IBM on empowering the world with better technology (IBM, 2012).


Although no monetary funding will be provided, the main benefit of the SmartCamp program is its intangible services. Participants in this program will expect close interaction with high profile executives, investors and mentors. This signifies that participants of SmartCamp are right away fast forward to the “Demo Day” component of a program in an accelerator and prove to be a huge drawing factor for participants.

In addition, there will be 5 winners. The champion of SmartCamp will be able to go through another 3 months acceleration program tailored for them by IBM. The 3 months acceleration program will include relevant mentor pairing, technical training and marketing of the startup’s product through IBM’s network (IBM, 2012). The rest of the 4 SmartCamp’s participants will automatically gain admission into IBM Global Entrepreneur Program.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the acceleration program.

Financing the Startups

There will not be any equity stake taken in the program participants.

Networks and Mentors

Leveraging on its network, IBM will invite prominent names in the IT and venture capital industry. The most recent attendees of SmartCamp Asia 2012 include people from IBM (Jim Corgel, Windy Lung and Claudia Fan Munce etc.), IDG (LI Fung) and GGV (Jenny Lee). QuestVC also participated by being a part of the roundtable discussion segment.


With a similar intention as Microsoft to play a more integral part in China’s startup ecosystem, IBM SmartCamp’s main objective is to associate IBM with entrepreneurial activity in China. SmartCamp provides startups with a fast-track program to Demo-Day. In terms of intangible services like mentoring and network, IBM definitely fast tracks a startup and raises their profile among potential investors.

However, the only downside of the SmartCamp program is that the number of startups that have a chance to participate in the program is too limited with just 7 slots. This lowers the chances of a Chinese startup of taking part in the program. As a result, the effectiveness of IBM’s SmartCamp on growing China’s startup ecosystem is somewhat limited.

SAP Startup Forum (新创论坛)

Just like Microsoft Accelerator, SAP Startup Forum incentivizes startups to join their program by providing them with its HANA database. In this way, SAP will get a growing set of third party solutions coming from startups that use SAP HANA database. The forum lasts for a day where interested startups make a pitch on how they intend to make use of SAP’s HANA database to build, enhance or complement their product offering. From this startup forum, about six to ten promising firms will be invited to join a development accelerator to develop the product.

In April 2012, SAP Ventures also announced the establishment of a USD 155M SAP HANA Real-Time Fund. This fund means that any startups invited to the development accelerator will have the chance to get funding from the SAP Fund (Nicole O’Malley, 2012).

Acceleration Program Cycle

This section will touch on the cycle of the SAP event. The analysis will provide an understanding of the process of the one-day program and also the benefits of it.


There are no figures given about the number of participants in SAP Startup Forum Beijing, but there are a total of 40 startups for the one held in Silicon Valley (QQ, 2012). Thus, the number of participants is estimated to be about the same as the one in SV.

There are no particular industrial sectors that SAP is targeting as long as the participants build a viable product offering using SAP HANA database.

SAP selects their participants for the startup forum based on how desirable the product offering is, how feasible the product is with SAP Hana platform and how viable the product offering is (Nicole O’Malley, 2012).


Just like Microsoft Accelerator and IBM SmartCamp, although no monetary funding will be provided, the main benefit of the SAP Startup forum is its intangible services. Participants in this program will expect close interaction with executives, mentors and SAP HANA Fund. On top of intangible services, the tangible service comes in the form of the free provision of SAP HANA platform.

6 – 10 promising startup firms will be selected to join a development accelerator out of all the participants of the Startup forum.

Accelerator Organization

In this section, we will touch on the different building blocks that make up the acceleration program.

Financing the Startups

There will not be any equity stake taken in the program participants.

Networks and Mentors

As the main objective of the SAP Startup Forum is to create as many quality solutions that use its HANA database, the main network that would be provided to the participants of the Forum will mostly be from SAP. However, SAP will assist to market the products of promising startups as the endorsement of these promising startups will open up a market of new paying customers.


From SAP’s perspective, with virtually the same objective of a potential market of new paying customers as Microsoft Accelerator, SAP is incentivized to help to commercialize the product offering of the participants that take part in the SAP Startup Forum.

From the startup’s perspective, if SAP HANA platform is one of the building blocks of the product offering, then startups would be incentivized to join the SAP program. However, if the startup has to build its product offering around the SAP HANA platform at the expense of their product offering, then it might not be the most ideal program for them.

Startup Leadership Program (SLP)

SLP is a six months program with 60 hours of classroom activity aimed to equip prospective startups with the hard and soft skills of entrepreneurship. SLP has clarified that it is not a typical boot camp or acceleration program and the main purpose of the program is to ensure that participants are well-trained (SLP, 2012).

Acceleration Program Cycle

This section will touch on the cycle of SLP. The analysis will provide an understanding of the process of the six months program and also the benefits of it.


There were 29 successful applications for the first cycle and 12 for the most recent second cycle (SLP, 2012).

Focus areas: Technology, life sciences, clean technology and social enterprise.

Aim: SLP wants capable leaders with a visible passion for SLP and willingness to play a part in SLP’s community (SLP, 2012).


Participants can expect to gain theoretical knowledge of the entrepreneurship process and gain access to possible funding with SLP’s partners. In a classroom-based learning environment, participants will be able to take modules regarding business plan evaluations, lean startup strategy and term sheet competition etc.

Accelerator Organization

In this section, we will touch on the different building blocks that make up SLP.

Financing the Startups

There will not be any equity stake taken in the startup of the program’s participants as some of the participants do not even have a product offering.

Networks and Mentors

SLP markets itself on its extensive network of SLP Fellows. There are about 12 venture capital partners (SLP, 2012).


Still situated in its infancy stage, SLP Beijing Chapter has not gained as much publicity as it had wanted since the launching of the Beijing Chapter. In addition, the missing component of unwavering focus on product development questions the effectiveness of the entire model. In short, SLP is not considered as an acceleration program, but rather an educational program to equip current and aspiring entrepreneurs with the skill sets to succeed in China’s startup scene.

The six months program is not the entire duration of the program, but rather the program spans over six months with 60 hours of classroom learning. This means that throughout these six months, participants can still hold a full-time job and do not need to focus on the startup or the idea that he or she has. At the end of six months, a demo day will be held.

This model can be successful, but in order to be a hit in China, it has to be run well. QuestVC attended the demo day for Cycle 2 and was on the judging panel. There are two things that we feel SLP could improve from our perspectives.

1) The participants in the program need to set China as their primary market, so SLP will need to find more participants with China as the target market. This will increase the interests among China-based investors.

2) The program need not be spanned over such a long period of 6 months. The participants need to feel the intensity of the program and a 60 hours classroom activity program can definitely be compressed to a shorter time span.

Moving forward

Before we begin this chapter, it will be a good time to bring up the Accelerator Equation again:

Accelerator = Incubator + Acceleration Program

In the previous chapter, we went through a couple of accelerators and acceleration programs. From the discussions, we can generally see the trend of the incubation scene in China. More and more incubators are offering acceleration programs and becoming accelerators. Even for those not offering common working spaces like incubators, they are offering acceleration programs. From QuestVC’s perspective, the following factors are those required of a good accelerator.

What Makes Up a Good Accelerator

Reasonable equity stake

Higher-than-average equity stake may discourage startups to join the accelerator. Thus, a reasonable equity stake around that required from an angel investor would be a good gauge for any accelerators.

Focus on Intangible Services

There must be special focus on important intangible services like networking and mentorship sessions. In addition, value-adding business services should remain one of the critical components of an acceleration program as accelerators should complement the business needs required from the startups that most commonly lack. More often than not, we see too much focus on networking and mentoring sessions, yes, important they may be, but accelerators also need to remind themselves that startups require business support in order to fill up the knowledge gap they lack to move forward during the growth phase.

Continued Interactions Between Previous and Current Batch of Program Participants

Continued interaction with past graduates of the same program will enable the current batch to gain new perspectives on their product offerings and also to update on their progress. However, these types of sessions may exist at the risk of “the blind leading the blind”. The problem is that just because a startup has graduated from this program doesn’t mean that they are correct in how they handle certain issues. Nonetheless, having such sessions is better than not having. Accelerators just need to make sure that their current batch of participants does not follow blindly.

Physical Mentoring

We shouldn’t rule out the influence that physical mentoring provides as compared to virtual mentoring. Physical mentoring requires the presence of the mentors in the accelerator, this may prove to be a stumbling block for accelerators to incorporate the physical mentoring element into the acceleration program. For a mentor to be physically present in the accelerator, either the mentors work full-time in the accelerator or the accelerator is easily geographically accessible to partnering mentors. The first alternative is especially costly to accelerators and the latter would prove to be a more viable alternative. This highlights the importance of geographical location once again which we will touch on next.

Geographical location

As touched on previously, geographical locations are critical in order to retain resources for both mentors and alumni. Geographical location comes as an issue of balancing what matters most to the accelerator, cost-saving or close proximity to a more strategic geographical location. In truth, especially in China, it would be beneficial to locate the accelerator within areas that are earmarked by the government for intensive economic development. These areas are Zhusanjiao (珠三角), Changsanjiao( 长三角) and Zhonguanchun (中关村).

Accelerators/Programs Must be Incentivized

We must reiterate this point even though it might be common knowledge in the industry. The reason for emphasizing this is due to the rise of acceleration programs not taking any equity stake in their program participants. This type of acceleration program is often organized by large corporations with the sole objective of marketing their products. In a way, large corporations are incentivized to organize these acceleration programs. With incentives, both accelerators and incubatees will be motivated to perform at their most optimum.

Accelerators Management Should Ideally Come From an Entrepreneurial Background

You might ask, how relevant is this aspect to the success of an accelerator? Even if it’s not relevant, we cannot deny the fact that it’s a plus point for any accelerator whose founders are from an entrepreneurial background. Let’s take a rhetorical question for example: Would you trust someone with in-depth recipe knowledge but no cooking experience to groom you into a top chef? Of course, there are exceptions. But, the point here is that it’s beneficial to have a management coming from an entrepreneurial background as incubatees can tap onto their experiences when the unexpected occurs.

Integration with Chinese Government

The path of entrepreneurship is tough but the path of entrepreneurship in China is made tougher given the unique role the Chinese government plays. Moving forward, as the ownership structure progresses towards an increasingly private/mixed structure, it will be beneficial to observe whether the accelerator is moving with the government’s intended direction. In this section, we present some cornerstones of the government’s three-year plan for the entrepreneurship scene. Some of the objectives are as follows:

  1. Fund size of 40 million RMB funding 300 start-up
  2. Building up a network and database of 500 mentors and 5000 start-ups , 500 investors
  3. To publish an annual research report on entrepreneurship educational materials

Source: QuestVC’s Internal Research

The Chinese government aims to achieve these objectives via 10 channels as follows: Organization, Policy, Funding, Training & Development, Human Capital, Intermediaries Platform, Marketing, Patent, Incubation and Acceleration.


Writing a report on China’s incubation scene has really deepened QuestVC’s understanding on the incubation and acceleration scene in China. From QuestVC’s perspectives, we have come up with a few key takeaways that could potentially shape our activities for 2013.

Upcoming trends

Self-Organized Acceleration Program Should Be The Main Deal Source Channel for Venture Capital Firms

Yes, we have recognized the need for a venture capital firm to host its own acceleration program as the main deal source channel instead of sourcing for deals in other acceleration programs or events. A VC firm typically combines all the elements of a good accelerator from our own perspective.

2013: A Good Year for Accelerators

Given the lackluster performance in venture capital investments in 2012, 2013 looks to be a good year for deployment of accumulating dry powder in the industry. For accelerators, this is positive news as the exit route is clearer.

From Accelerators to Acceleration Programs

One question we asked ourselves during the research process, is there a need for common working space? Yes, startups need to be situated in an entrepreneurial environment, but is common working space really that critical?

In the venture capital industry, it is common knowledge that one of the most important aspects of the due diligence process lies with the evaluation of the team structure of a prospective startup. We know that more often than not, the problem lies not in the idea itself but on the execution of the idea. Thus a committed and driven team is what we’re looking out for. If a startup fits this criteria, we need not situate them in an pro-entrepreneur environment for them to stay driven. Provision of intangible services are still essential, as such, we believe that there will be a movement of accelerators to acceleration programs.

Finally, to wrap up the report, we thank you for your time in reading this report. We hope that you have gained a deeper understanding of China’s Incubation Landscape through this report.


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