When Singapore startups are looking to expand overseas, the go-to destination has always been its backyard in South-east Asia. But in an increasingly competitive and mature market, where the fight for top tech talent is intense, this reflex strategy requires a rethink.
Fast maturing Hanoi and Jakarta have seen startups grow at a rapid pace, and have attracted significant venture capital funding. There is not a lot of room left to play for latecomers.
At the other spectrum are Cambodia and Laos, which looked ready for Singapore startups to explore and expand. But VCs’ experiences reflect markets which are still at an early stage of building their startup ecosystems, and not quite ready for significant venture capital investments.
The need for startups here to look for fresh pastures farther afield is urgent, especially in a post-pandemic world where the search for opportunities requires greater creativity, commitment and courage.
Instead of being content to be near home, take the leap into less familiar territories. A good new landing point would be Central Asia. The region provides strong conditions to develop a startup ecosystem.
We are taking action. My company Quest Ventures will roll out a startup acceleration programme called Kazakhstan Digital Accelerator by the end of the year. It aims to nurture tech startups in Kazakhstan and Central Asia over the next three years.
This came after funding into Quest by QazTech Ventures, the venture arm of Kazakhstan’s sovereign wealth fund, in April this year. Our target is to groom 30 startups, or 10 a year.
Such optimism is not based on a punt. Central Asia, with Kazakhstan at its heart, is the new frontier for startups and is well equipped to take off.
As the most economically developed market in Central Asia, Kazakhstan has sought to create a finance and investment hub in its capital city of Nur-Sultan. The Astana International Financial Centre, established in the capital in 2018, uses English as the working language and offers visa and tax waivers to woo investors and global financial players.
On the tech front, the country has shown significant commitment in developing a future-ready infrastructure. For instance, several of their government services have gone digital – residents can register the birth of a child, or report a lost vehicle conveniently online via a centralised website.
This initiative was developed under the Digital Kazakhstan programme, a government-led effort to transform the country to a digital economy. Last year, the programme created some 8,000 jobs in the country.
Also, more than 75 per cent of its population have access to the Internet. Its telco sector is highly developed, with an extensive 4G network and high mobile penetration rate.
A large segment of the population own smartphones, and have access to mobile data. On Chocolife, a homegrown ecommerce startup in Kazakhstan that offers food delivery services, youngsters regularly spend the equivalent of S$4 or S$5 to order beverages for themselves – similar to Singaporean youths who are frequent consumers of gourmet coffee and bubble tea drinks.
This is good news for startups. Consumers in the young Central Asian country, where 45% of its population are aged under 30, are hungry for new experiences, curious about the world, and have the spending power to boot.
Some might point out that the Kazakh market, ready as it may be, is small and hence offers limited opportunities. Indeed, the sprawling country has just about 18.7 million people. But just like how Singapore is often seen by industry players as a gateway to South-east Asia markets, Kazakhstan is a bridge that connects investors to Central Asia.
The region, which includes Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, is home to 72 million people. In fact, if we expand the range to include regions within a 2,000km radius from Kazakhstan, we are looking at a potential market of 3.3 billion people, including a large swathe of Russia and Eastern Europe.
I can think of two immediate opportunities in Kazakhstan for Singapore-based startups.
First, to hunt for tech talent in the Central Asian region. While startups here have typically recruited talent from Vietnam and Indonesia, the brain drain in South-east Asia is a growing constraint. Kazakhstan’s emerging tech scene offers a rich talent pool of young, tech-savvy people seeking white-collar careers. They are educated, creative and modern.
The Kazakh government has invested significantly in developing and promoting STEM education. Students at the secondary education level are exposed to coding, robotics and even virtual reality to cultivate an interest in tech.
The country also wants to grow its startup landscape. Astana Hub, a government-run technology park similar to Singapore’s Block 71, offers support to startups in the form of training programmes, mentorships from entrepreneurs, office spaces and networking opportunities.
Second, Kazakhstan’s ambitious task of building a digital Silk Road provides opportunities for tech players. The government is pouring significant resources to develop the country’s information and communications technology infrastructure. It will require support in fields such as digital literacy education, cybersecurity and data analysis, to name a few – areas that Singapore startups are well-placed to be a part of.
Companies here may be reluctant to venture to the Central Asian region, due to differences in culture and language. But the longer we stay stagnant and stick to old formulas for growth, the easier it is for someone else to steal our lunches.
The writer is the managing partner of Quest Ventures, a Singapore-based venture capital firm.
This post first appeared on The Business Times.