Panellists discussing investment opportunities and trends in ASEAN and China at SWITCH 2018 (Photo: National Research Foundation Singapore)

Chinese technology investments will continue to flow into ASEAN because of the region’s sustained economic growth and large market. In the past two years, Chinese unicorns have scouted the ASEAN markets looking to understand it better and get a share of the pie. Some like Internet giants Baidu, Alibaba and Tencent have invested in ASEAN startups such as Tokopedia, Lazada and Grab.

Hot on the heels of these Internet giants are smaller Chinese companies, some of which are using mobile apps to access the ASEAN market instead of starting physical operations. In Indonesia, venture capitalist Jefrey Joe pointed out that about 200 Chinese companies have introduced their online business via mobile apps.

“This is the first wave of smaller Chinese entrepreneurs testing the market,” said Joe, co-founder and managing partner of Alpha JWC Ventures. He was among three seasoned venture capitalists at a panel discussing the tech investment opportunities in ASEAN and China. The others were Chua Wee Liang, partner of Cowin Capital and Chua Kee Lock, group president and chief executive officer of Vertex Venture Holdings.

They were part of a panel titled “Bridging the Innovation and Investment Opportunities Across ASEAN and China”, which was held at the Singapore Week of Innovation and Technology or SWITCH, on Sept 17 at the Marina Bay Sands Convention Centre. It was moderated by Nic Lim, founder and managing partner of 8Capita.

Cowin’s Chua said smaller companies are interested to look beyond China’s shores. For example, he is helping his investee company which is making industrial drones to expand into ASEAN, particularly Indonesia because its equipment can be used for the agriculture sector.

However, Joe stressed that the Chinese, whether they are giants or smaller companies, need to understand the local business environment to make a more meaningful market impact.

ASEAN is not homogenous with different languages, religions and rules.  Foreign investors and companies including those from China would do well to bear this in mind, advised Vertex’s Chua.

In an analogy, he referred to a period about 25 years ago when American companies tried to impose its way of doing business in China and failed miserably because the Chinese market is unique.

The lesson is that to be successful, the Chinese companies must learn about the intricacies of the ASEAN market in greater detail. After all, ASEAN is an attractive market with over 600 million people.

On Chinese companies investing in ASEAN, Cowin’s Chua said that there is room for new business ideas and market expansion opportunities due to the growing middle class and a tech savvy population in ASEAN.

Moving to the topic of acquisitions, moderator Lim wondered whether ASEAN and/or Chinese tech companies or family offices are likely to acquire companies in the coming months.

Large Chinese giants are interested in acquisitions, but the trend suggests that the large family-owned businesses in the region are increasingly interested in investing in tech startups rather than acquiring them, said Joe.

Part of the reason explained Vertex’s Chua is the difference traditional companies and tech startups have in the way they value time and money.

He explained: “Time is the most important factor for startups. If they can do something or develop a new product in one day and it costs $1 million, they will do it because they can get to their end goal faster. For incumbents which are the traditional businesses, they would rather spend half the money to do something in 6 months.”

Joe’s view is that with the high valuations of tech companies, they have the capability to acquire other companies including the traditional companies. “Any good tech company that can smartly leverage this valuation can acquire the more profitable and traditional companies.”

SWITCH is organised by the National Research Foundation together with Enterprise Singapore. This is the first time that SWITCH, which is in its third year, is focusing on ASEAN-China innovations. The panel is timely as 2018 is the year of ASEAN-China Year of Innovation, and with Singapore as chair of ASEAN this year.

There were two other China-focused events at SWITCH, namely DEMO ASIA Summit by CYZone and ORIGIN by TechNode, where SWITCH participants heard the latest trends of the Chinese innovation ecosystem from leading investors and entrepreneurs.

SWITCH was held from 17 to 20 Sept, attracting more than 11,000 innovation leaders, policy makers, venture capitalists, scientists and business professionals. SWITCH discussions include topics on angel investing, the rising influence of deep tech startups, encouraging more women to enter the technology industry, the intersection of lifestyle and technology and much more.