I had had virtually no experience in Asia when, in mid-2013, I moved my family to Hong Kong to open my agency’s first international office. I’m now convinced that every entrepreneur and every startup founder needs to visit that part of the world, if only for a few days, and whether Asia is part of their business plan or not.
The reason is that the income levels of households in Asia is changing fast, and millions of individuals there are acquiring smartphones and high-speed Internet. So, even if you don’t sell to Asia directly, what Asia is doing today, and where it is going in the future, will affect your business.
Before I moved to Asia I already knew something about its population density: China’s land mass, for example, is about the same size as the continental United States, but with four times as many people (1.357 billion). And India's is a close second (1.295 billion). The United States hosts the third-largest population in the world, with roughly 319 million individuals; but did you know that Indonesia has the fourth largest, with more than 250 million people?
If you aggregate Indonesia with the other countries in Southeast Asia, that region's combined population is more than 600 million. In short, more than half the world’s population lives within a four-hour flight of Hong Kong.
Despite Asia’s 4.4 billion people, the United States' much smaller population still remains the largest target for many startups because disposable incomes here are larger. And certainly, by comparison, those who live in poverty don’t buy much, even in the aggregate, when compared to U.S. consumers -- especially when the product is an app or online service.
But that’s changing. Asia’s population is projected to grow to 4.9 billion by 2030. And, sure, 600 million more people is a big number, but that’s not why your startup needs to pay attention to Asia. You need to pay attention to the growing middle class in the Asia-Pacific region, which is estimated to make up 85 percent of the growth in the global middle class by 2030.
In Asia the middle class in 2013 stood at 525 million, but by 2030 it will exceed 3.1 billion. Alongside team composition and a great product, venture capitalists typically consider market opportunity when deciding whether or not to invest in a startup. What sounds more exciting to you, a target market of 300 million or 3 billion?
What's more, the middle class in Asia doesn’t just have increasing amounts of disposable income, but also time, education and access to information. This last point is key to your business, because it breaks down the barrier of geography, making every person with a smartphone a potential customer. In 2005, Internet penetration in Asia-Pacific was a meager 9.4 percent (although still a sizable 344 million individuals). But by 2015 that proportion had risen to 38.8 percent, or 1.56 billion.
In 2005 there were no mobile Internet users in Asia-Pacific (mobile Internet didn’t yet exist). But today 1.02 billion people in the Asia-Pacific region are using their phones to get online. There are 525 million smartphone users in China alone, a number expected to grow to over 700 million before 2020. That means there will be more than two smartphone users in China for every person in the United States. If these consumers can afford a smartphone and the data plan to go along with it, what else can they afford? What else might they be looking for?
Reading these statistics isn't enough. You need to see Asia to understand the opportunities. There is no substitute for standing on a street in Beijing or Hong Kong and seeing how many people are glued to their smartphones while walking or even while riding a bike. You can’t truly understand how the Chinese use WeChat and other apps until you see them doing so in person. And, most important, you won’t see how your business might fit in unless you witness firsthand the differences among Asian countries, and even among regions within the same country.
Traveling to Asia for a few days is a must, then, but you’ll benefit more by visiting several countries for a few days each. Here are three startup hotspots in Asia where you can find vibrant and active communities of entrepreneurs.
- Hong Kong and Shenzhen. Together, these two cities, located just an hour apart, are uniquely positioned for the “Internet of things” and hardware startups. In addition, Hong Kong has a fast-growing fintech scene. In the business community it is easy to get by with just English. For more information see StartMeUp.HK, StartupsHK, FinTech Hong Kong, EntrepreneurHK and HAX.
- Taiwan. I recently visited Taiwan to speak at a startup conference there called MOSA and found a nascent but growing startup scene that is attracting attention from the old-guard manufacturing elite. Learn more about the startup scene there by visiting Startup Stadium and the Startup Digest page for Taiwan.
- Singapore. A stable and predictable rule of law, government support and a population where 80 percent of the people speak English have made Singapore a popular destination for entrepreneurs and other business types. Eduardo Saverin, co-founder of Facebook, lives there. So does legendary investor Jim Rogers. The Singaporean government has a website where you can learn about starting a business in that country, but if you’re visiting make sure to go when there is an event hosted by the Singapore chapter of Startup Grind where you can meet fellow entrepreneurs and hear from successful members of Singapore's startup scene [Full disclosure: I'm the director of the Hong Kong chapter of Startup Grind].
Even if you never do business in Asia, chances are your business will be impacted by it. A startup in Asia can scale quickly, build up cash reserves and then use that superior position to enter the United States and other markets before its U.S. competitors can react. While such instances may be few and far between at the moment, expect them to occur with greater frequency in coming years. If for no other reason than a defense play, you should put a visit to Asia on your calendar.
But entrepreneurial battles aren’t won by defense. Compelling reasons to visit Asia include the ability to see the size of the market, build opportunity for your business and implement a strategy for expanding your reach to this side of the world.
It’s paying off for me. And I guarantee that if you visit, or stay a little longer, you won’t regret it.