Should Government Regulate Ride-Hailing?

#LKminiblog - Should Government Regulate Ride-Hailing?

Indonesia is planning to regulate ride-hailing rates, amid pressure and protest from driver groups. Both Grab and Go Jek depended on low price offers to passengers in the past for initial growth and expansion, but prices have always surged as business matures. Plus, the ride hailing firms subsidises drivers during discount campaigns. 

Low price is just an entry strategy....

The low price was just an opportunistic route to break into new grounds and get customers accustomed to a new alternative. Over time, reliable and consistent service quality became the foundation to sustaining the massive success of these unicorns. 

Ride-hailing businesses run on leading edge technologies, not an easy feat to replicate...

Unlike traditional transportation service providers, ride-hailing companies built their business capabilities by adopting various leading edge technologies (AI, ML, DL, Augmented Reality, Mobile app, bigdata and IOT) for operational automation, service delivery, prediction and planning. User data is collected through mobile app and harnessed to innovate faster, improve services and maximise values to the whole business eco system. 

A well functioning alternative service to riders.....

The arrival of ride-hailing companies in Southeast Asia were welcomed, as for once passengers had a choice to abandon conventional transportation service providers, that mistreated clients for decades (all of which were regulated businesses). Since the arrival of ride-hailing companies, more passengers comfortably leave their vehicles at home and use the ride-hailing services. After all, passengers can easily book a ride via their mobile app and get served within 7 to 10 minutes, as opposed to the old call booking system where getting through is extremely difficult.

The solution to driver economics problem is dynamic in nature...

Question is, why would we need government intervention to solve a problem already resolved? Secondly, there are two methods to solve this driver economics issue - one by increasing passenger prices, the other is by streamlining the large number of drivers according to current demand. Both are dynamic elements and neither strategies can be executed by the government efficiently without realtime data, reliable predictive capabilities and the backing of a credible data science team.

Let's not get politics in the way of good business....

Finally, driver groups involved in protests may carry other hidden agendas (speculative but that's the popular trend) than just preserving their economic interests. Government intervention here might end up protecting business interest of politically linked individuals or groups that destroyed service quality, encouraged business monopoly without competition and frustrated consumers in the past.

Are Superapps Draining our Money Pots?

#LKminiblog - Are Superapps Draining our Money Pots?

Superapps and ecommerce startups snatched a big chunk of startup funding for Southeast Asia last year, especially those endorsed or lead by Softbank and BAT (Baidu, Ali, Tencent). 

Capturing the sizable Southeast Asian consumer market...

In 2017/2018, investors were particularly focused on startups with standardised platforms to engage with Southeast Asian consumers mainly via mobile devices. This trend is expected to continue this year, but with more coverage areas by ride hailing companies and new value added services including to businesses.

The 10 or so well backed Unicorns will continue to grow and prosper...

Plenty of capital reserve will enable companies like Grab, Go-Jek, Zalo, Bukalapak, Tokopedia, Lazada, Shoppee and others to continue improving their applications, interfaces, technology stack, talent pool and market reach. These startups can become a critical gateway to new eco systems in health, retail, and finance, not reachable by conventional businesses.

What about the B2B tech startups?

However, this strategic focus by major investors certainly affected tech startups on the B2B segment, especially those developing and innovating vertical solutions. Most investors, including regional financiers, simply followed the footsteps of larger investors with their bets in the past years. This drained the money pot and left thousands of B2B folks to battle it out for the leftovers.

Driving the change we want...!

Hopefully investor tone will change this year with promising startups emerging for applied AI and AR in various sectors, fintech that blends several techs, healthcare innovation and smart city solutions. 

As for regional and corporate MNC investors, the former will continue to invest opportunistically or for nationalistic reasons and the later will align investment to scale the size of the community on their platform. The rigour of activities here will depend heavily on economic growth and the entrepreneurial community.

In the end, the challenge for Southeast Asian B2B startups in 2019 remains the same as the previous years. Changing the perception of stakeholders and our entrepreneurial community to break the heuristics that we are incapable of creating scalable world class solutions.  Instead, we should be driving harder for excellence, up skilling, team building, task completion, coaching and envision business solutions fitting for global markets and scale. 

Are we up for it?

Southeast Asian Tech Startups – Race for Alpha

Southeast Asia is bustling with thousands of tech-startups and budding entrepreneur communities mostly centred in cities such as Singapore, Jakarta, Bangkok, Kuala Lumpur, and Ho Chi Minh. Between 2015 and 2018 the region secured some US$ 11 billion in investment through 1,412 deals with Singapore (US$ 8.4 billion and 888 deals) and Indonesia  (US$ 1.6 billion and 228 deals) accounting for 85% of the deals. At least US$ 7 billion of this amount was locked in 2017 alone.

If that's not stunning enough, 2017 and the first half of 2018 also witnessed several unexpected moves by key players and most sublime moments in the sector with Uber selling operations to Grab, Grab’s over US$ 2 billion funding round, Lazada’s acquisition by Alibaba, Rocket Internet shaving down holdings, the emergence of the 4th Indonesian unicorn - Bukalapak, Amazon’s e-commerce service debut, several billion dollar funding rounds (Traveloka, Tokopedia, Go Jek), Philippine based Revolution Precrafted expanding into Latin America and most probably becoming the region's ninth unicorn.

The progression of local tech scene is rapid, driven by the confluence of state backed initiatives, access to best class of technology, availability of massive amount of data through connected devices and a booming Southeast Asian economy.

The region is integrating unexpectedly through a common digital cultural imagery

Business professionals however, have repeatedly warned of the insurmountable difficulties that is associated with scaling businesses and navigating the market in Southeast Asia. The inherent diversities geographically, culturally, and economically makes standardisation impossible but the region somehow brilliantly encapsulates the economic themes of some 10 to 11 different nations with a collective population of 650 million people through a common recursive digital cultural imagery. A digital society that is highly tech savvy, predominantly young, connects ubiquitously, consumes, plays, works and socialises online. Staying attuned to latest of technologies, apps, and tools, is a mandatory routine for this psychographic.

Abundance of opportunities

This highly interactive, well informed and sound ‘digital society’ is one of the key forces behind the stupendous growth of consumerism and staggering expansion of the SMB market in the region. This generation is open and willing to endeavour new methods in resolving growth challenges, rethink experience, update legacy utilities and foster new data driven services. These encouraging signs unlock infinite opportunities, especially for businesses centred on new technological frontiers namely mobility, artificial intelligence (computer vision, speech recognition, robotics), Bigdata, IOT, 3D printing, blockchain, and virtual reality.

Emergence of new type of data driven services

For instance,ViSenze specialises solutions in advanced visual search and image recognition solutions for eCommerce, mCommerce and online advertising. The company’s core research and development is anchored on computer vision technology and machine learning to help shoppers simplify search for items by uploading images on social media or video networks.

ADDO.AI is based out of Singapore with branch offices in Germany, Dubai, Philippines, and Pakistan. With no investor backing announced so far, Ayesha Khanna, CEO of ADDO.AI, has been striving hard to position the company as an artificial intelligence advisory firm that focuses on various multi-dimensional projects in agriculture, transportation, and finance. The company has been featured several times by media for successes with SMRT Singapore, a crop prediction project in Pakistan, and SmartDubai.

Trax Image Recognition is another revolutionary service provider, also based out of Singapore. The company’s image recognition and deep learning solutions can empower enterprise data science capabilities - all using pictures taken by smartphone cameras as input for analyses by algorithms that decipher the images into a series of real-time actionable insights. For example, consumer brands can monitor and analyse retail shelves across stores and enforce more control over how products are arranged on retailers’ shelves.

A growing fraternity of prestigious unicorns

The region is now cohabiting colonies of startups at different stages (development, optimisation, growth, expansion, mature) with some 9 unicorns, namely SEA, Bukalapak, Go Jek, Traveloka, Tokopedia, Grab, Lazada, Razer and Revolution Precrafted. Both Indonesia and Singapore are tied in terms of the number of existing unicorns, while Singapore is leading in the number of total startups and advance technological solutions. Crunchbase cited that more than half of the 2,151 seed and early-stage rounds recorded between 2008 through 2017 were involving startups based out of Singapore.

3x more funding than the previous year

In 2017 alone, the region secured an astounding US$ 7.8 billion in venture fundings, threefold from the earlier year, though the number of deals dropped significantly from 335 to 320,  according TechAsia. A significant slice of the pie was captured by ride-hailing, fintech, e-commerce and gaming segments. These excludes the latest fund raising activity undertaken by Grab for a staggering US$ 2 billion, lead by its Japanese investor, Toyota. Go Jek, Tokopedia and Lazada each raised funds exceeding the range of US$ 1 billion in their last late stage funding rounds.

Signature investors

China’s tech giants namely Alibaba, Didi, Tencent and JD, the region’s conglomerates owned by some of the region’s richest families, and venture capital funds are some of the biggest investors in the region's startups.  In addition, as the scene intensifies with new innovations, super apps, vibrant research and development offices, several new funds have emerged, specifically targeting the region – the likes of  500 Startup, KK Fund, Kejora, Insignia Venture, Meranti Growth Fund and Vertex. Southeast Asia is now fully loaded with funding to grow a lot more startups aiming for high yield exits.

Is there enough ‘fish’ in the pond

As deal activities ramp up with several high profile funding rounds last year, investment patterns begin to signal a strong shift to quality rather than quantity. Mature segments such as e-commerce and ride-hailing witnessed execution of several higher value deals whereas massive amounts of early stage fundings was issued in other growing segments such as fintech, gaming, crypto economies and AI infused customer experience.

For now there are still plenty of startups in the pipeline though unevenly dispersed across the region with more than half based in Singapore, followed by Indonesia, Malaysia, Thailand and others. Besides, many more early stage startups are predicted to enter the pool as governments race to campaign acculturation of state owned innovation platforms and compete for intellectual properties.

Still nascent but the tipping point is near

As expected, Singapore is the leading destination for startup businesses in the region.The ease of doing business, a global talent pool, mature infrastructure, supportive government initiatives, and a US$ 13 billion research and development facility are some of the reasons why startup community sets-up shop here.

Singapore hosts an impressive line of startups namely, Trax Image Recognition (Computer Vision), AirTrunk (Datacenter), Advance.AI (AI driven Financial Services), Ninja Van (logistics), Tessa Therapeutics (Bio Medical), oBike (Bike Sharing) and many other well funded venture, mostly focusing on B2B models. Many are migrants from neighbouring countries to take advantage of the flexible business conditions there.

Singapore’s comfortable seat is fiercely challenged by Indonesia, Malaysia and Thailand, all picking more pace than ever. Indonesia alone is aiming for 8 or 9 unicorns in the coming years, with some rising names such as Matahari Mall (e-commerce), HaloDoc (online medical services), Pundi X (Crypto marketplace), Snapcart (Bigdata for consumer brands), and Akulaku (lending services).

The rest of the region seem to be focused around fintech, blockchain and B2C e-commerce platforms. Some upcoming names worth mentioning - iflix, MOL, Supahand and iCar from Malaysia; aCommerce from Thailand; Tiki.vn from Vietnam; and Cogito from Philippines.

It will take time for Southeast Asia to catch up with other global startup hubs in China and America, but chances are, the region will become a critical trade bet between east and west. This unique time bound opportunity, can be cleverly exploited by the region's startup community if only more speed can be acquired in mobilising their visions to fully tap the market.



Links to references

• SEA focused seed funds - CBInsight Report
• Grab picks up another US$ 2 Billion - TechCrunch Report
• List of Top funded Startups in SEA - TechinAsia Report
• State of SEA Startups Report - by Slush
• Crunchbase for Startup Data
• Let's Kopi Unicorn Tracker