Singapore investors take note – If it works in India, it will work in Southeast Asia

During the Singapore FinTech Festival which recently concluded, there were calls by Indian venture capitalist Mohandas Pai for Singapore to create a billion-dollar funding arrangement for investments in ‘at least 1,000 start-ups in India’. Whilst Pai was largely referring to the evolving Indian IT industry, Singapore should look seriously at this idea and consider expanding its scope to include start-ups from other sectors as well.

India is a fast-developing country with a vibrant and colourful business culture, one that is well suited to producing start-ups with over 1,300 start-ups added in 2019. Many of these new firms could go on and succeed in Southeast Asia and beyond in part because both regions are similar in many ways.

For instance, financial inclusion is one area where both India and Southeast Asia share many of the same challenges with poorer citizens unable to open bank accounts due to both the high cost of servicing this segment (especially in rural areas) and the growing prevalence of fraud. In India, whilst 80% of citizens have a bank account, the remaining 20% who lack access to bank accounts are mainly in rural, hard to reach areas.

Start-ups in India have emerged that seek to solve these issues. One company uses Artificial Intelligence (AI) and other technology to scan photo IDs and detect fraud. By making it safer and less risky to provide loans the cost of lending will reduce allowing banks to lend to more people from lower economic means.

This technology would work very well in Indonesia where the threat of financial fraud – especially fraud involving fake IDs – is holding back greater financial inclusion. It would also work in many other poorer nations in Southeast Asia where banks have struggled to cater to poorer segments of society.
Another example is in the electric vehicle space, an area we are well acquainted with. It is now well known that many of India’s cities suffer from severe smog and pollution caused by fossil fuel-powered vehicles. Air quality in Delhi was deemed ‘severe’ at 436 a few weeks ago, about nine times the recommended maximum, causing the government to remove almost 1.2m registered vehicles from the road.

As such, India is driving forward (excuse the pun) with electric vehicle adoption and a number of promising start-ups have emerged that are seeking to solve this problem. We are seeing start-ups emerge providing new battery technology, innovative business plans that seek to spur EV adoption via SMEs and many other examples of creativity and innovation from entrepreneurs as well as established companies.

Once again, the solutions that many of these firms are developing are highly applicable to Southeast Asia. Cities from Manila to Jakarta also suffer from bad air pollution and are seeking to develop their own EV adoption strategies. Furthermore, many Southeast Asian countries are very dependent on fuel imports which affect balance of payments, so they have another reason to move forward with greater EV adoption.

What is key here is scalability. Investors will look at start-ups and make decisions on whether or not to invest according to the likelihood that they will make their money back plus more in interest etc. If a start-up can show that it has the potential to grow into new markets and its solutions are applicable to these markets then its valuation will rise.

This should interest Singaporean investors for many reasons. Firstly, a start-up that has been ‘battle-hardened’ in India’s rough-and-tumble business environment will be well-suited to Southeast Asia. Furthermore, Singaporean investors usually understand Southeast Asia and have more experience dealing in the region and so the chance of an Indian company succeeding under their guidance is increased.

If it works in India, it works in Southeast Asia. India presents plenty of great opportunities for Singaporean investors because it is a testbed for innovations and solutions that can then be brought over to Southeast Asia. For globally-minded Singaporean companies this should be one of the first places they look when deciding on their next investment.