When I moved to Singapore 2 months ago, I was excited to go to a different part of the world but a little scared to go to a totally different region with many unknown unknowns.
During these months, I did a deep dive into the region to understand more not only about Singapore but also Southeast Asia as a whole, and I was quite surprised to learn that Latin America and Southeast Asia (SEA) might not be as different as I thought they were.
First of all, both regions have roughly the same population, Latin America with 646 million and SEA 641 million. Their two largest countries by population are Brazil (205M) and Mexico (130M) for Latin America, and Indonesia (267M) and the Philippines (106M) for SEA. Not that different, right?
In economy, Latin America had US$ 10 trillion in GDP PPP (Purchasing Power Parity) while SEA US$ 7.9 trillion (PPP GDP is a better approach for comparison as the currencies in the SEA are more devalued than in Latin America). However, Latin America should grow only 2% in 2018 while SEA will grow 5%. Although Latin America is ahead, for now, SEA should catch-up quite quickly as it’s growing on average 5% for the past 10 years and there are no signs of slowing down, which is quite impressive!
On the social side, things are a little bit different. Latin America is a quite homogenous region with all the countries, except for Brazil, speaking Spanish and all the countries are predominantly Catholic countries. This social design facilitates startups such as Mercado Libre, Despegar and OLX to expand well regionally. On the other hand, Southeast Asia is a little bit more complicated. Just Indonesia has more than 700 languages spoken on its many islands and even Singapore, which is one of the easiest places to do business, has 4 official languages. Things are no different in religion, the most practiced religion is Islam with only 40% of the total population with Buddhism and Catholic as the other two main religions.
Although the SEA market seems very fragmented, the main cities in the regions behave in a similar way. To understand that, it’s worth checking this material by Jungle Ventures: SEA Venture: Discovering Opportunities in a Fragmented Market
On the other side, Internet and social penetration in those regions are similar. Latin America leads the internet penetration with 66% while the SEA has 58% while social penetration is 60% and 55%, respectively.
In the startup ecosystem, it seems that Latin America has been fostering for a long time now but SEA is leapfrogging the Latinos due to a massive investment in the region. The Latin America startup ecosystem has been around for more than 10 years now. Just to put some perspective, Monashees, one of the first venture capital funds in the region, was launched in 2005. Also, Mercado Libre went public in 2007 and Buscape was acquired by Nasper in 2010.
Singaporean startup ecosystem, arguably the most developed in the SEA, has only around 5 years old with its first VC funds appearing around that time. 500 Startups Durian and Golden Gate were one of the first funds in the region and they were launched in 2014 and 2015, respectively.
Pushed by the local governments as well as foreign investments, Southeast Asia had an incredible growth in venture capital investment in the past few years, passing Latin America by far.
In 2017, the Venture Capital funding market reached US$ 7.86 billion while, in the same year, Latin America just crossed for the first time US$ 1 billion investment (link). Singapore alone received a total of US$ 5.6 billion in startup investment in 2017, which is quite impressive.
As the startup ecosystem in the SEA is quite new, there are just a few success stories to tell so far. The most relevant ones are: Grab (valued at US$10 bi), Go-Jack (valued at US$ 5 bi), Lazada (sold to Alibaba at an undisclosed amount), SEA – former Garena (IPO with current market cap at US$ 5 bi), and Tokopedia (valued at US$ 1.3 bi).
As Latin America has a long history in the startup world, it has more success cases to show. Here follows a few: Mercado Libre (IPO with a current market cap at US$ 15 bi), PagSeguro (IPO with a current market cap at US$ 8 bi), 99 (sold by US$ 1bi), Nubank (valuation around US$ 2bi), and Buscape (acquired by US$ 342 M).
Although at first, those regions seem quite different, as shown, they had many similarities that might make then a better comparison to each other than to compare to US, Europe or China, at least in the startup ecosystem development.
The Latin American startup ecosystem is starting to mature with some big exits this year such as 99 and PagSeguro as well as big investment rounds in Nubank (US$ 150M), Movile (US$ 124M). On the other side, SEA is at an incredible pace with Grab raising another mega round of US$ 1bi and Go-Jek of US$ 1.5 bi.
I’m quite excited to see how both ecosystems are going to develop themselves!
And you, what’s your opinion about this?