You would have read our predictions for Southeast Asia last week. Now, we have our predictions for what we think is going to happen further afield in 2018.

Let us know what you think by commenting below or emailing us at hello@mworks.asia

1. Early stage investors in India find it really hard to invest, late stage startups will not die

The biggest and most obvious opportunities are taken, but more importantly, lots of consumer facing platforms are now struggling with the hard truth that although you can expand your user base, most of the users DO NOT HAVE ENOUGH MONEY TO SPEND.

There are a lot of good initiatives by the Modi government to release the potential (GST, Make in India etc.) in the economy, but it takes time for them to show the results. Unless most rickshaw drivers, street vendors and porters are absorbed into the formal sector, India is not a market of 1.3 billion.

That said, India is still a huge market, with a lot of potential. We also expect Modi to be bolder if he wins the general elections in 2019. For investors, the results will take years to emerge.

So for early stage investors, finding the next big opportunity (that is beyond obvious) requires more than serious head scratching. As late stage investors have no choice but to invest in the handful winners in respective sectors, the expanded cash reserves of these big players also make it difficult for emerging ones to make it big.

2. Mobile payments grow in leaps and bounds in India

Aadhaar, demonetisation, MDR reimbursement, Reliance Jio – there are a lot of great government and private initiatives to create the fertile ground for mobile payments. We recently surveyed a few towns in the country and was pleasantly surprised by the actual uptake of mobile payments.

MDR reimbursement will clear the main hurdle for adoption, if executed well. And the adoption of fast payments will enable a lot of other opportunities, as experiences in China have shown.

3. Latin America still beyond reach of major Chinese ecommerce players; Chinese startups and investors are heading there though

Chinese ecommerce companies are aggressively expanding into different parts of Asia, Eastern Europe and Africa. Latin America, however, remains a challenge for the main reason of geographical distance and the complexities that brings. Aeromexico’s Shanghai-Tijuana flight is the only direct line between China and Latin America without a stopover in a third region. And the only big Chinese ecommerce company that seriously explores Latin American market is AliExpress, part of Alibaba group.

That said, most major Latin American countries have higher GDP per capita than most Southeast Asian countries, and is a market that anyone with global aspirations can’t ignore. As Southeast Asia was before 2016 and Middle East is until now, startup teams and early stage investors are going to explore the markets first, before major players move in.

4. Eastern Europe catches attention, not only as a tech talent hub

With almost 300 million people, an average GDP per capita of US9000. Eastern European market as a whole is bigger than that of India.

The region also boosts decent infrastructure, lots of good tech talent and pretty stable growth over the past few years, the only thing missing is serious investor push in the tech arena. Whether Yandex will grow into a regional giant (beyond CIS), or Chinese investors will start pouring money into the region – the opportunity is there.

5. Everyone notices Saudi Arabia and the Middle East

We asked a successful tech company, a client of ours, what gave them the edge for winning the Saudi market. “Nothing really, we were just there two years earlier than everyone else”, his answer was.

Not anymore, Souq was acquired by Amazon, PIF set aside a lot of money to build noon.com. And there are many Chinese players entering the region. Gaming, social, mobile content and other categories are getting competitive as well.

Below is a recent screenshot of top 10 shopping apps in Google Play Saudi Arabia – five out of the 10 are Chinese companies (guess which ones):  

6. Brilliant startups in Iran, but international funding is still hard

In 2015, when the Iran nuclear deal was agreed on, some investors and startups moved into the market, expecting to reap the reward when the sanctions are eventually relieved and eventually lifted. Then Trump happened – and nobody expects the relief of sanctions to come anytime sooner than 2020.

So brilliant startups are still coming out, and growing with initial funding from domestic market. Those which need international investors to grow further will find it painful.

7. Jumia still parties (outside Africa), more Chinese ecommerce players pour in

Jumia, Rocket Internet’s Africa outfit, raised €225 million (US$267 million) last year from investors including Goldman Sachs.

The group has not really grown since, at least from what LinkedIn indicates:

And for the right reasons. Africa has huge potential, but the infrastructure etc. are not really for massive marketing push yet:

Source: World Bank

We expect the situation to remain pretty much the same in 2018, with bright spots of growth here and there.

8. Chinese cross border ecommerce companies try to consolidate global supply chain

The advantage of some leading Chinese ecommerce companies is the integration of their supply chain, allowing them to offer good variety of SKUs quickly and manage inventory efficiently at the same time.

Next year we will see some of these companies attempting to leverage their expertise to consolidate the supply chain in other countries: Japan, Vietnam, India, Turkey etc. This will not be an easy or quick process, but a worthwhile one.

A main challenge in the process will be language, culture, and the nuances in supply chain structure in each country/sector.

9. SaaS remains elusive for most developing countries

In many countries, manpower costs are not growing as fast such that businesses need to switch to tools to manage processes. This will not change much in most markets in 2018.

10. More international investors want to invest in China

Many top VCs from key developing markets approached us this year on experiences from China. We expect for next year some of them will take a more aggressive approach by directly investing in tech companies in China that could potentially be relevant for their own markets.

We believe it is a safer way for both sides – investors in home markets as well as Chinese companies trying to enter these markets. We have become the facilitator or joint venture investor/partner in some of these deals in Southeast Asia, and we believe more of these will happen next year.

(bonus) Momentum Works goes global!

Yes we have received enquiries, requests and proposals from ALL major developing markets. Keeping our core in Southeast Asia, we have explored projects & ventures in India & Middle East in 2017. And we are ambitious about expanding our team and our presence across the major developing countries in the world.

This is our footprint for 2017:

 

This is our projected footprint for 2018:

Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at hello@mworks.asia and let us know how we can help.

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