We’re often tasked by our clients (and joint venture partners) to try and predict the future. Thankfully, due to our experience, and from keeping our ears to the ground, we’re happy to say that we’re right a lot of the time!
For those of you that read the Low Down regularly you will see we cover a little bit of everything, we think that this is reflected very nicely in our predictions for 2018.
Please have a read through and leave your comments below. Where do you think we have gone horribly wrong and what are your predictions for 2018?
This is a much shortened version, for a longer version of this article, please read it here.
1. Payday loan bubble bursts.
The second half of 2017 saw an influx of Chinese payday loan players entering Southeast Asia, notably Indonesia but also Thailand, Vietnam and the Philippines. We believe the current growth will be short-lived, and by June most such loan providers will get their wings clipped by regulations and local players.
2. Uber throws in the towel in South East Asia.
Uber is fixing its scandals and has hired really talented people. However, Uber has not fixed its fundamental problem, which is its business model. Simply going by take-rate is not as cool as it used to be, while Grab & Go-Jek both have a sexy fintech story to tell. Many smart Uber executives in the region have shown weariness in private chats recently – and we think that unless magic happens, Uber is not that far away from throwing the towel in Southeast Asia.
3. Ecommerce (and payment) continues to be fight of Chinese titans, with their local partners.
Through an aggressive S$1.1 billion investment into Tokopedia, Alibaba has effectively managed to control a leading player each in B2C (Lazada) and C2C (Tokopedia) space. JD.com, China’s number 2 ecommerce player and part of the Tencent portfolio, is finally making some inroads into Indonesia as well. Similar battles are happening in Thailand, Malaysia, the Philippines and Singapore (think of 11street, Qoo10, Rakuten and Amazon).
Alibaba and Tencent have also realised the need for local partners, especially as they venture into more infrastructure spaces such as payment & logistics.
4. Chinese cross border e-commerce enter fierce competition
Armed with sophisticated supply chain, and data-driven marketing operations, more Chinese cross border e-commerce companies are entering the region. This is in addition to the cross-border efforts of Lazada and Shopee as platforms. At the same time customs clearance are becoming clearer and we expect trade flow to be more regulated. Thus, people’s attention will be more on improving customer experience, rather than solving customs issues.
5. GoPay will rapidly become the preferred payment method in Indonesia.
With their recent acquisitions, Go-Jek has proven that they are willing to invest heavily in tech & teams that support their plan into fintech.
Ask ordinary consumers in Indonesia and they will most likely tell you GoPay is still the most convenient payment method among the current options. How long this competitive advantage will last really depends on how quickly the others catch up, and how fast Go-Jek can run to stay ahead.
6. Vietnam and Philippines receive more attention.
The time is right. Or rather, when Indonesia and Thailand become too hot, people start to look for the next growth engine. Both countries have a young demographic with robust growth – and politically they are more stable than ever. That said, many investors will still prefer the holding structure to be set up in Singapore.
7. Investors still struggle to find the next billion dollar opportunity.
People have long complained about lack of Series C (and later stage) funding in the region. However, with a number of big scale investments over the past 12 months – nobody seems to complain about the lack of serious money anymore. The challenge for late stage and PE investors is where can they find the next billion dollar opportunity.
8. Corporate innovation goes to the tangibles – with bold moves
In 2017 we went to at least two dozen corporate venture/incubator demo-days in the region. Most of them were underwhelming. We believe the whole model that many corporates have been adopting is flawed – especially hiring consultants who have never led any startup or innovation programmes.
We expect more companies to take a different approach in 2018, and achieve some tangible, bold results. We’ve done a few in 2017 and the results have been, at worst, phenomenonal. Speak to us to find out more.
9. Bitcoin reaches $100,000, and blockchains enter the mainstream.
Depending on who you ask, Bitcoin will either boom or bust. We are of the opinion that it will boom in 2018 – eventually. Although the road there will be very, very bumpy.
Riding on the crest of the Bitcoin/cryptocurrency/blockchain hype, we expect to see more activity in this area – especially banking and insurance companies who have been speaking about blockchain for the last 12-18 months. If corporations and governments in the region are serious about combating some of the more “grey” areas of business, blockchain technology will be one of the solutions.
10. Deep tech remains elusive for the region.
While there are plenty of tech startups in the region, there are very few companies that are really pushing the envelope in truly groundbreaking technology. The lack of talent, especially for artificial intelligence, hinders this growth.
Of course, some choose to brand rule-based trading algorithms as deep tech – well if that is the case, yes we will see a lot of deep tech opportunities in the region.
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 firstname.lastname@example.org and let us know how we can help.