eli james

Because Asia

12:49am, 21 June 2013

If you’re in technology, like I am, Silicon Valley is the place to be.

To say that you can’t succeed in consumer Internet outside of the Valley is a bit of an exaggeration, but it’s not far off from the truth. The Valley is cutting edge. The Valley is hot. The Valley has all the tech and talent in the world. Valley engineers, entrepreneurs and investors believe — they really, really believe — they can make a difference in the world. And very often they do.

I want to play Devil’s Advocate for the duration of this essay and argue from the opposite direction: that Asia’s a good place to be. There’s a Quora question from awhile back that goes: What does Singapore offer a startup that Silicon Valley doesn’t? (The short answer is: erm, not much.)

But I think there’s a compelling answer you can give today, and it’s possible to say it with a straight face if you start from the right assumptions. The answer is: ‘because Asia’.

Not Consumer Internet

First, let’s get the obvious problems out of the way: it’s incredibly difficult to do good consumer Internet startups outside of Silicon Valley. The media version of this question is: can Facebook be invented in Singapore? The answer is usually no. There are many obvious reasons for this: not enough smart money, barely enough talent, and no large, homogenous domestic market to grow from. It’s difficult to make a consumer play in Singapore. It’s more likely to succeed in China and Japan, but the odds are against you and the journey is fraught with dangers.

One of those dangers is the nature of a consumer Internet startup itself. Great consumer Internet companies tend to have business models that only work at scale. At True University this year, I heard Akash Garg, the head of Growth Engineering at Twitter, phrase this as: “once you get to a billion users, you’re good. Even a monkey can monetize a billion users.” The converse is true: it’s hard to monetize a few consumers. (Unless, you know, you’re Evernote).

If you’re doing a startup in Singapore, you’ll probably have to start making money early. This usually means charging for your product, and if you’re not in the lucky position of being able to sell to consumers, you’re most likely going to sell to businesses. The 37signals guys, when preaching their business philosophy, couch their advice with ‘go sell to businesses. It’s easier’.

(It’s no surprise, then, that great consumer-facing Internet companies don’t look like 37signals. The 37signals people think this is crazy.)

Selling to companies is less sexy, but it’s also very lucrative. Many great companies can be built this way — in fact many are; you just don’t hear about them as much. Obviously someone has to make the software used in checkout machines and financial departments and in tollbooths. If you think about how much each license costs, and then multiply that across the entire company, and then across the entire industry of similar companies - you’ll end up with a pretty large figure.

The good news is that there are a thousand other problems that pop up when you’re managing a large organisation — many of them solvable with software. And businesses are also more likely to pay you to solve them than John Doe iPhone user.

Trade

Asia is where all the manufacturing and the shipping in the world is at. I could quote numbers, but this isn’t necessary: we all know where most of our stuff comes from.

If the majority of the world’s trade runs on the back of Asian manufacturers, and are shipped to customers on the back of Asian logistic firms, it’s likely that there are inefficiencies in their work that can be solved with software. I’m referring, of course, to Andreesen Horowitz’s ‘Software is Eating the World’ argument, which says that software is empowering (and often revolutionary) when applied to previously un-softwared industries.

It’s obvious that software companies serving logistic chains exist: we know they must because we have incredibly responsive logistic operations that span the globe (cough, Apple). These operations can’t exist without the help of software. And take a look at the inaugural Asian Manufacturing Awards, a who’s who of large enterprise software providers.

But the market of manufacturing companies is a large one. There are smaller factories, and smaller import/export firms. A friend of mine, who’s currently working on a manufacturing startup, tells me the number of low-hanging fruit available in manufacturing is ridiculous (here’s an example of a product: spreadsheets with pre-populated formulas for ops management in small companies. Price: $50,000 - $100,000 a pop). If we look past scale, I posit that there are many more problems in these companies that remain unsolved due to uneven access to technology, or lack of attention, or both.

Asia is peppered with businesses at various stages of growth. More importantly, Asian businesses are likely to have problems that don’t exist in the West. The set of unsolved and unidentified business problems is probably larger in Asia than you think - mostly because the people in tech are too busy with the West to start looking.

This is probably an opportunity.

Why Singapore?

UK-based entrepreneur Daniel Tenner likes to argue that you should build companies that can’t be built anywhere else. The current thinking on aping Silicon Valley startups is not particularly intelligent. Asia is not America, and Singapore is not Silicon Valley. There are advantages that Asia has that Silicon Valley companies don’t; consequently, companies based in Asia should probably be built with these different assumptions baked in. As an entrepreneur, it’s probably a good idea to think about the lack of smart funding and the small talent pool available to you in Singapore before you launch the next big food SoLoMo app. Play to available advantages instead.

For instance, it’s hard to imagine a Silicon Valley company solving the software problems of a manufacturing firm — because comparatively little manufacturing happens in the US today. Replace the words ‘manufacturing firm’ with any other company in the business of moving product across the world, and you’re probably going to get a large set of opportunities completely invisible to the best and brightest in the Valley.[1]

So what does Singapore have? Singapore is in Asia. Singapore is safe, English-speaking, educated, business-friendly, politically stable, and one flight away from all the major Asian cities. I’m not going to make a stronger argument than this - I realise many of these facts apply to many other cities in Asia … but not too many.

But I hope I’ve left you with a few things to think about.

Of course, I’m sweeping a whole bunch of assumptions under the carpet, and obviously I haven’t done much research by way of selling product. I also realise that I’m dangling large manufacturers as a carrot in this argument, but it’s probably accurate to say that a startup should begin with small-to-medium sized firms for a number of years, before scaling to larger companies.

It’s also important to recognise that I’m using manufacturing as a crutch in this argument. Manufacturing is easy to use as an example because it’s what Asia is known for. But the trick, really, is to think: ‘which markets are large, lucrative, and globally important, that can’t be reached effectively from outside Asia?’. There are probably entire categories of problems out here in Asia that are invisible to the West that I don’t know about.

This is a thought experiment, and I’m writing to think. Asian entrepreneurs have advantages available to them that aren’t obvious. They (and by ‘they’ I mean ‘we’ - for I should include myself in this) would benefit from thinking strategically about the location in which they’re launching. Don’t launch the next Facebook if your geography works against you. Launch something that can’t be built anywhere else.

Singapore is not a horrible place to be in if you’re smart about it … and now I have an answer: because Asia.

Footnotes

[1] This was made clear to me rather recently. I was hanging out with a bunch of friends at their house, whose startup had recently graduated from Y-Combinator. A bunch of other YC founders came around to drink and hang out. They were from Stanford, whip-smart, funny, and (outwardly, at least) all set for success.

One of them started talking about consumer Internet companies, and then went on a tangent: “I mean, let’s think about this. How many Internet users are there in the world? I mean users you can sell to. How many people are there in America?”

“Well, you could probably count the UK as well.” another Stanford founder said.

“Ok, I can add the UK. So how many?”

And the conversation continued as if they hadn’t said something profound. But in my head I was reeling: here were some incredibly smart, incredibly driven entrepreneurs, all of whom were YC alums. And they didn’t see the rest of the world.



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