Why French startups should consider Far East Asia

Jul 22, 2014
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fareast1When I first arrived in France from Silicon Valley over ten years ago, I regularly received business plans from French startups that were limiting their sights to the French market. The few that spoke about international expansion would have a line in their financial projections for revenue in year 5 from Belgium or francophone Switzerland.

Mercifully, this mindset has virtually disappeared. today, the vast majority of French tech entrepreneurs I meet aspire to deploy beyond this country’s borders from day one, usually with an ambition to enter the U.S. market. This reasoning has made sense for many sectors. the U.S. is the world’s largest economy, with hundreds of millions of consumers possessing resources for discretionary spending that behave on a relatively homogeneous manner.

Now, however, I submit that French entrepreneurs need to seriously consider prioritizing another region in their global deployment: Far East Asia. And specifically, by Far East Asia, I’m referring to one of the following countries, each for different reasons: Japan, Singapore, Thailand, and Indonesia.

Singapore

Singapore is a logical base for a startup’s APAC headquarters. Immigration and company incorporation regulations are incredibly straightforward. corporate tax is low, and everyone speaks English. The cost of living is high, and the domestic market is small, however, so Singapore is most appropriate for firm that either seeks a test market for its Asian rollout or looks to establish its credibility in addressing the entire East Asia region.

Indonesia

Indonesia, as I’ve learned from some interactions last week with a cadre of Jakarta’s tech visionaries, represents a low-cost market full of talented innovators of substantial energy for embracing new technologies. With a population of 250 million, a rapidly growing middle class, and e-commerce penetration still in its infancy, the market potential is tremendous. Apparently, Indonesia was the most rapidly adopting market for WhatsApp before its Facebook acquisition, and rumor has it that Twitter’s fastest take-up is in Indonesia these days.

Thailand

Thailand could be a healthy compromise. It’s smaller than Indonesia at 67 million, yet smartphone adoption is higher, especially at the high-end. I’m told that Thailand boasts a fairly educated talent pool, a rich expertise in design, strong English proficiency in the main cities, and remains incredibly affordable. I need to explore Thailand in more depth to form a more educated opinion.

Japan

Prioritizing Japan for Asian market entry could make sense for different reasons. The cost of living is high, comparable to Singapore, and unlike Singapore, Japan is not an easy country for foreigners to enter. However, for those willing to persevere, the Japanese market is rich in rewards. It’s one of the top three world economies, and represents the highest monetization in mobile apps across the board. Japan also boasts the highest concentration of leading technology firms, many of which were previously unknown outside Japan but now are becoming increasingly acquisitive globally. My few European investments which have persevered in Japan have witnessed metrics off the charts in KPIs like adoption and ARPU. Moreover, cities like Fukuoka are launching startup-friendly initiatives worth seriously exploring (see Asia Biz Fukuoka).

So why should French entrepreneurs look east instead of west?

It’s ironic that as a California native I put this question on the table. Yet I believe that depending on a startup’s ambition and product segment, there are numerous reasons to take this question seriously. The U.S. still might represent the best allocation of scarce international resources, but remember that the glamourous success stories we hear from California and New York these days represent a distortion of reality. The vast majority of tech startups descend into the abyss of a red ocean. Granted, bouncing back is far easier, and the highest-in-the-world concentration of wealth, talent, experience, and audacity will continue to produce global tech winners. However, the U.S. no longer has a lock on innovation. Why summarily dismiss other regions in favor of a cutthroat U.S. market which requires tens or hundreds of millions in financing to rise above the noise level?

The Far East Asian countries I mentioned represent open fields of opportunity, either for customer expansion or revenue enhancement, depending on the geography. They also represent fertile ground for innovation, which can close the feedback loop and inspire further development in the mature markets of Europe.

Furthermore, it’s in our DNA as Europeans to work effectively with other cultures (far better than we Americans, I might add). We also perceive product value more similarly in certain areas. Virtual stickers, for example, don’t generate enthusiasm in the U.S. yet represent a billion dollar business in East Asia and Europe. A French entrepreneur I respect that has succeeded in Japan joked how the French innate tendency toward complexity, ridiculed in the West, tends to go over well in feature-rich Japanese UI design.

Of course, it would be naive to think one could penetrate these markets on one’s own. One needs a local partner, or a recruit on the ground that knows the culture and speaks the language, as well as a sufficiently long time horizon. Also a word of warning: this advice is not appropriate for everyone, only for entrepreneurs with the right appetite for adventure operating in the right domains.

With that caveat in mind, Far East Asia represents an important vector of what in my opinion will become the most important market for innovation globally, even ahead of the U.S. and China: the Rest of World market. Stay tuned for more on this theme.

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