Startups in Asia are stepping out of Silicon Valley’s shadow to be leaders in technology and innovation.
Jenny Lee, managing partner at GGV Capital, said while firms in China had initially copied business models from the US, they were now surpassing it.
She added that China had more than 800 million mobile internet users, more than two-and-a-half times as many as in the US.
“The Chinese market has grown tremendously and because of that growth it has now surpassed the US in terms of the innovative models that we see,” she said.
Lee identified three key innovation trends in China, namely transportation disruption, such as ride sharing and bicycle sharing apps, autonomous cars and electric vehicles; automation, with robots replacing factory workers; and internet giants, such as Alibaba and Tencent, taking their business models international.
“We think China will continue to see a lot of startups emerge over the next five to 10 years,” she said.
Innovation driven by talent
Joe Zhou, managing partner at Keytone Ventures, said innovation in China was being driven by rising labour costs.
“China used to be based on cheaper labour, but going forward some of the new technological innovation and economic progress will rely on AI,” he said.
Zhou added that significant talent in the country was also driving progress.
He said China had around eight to 10 times more technology and engineering graduates than the US.
“China in the next five to 10 years will dominate in terms of a structured labour force that will be behind a lot of innovation,” Zhou said.
Duane Kuang, founding managing partner at Qiming Venture Partners, agreed that innovation in China was being buoyed by a large influx of top AI talent.
He said: “We are seeing a lot of innovation in the area of AI, where China is in the first tier globally.”
He added that China also had a global advantage due to the large amount of consumer data available, with this data necessary for developing machine learning and deep learning.
Kuang said there were also very supportive industrial policies in China which encouraged innovation, while the government was likely to see the development of autonomous driving as a way to leapfrog traditional and entrenched automakers in the rest of the world and create a home-grown auto industry.
He added that another area of meaningful innovation was the development of micropayments and mobile payments, which had enabled the creation of new business models offering payment for answering questions or sharing information.
“With all of these factors we see a lot of opportunities and we are investing in quite a few of them,” he said.
“The reason you are seeing innovation come out of Asia is that necessity is the mother of invention.”
“There is no other choice but to innovate. We have to find unique approaches to solving local problems and if you are insightful enough you can create businesses that solve global problems.”
In terms of investment opportunities, Lee said GGV Capital was looking at the areas of consumer consumption and e-commerce, particularly cross-border business models and offline disruption coming out of mobile payments.
She also likes frontier technology, particularly automation, pointing out that 90% of factories in China are not automated.
Anand sees the biggest opportunity in the region as being in financial services.
He pointed out that in Indonesia out of 250 million people only 11 million have a credit score.
“A lot of companies are venturing into this space, whether it is digital banks or companies capturing data, there is so much opportunity to be tapped into by start-ups,” he said.
“More and more we are looking for companies which capture data or build proprietary networks which will make it hard for companies from the US or China to come in.”
Kuang is interested in robotics.
“I believe China can be one of the earliest countries to come up with useable consumer robots,” he said.
He also sees opportunities in the area of clean technology.
“We are seeing a lot of emphasis by the government to clean up the air and clean up the water and that is going to drive innovation,” he said.
Zhou said Asia offered investors significant opportunities.
“If you want to invest in technology in the next five to 10 years, Asia is definitely the place,” he said.