Asia has always been seen as a long-standing centre of trade, especially for manufactured goods. Even today, the key manufacturing powerhouses are located within Asia, and this has played an important factor in fuelling Asia’s economic growth through the years. However, with the rise of digitalisation from around the world, demand for digital services is now one of the key drivers of economic growth.
To support a digitalising economy, there must also be adequate infrastructure to encourage innovation. Governments in Asia are pushing for the development of smart cities, with the rise of 5G and Internet of Things (IoT) enabling greater connectivity and improving optimisation across various industries. Digital twins will also allow these new developments to be replicated virtually and acts as a platform to testbed these new solutions, helping to drive this push towards digital nations. The combined effects of increased digitalisation and connectivity and the rise of the mass affluent in Asia have also spurred the rise of Web3 products and emerging technologies in Asia.
This special report produced by KPMG for ATxSG presents an in-depth outlook on the Asian start-up ecosystem and its challenges, as well as recommendations for entrepreneurs, investors, policy makers and incubators.
Despite venture funding in Asia looking suppressed in 2023 due to the existing global economic turmoil and high interest rates, with Q1 2023 seeing a continued slowdown in venture financing, there remains cautious optimism across Asia for Q2 2023. Key macroeconomic indicators are showing strong potential growth. Strong players in the start-up ecosystem are likely to survive the current funding crunch and emerge with stronger unit economics and more robust business models.
With its relatively nascent markets and the rapid rise of digital penetration in Asia, the region is positioned as a key market for digital and technology start-ups. The inflows of wealth, as seen from the growing number of high-net-worth individuals, more family offices setting up in Asia and the rise in spending power of the affluent middle class provides a ready market for these start-ups to penetrate. With strong governmental support for the development of infrastructure-wide solutions, there are many available resources for start-ups across sectors to scale at quick pace.
There is high potential for soonicorns (soon-to-be unicorns) to emerge across the sectors featured in this report. As catalysts for growth differ across sectors, the development of start-ups is dependent on whether the right conditions are met. Start-ups will require different types of support based on the sectors and markets they operate in, and innovation and collaboration between stakeholders to create a conducive ecosystem for start-ups will be critical. With climate change a top-of-mind concern in Asia, expect to see ESG tech and green fintech on the rise in the near term. Emerging technologies like Web3 and AI will likely see growing adoption across Asia.
Key innovation hubs in Asia: Singapore
Singapore is a thriving hub for start-ups with a growing number of successful ventures, including the creation of 16 unicorns, each valued at over US$1 billion, making it a key player in Southeast Asia's start-up ecosystem. With over 2,777 start-ups and a robust investor community of 7,247, including 1,231 accelerators and incubator programmes1, Singapore has established a strong start-up ecosystem. As a major global financial hub, Singapore also has a strong presence in fintech, with blockchain and cryptocurrency start-ups accounting for the largest segment of the community, followed by payments businesses and wealthtechs2. Under the Green Plan 2030, Singapore also aims to be a leader in green finance and services and seeks to nurture local enterprises to capture market opportunities in the sustainability space, while facilitating Asia's transition towards a more sustainable future3.
The Singapore government offers comprehensive support for start-ups, enabling them to gain access to funding, accelerators, talent, cross-border collaborations, and customers. The Digital Industry Singapore (DISG) is one such initiative, bringing together the Economic Development Board (EDB), Enterprise Singapore (ESG), and the Info-communications Media Development Authority (IMDA) to act as a single point of contact for digital enterprises. By combining resources, DISG is helping to establish Singapore as a global technology hub with a thriving ecosystem for innovative products, services, business models, and partnerships, both in Asia and beyond.
Download the full report for more insights on major innovation and start-up hubs in Asia.
1 Pitchbook Data
2 Singapore fintech report 2021, FinTech New Singapore
3 New programme will help SMEs go green, capture business opportunities in sustainability: Grace Fu, The Straits Times