>> MIM Speaks
BRIGHT FUTURE FOR ASIAN START-UPS
FEBRUARY 11, 2001 -
THE STAR
By ILYAS KHAN
ARE Asian technology start-ups destined to fail? Despite the
popular hype of early 2000, when public equity markets seemed
to be creating dozens of newly-minted millionaires each week,
the harsh facts are that the overwhelming majority of
technology and dot.com companies set up in the past 24 months
no longer exist.
In the United States, over 80% of technology start-ups that
were established in 1999 are no longer operational. If 8 out
of 10 start-ups fail in the United States, what are the
statistics here in Asia?
There is no doubt that Asian start-ups fared just as badly as
(if not worse than) their counterparts in the United States.
Although there are no reliable region wide statistics, a quick
round-up of feedback from Asian-based Venture Capitalists, and
organisations such as iandi Asia (www.iandiasia.com) suggests
that the proportion of failed start-ups in Asia is easily 80%,
and will possibly even be as high as 90% by the end of this
year (which is universally being seen as probably "tougher"
than last year).
The rapid dwindling of capital availability is only one
symptom of the change in fortune for the early stage
technology company. Other symptoms include the souring of
sentiment, and the reality that while technology may change,
the rules of doing business have not.
So, is there any point in nurturing entrepreneurship in Asia's
technology sector? My answer is a resounding yes.
Here is my basis: Asian entrepreneurship in the tech sector
offers the best way to harness our resources and our talent
during the coming decades.
A unique confluence of circumstance occurring right here in
Asia means that there will be no greater wealth-creating
sector than that of technology in the next 10 years.
In fact, I am so confident about this view that I am looking
forward to meeting up with readers of this column in 10 years'
time, and looking back over the first decade of this new
millennium, and counting the number of successful corporations
that will populate the corporate landscape. Many or most of
these companies are but a twinkle in the eyes of their
founders, and have yet to be created.
No sector, be it banking, stockbroking, food, or even tourism,
will match the wealth and economic activity of technology.
Innovation will flourish, and dramatic changes that we can
only barely envisage right now will have stimulated the growth
of companies that will be started up by people like you and
me. And these companies will survive the challenges which
might seem insurmountable at present.
Let me walk you through some important factors that lead me to
this conclusion.
Pace of change in technology
A simple way to highlight this is to look back at your own
working environment five years ago, and compare it with today.
You will note that many of the tools with which you conduct
your business are seemingly unchanged. You would have a PC or
notebook, and you would have a mobile phone and some sort of
PDA.
Now look forward five years. The chances are you will notice
dramatic and fundamental changes. Wireless technology will be
much more prevalent, and the mobile phone and PDA will be a
single device. The average increase in access speeds will have
doubled or even tripled each year for the next five years,
making voice, data and video access almost ubiquitous. Your TV
could be truly interactive, and the virtual workplace will be
commonplace.
These changes will have profound and fundamental impact in the
way we live our lives. This change, and the pace of change, is
one of the foundations of my belief that we are living at a
time when great changes are taking place which will promote
and sustain innovation and entrepreneurship.
Availability of capital
This change in capital allocation will be a key factor behind
the growth of Asian technopreneurship. Despite the
well-publicised losses incurred by venture capitalists (let's
try to be very broad in our definition, and apply the term to
anyone who is providing equity capital for early-stage
businesses), true "VC" operations have historically been a
rarity in Asia.
As the global venture capital business itself undergoes
fundamental changes, and the dinosaurs (organizations, not
people) of the industry slowly become extinct, and as the
industry itself globalises, new partnerships and new sources
of capital are coming out to Asia.
I am excited by the fact that so-called "3rd generation"
venture capital firms have become evident. These firms will do
more than invest and then sit back and wait for the results.
Third generation VCs will emerge across Asia, and will be able
to develop and support the technopreneurs in ways that have
previously been virtually unavailable except to the lucky few.
Apart from venture capital, I also believe that "angel"
investing, which started to kick in during the past couple of
years, has also taken root, especially in Hong Kong and
Singapore. Angel investors will also add depth and diversity
to the availability of early stage capital. Some of the
world's best known success stories in technology were funded
by angels in the USA, and there is little doubt that this
trend is going to be evident here in Asia as well.
The reverse brain drain
The historic migration of talent and innovation across the
Pacific to the US West Coast is well documented. Many of you
will be aware that some of the world's greatest corporate
success stories are actually businesses that were created and
built by people who originated here in Asia.
The factors that led them to migrate across. to Silicon Valley
are clearly not going to disappear overnight, and certainly
not if we continue to lag in terms of the nexus between
tertiary educational institutions and business. However, there
is a discernible reverse brain drain, fuelled partially by the
very success that these people have experienced in the United
States.
Over the past decades, emigrants to the West would use their
hard-earned savings to send money back to their parents and
family members in Asia. This money would be used to help pay
for basic subsistence level existence in many instances.
In a few cases, this money was the "seed" that led to further
education for the newer generation. The new economy equivalent
is that the millions, and sometimes billions, of dollars of
wealth that have been generated by Asian technopreneurs
working in the United States are now finding their way back
"home" - and in some cases, the money is being followed by the
entrepreneur and businessman himself.
Sabeer Bliatia, the founder of Hotmail is only- one of the
more prominent examples, but this trend will increase, and
will, in turn, help generate innovation and a network of
entrepreneurship in Asia.
These are just three of the many factors that I believe are
important indicators of change in our lives. Asian
technopreneurship is still in the early days of its existence,
and rumours of its death are greatly exaggerated.
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