As a region, Southeast Asia has become a ubiquitous classification that is generally understood to encompass the 10 nations under ASEAN, with a primary focus on the six largest markets of Indonesia, Philippines, Singapore, Malaysia, Thailand, and Vietnam. But what if you, perhaps quite sensibly, lumped Taiwan into the mix? So enters Greater Southeast Asia.

Source: sea

Simply put, Greater Southeast Asia (GSEA) is Taiwan + Southeast Asia. The term was most recently popularized by Singapore-based internet and gaming company Sea in their recent IPO filing on the NYSE. In the group’s prospectus summary, GSEA is characterized as “one of the world’s fastest growing regions in terms of per capita GDP and at the early stages of internet penetration,” with “markets [becoming] increasingly interdependent, particularly for internet business models.”

It’s a rather colorful illustration that has long been applied to the formative grouping of 10 ASEAN nations. And given that 90 percent of Sea’s revenues is largely derived from its Garena gaming business, there’s a stark possibility that Taiwan was merely roped in for its regional dominance in online gaming.

However, a closer side-by-side comparison reveals a market that can not only hold its own when it comes to economic clout and technical ingenuity, but also serve as a guiding beacon for its more emerging brethren in the region that have only recently begun fully embracing the digital age.

A Diamond in the Rough

By and large, Southeast Asia’s startup landscape is still in its infancy, particularly when stacked up against mature markets such as US and Europe or even China where unicorns are comparatively abundant. To date, only 10 startups have crossed the coveted billion-dollar valuation threshold, with an average age of 6.5 years running across the board.

Unbeknownst to most, there is actually one unicorn to have come out of Taiwan’s stable—online English learning service TutorABC, which was established in 2004. That being said, Taiwan’s internet sector extends much further, with the earliest instance of e-commerce dating back to the late 90s when local online shopping champion PChome was founded. That means Taiwanese citizens have been purchasing on the web for the better part of two decades. It should therefore come as no surprise that the percentage of residents who shop online in Taiwan is surpassed only by the US and UK. Coupled with smartphone penetration reaching upwards of 75.8%—the 2nd highest in the world—this little island has actually given way to the largest e-commerce market in Greater Southeast Asia, for now at least.

Source: Frost & Sullivan

Aside from a few other challengers such as Momo, Taobao, and Yahoo!, PChome’s dominance over the domestic market had been left more or less uncontested since its establishment—that is until Singapore-based Shopee (Sea’s e-commerce arm) entered Taiwan in 2015. By adopting a mobile-first strategy, Shopee truly hit home with the nation’s digitally savvy and cyber-hungry population. Monthly orders grew rapidly to roughly 5.8 million per month, effectively usurping PChome as the market leader and contributing more than a third of the group’s total orders by Q2 2017.

Naturally, more and more foreign players have caught wind of the latent opportunities in Taiwan’s internet and mobile economy that are evidently up for grabs, despite its maturity. Southeast Asian startups such as Carousell, Shopback, and Honestbee have increasingly prioritized Taiwan along their regional conquests, a trend that’s likely to continue moving forward.

Startup Sanctuary

With only a population of 23.5 million people, Taiwan actually boasts the second largest economy in terms of nominal GDP when stacked against ASEAN countries. The country also displays—albeit unofficially—a human development index of .882, superceded only by Singapore in the GSEA region, while also scoring highly on most international rankings including global competitiveness, ease of doing business, and most notably innovation; According to Bloomberg’s Global Innovation Survey in 2014, Taiwan was cited to have the highest number of patents per population, and per R&D expenditure in the world.

Source: IMF

While unable to keep pace with the lucrative growth rates of an Indonesia or Philippines, Taiwan offers several fundamental factors conducive for bootstrapping and developing startups. Not only are the living costs a third of what you might find in Singapore, but the availability of technical talent far exceeds the rest of GSEA–perhaps best validated by Google’s US$ 1.1 billion acquihire of HTC’s smartphone assets, reportedly consisting of 2,000 engineering and design talent.

Currently, Taiwan boasts roughly 8,000 software engineering graduates per year, with average annual salaries hovering around US$ 20,400, compared to approximately 4,400 graduates and US$ 35,000 respectively in Singapore.

This is on top of the roughly 25,000 electrical engineers the country’s academic system churns out every year, truly speaking to the country’s longstanding heritage of semiconductor and hardware manufacturing. This grants aspiring innovators a unique opportunity to capitalize on the trending intersection of hardware and software, especially when it comes to IoT, smart city, and Industry 4.0.

From a VC funding perspective, although visibly minimized by Singapore and Indonesia, Taiwan still manages to come in a resilient third. And if we back out the billions of dollars raised by the region’s handful of unicorns, namely Grab of Singapore and Go-Jek of Indonesia, you realize Taiwan is just as good a place for an early-stage startup to raise money as those 2 countries.

Source: CB Insights, Taiwan Startup Stadium

Certainly recognizing its limitations as an end-all, be-all type market, Taiwan’s government has been pushing for a more future-ready environment that fosters and embraces innovation, rather than stifles it. Whether it’s establishing a regulatory sandbox, launching a dedicated AI research lab, unveiling a US$ 333 million national VC fund, or even just loosening its borders for foreign talent, it’s clear that Taiwan is keen on cultivating an ecosystem that can attract and enable startups from all over the region to keep up with the evolutionary pace of technology.

Redefining Old Cliques

2017 marked the 50th anniversary of ASEAN, a collective club of chaotic and sprawling settlements, historically only seen in the underbelly of neighboring behemoths China and India, until recent times that is. Open up the front page of Tech in Asia or e27 and you’re bound to come across the latest high-flying valuations of Southeast Asian tech startups disrupting traditional industries.

For Taiwan, though, the last 50 years have largely operated under the impetus of “Greater China.” While this term is not an official political classification, it infers an dependent type of relationship that has long confined Taiwan and its economic future to forces outside of its own control.

Taiwan’s “New Southbound Policy,” short of formally joining the intergovernmental organization, strives to align the island nation with ASEAN countries. Specifically, it fittingly contextualizes the country’s technical brawn, mature digital economy, and longstanding penchant towards innovation as the beating heart of a region currently bursting with opportunities.

If you’re a startup in the region looking to capture both scale and monetization, both growth and margin, and to build both local operations and a regional R&D hub, then expanding your scope to include both SEA + Taiwan hence, Greater Southeast Asia, is increasingly looking like an avenue that you can’t afford to miss.

For more information on how ambitious entrepreneurs across Greater Southeast Asia can leverage AppWorks Accelerator to capitalize on the region’s digital awakening, visit our website.

Jun Wakabayashi, Analyst (若林純 / 分析師)

Jun Wakabayashi is an Analyst covering Greater Southeast Asia. Born and bred in America, Jun brings a wealth of international experience to AppWorks. He spent the last several years working for Focus Reports, conducting sector-based market research and interviewing high-level government leaders and industry executives across the globe. He’s now lived in 7 countries outside US and Taiwan, while traveling to upwards of 50 for leisure, collectively highlighting his unique propensity for cross-cultural immersion and international business. Jun received his bachelors in finance from New York University’s Stern School of Business.

The co-founder of Singapore-based ShopBack, Joel Leong shares his experience in translating the cashback model to Taiwan and highlights the pivotal role that AppWorks Accelerator played in facilitating their market entry.

Cash is King

Who wouldn’t want free money…is exactly the premise that prompted Joel Leong and his co-founders to establish ShopBack in 2014. Fast forward 3 years, the Singapore-based startup has now become the largest cashback provider in Greater Southeast Asia (GSEA). Avid online shoppers are able to unlock tantalizing discounts and lucrative cashback rewards by simply accessing ShopBack’s app and online portal and browsing through any one of the company’s over 1,300 merchant partners spanning electronics, fashion, travel, among many other verticals. If a purchase is made, then ShopBack is paid a commission, which ultimately gets shared with the consumer in the form of cashback. This symbiotic relationship is what has allowed the company to recently nab a hefty US$ 25 million new round of financing, while accelerating its regional conquest across 6 countries in GSEA, including in the last year Taiwan.

While Taiwan is at times outshined by the notoriety of its emerging brethren in the region, it still punches well above its weight when it comes to e-commerce, and lacks no shortage of market opportunities for the taking. “If you really look at the data you find that GMV from Taiwan’s e-commerce alone [US$ 30 billion a year] actually beats all of Southeast Asia combined,” reveals Leong. “Of course, I recognize in the next few years that it’s going to change, but for now what we see is a huge market with potential.”

In Taiwan, merchants are much more privy to affiliate marketing due to surging rates charged by Facebook—the country’s dominant online advertising channel—and a developed online retail economy where e-commerce essentially serves as a way of life. That being said, foreign companies like ShopBack still face an upward battle, particularly when navigating an unfamiliar environment and cold courting local online retail partners. Joining AppWorks Accelerator #13 was ShopBack’s way of effectively tipping the scale in their favor.

A Successful Marriage

Having already graduated 15 batches of 323 startups and 780 founders, AppWorks has amassed the largest active alumni base of any accelerator in the region. Consequently, AppWorks has grown into vital platform for aspiring Internet entrepreneurs, specifically in its home market of Taiwan where it has forged linkages with most of the top-tier Internet companies such as PChome, GOMAJI, and momo, each commanding fierce customer loyalty among locals.

Through a revolving cycle of mentorship, networking, and training during its 6-month program, AppWorks Accelerator pushes its teams to “fail fast, learn fast, and iterate faster,” minimizing non-value adding blunders and shortcutting the time that they would otherwise spend knocking on doors one-by-one.

And like every couple joined in holy matrimony, the relationship has gradually evolved over time. “When we came here we just wanted to be part of the accelerator, have that sort of credibility, and at the same time grow our team,” recounts Leong. “But then it has gone on to some crucial mentorships, invaluable connections, and now with the help of AppWorks we’re trying to localize our site even more by trying to build another technical hub here and hiring Taiwanese coders to help us make our site more palatable for the Taiwanese market.”

The same guidance that has proved instrumental to ShopBack’s landing in Taiwan is exactly the type of support that they’ve passed on to Taiwanese startups such as KKday or TokiChoi who are currently expanding across GSEA. This cross-border “pay-it-forward” mentality is what has enabled such a powerful, tight-knit community among AppWorks startups.

Southbound Horizons

When stacked up against countries such as Thailand or Indonesia where their sizable markets alone are large enough to support startups’ growth and justify an all-out campaign solely focused on winning home turf, Taiwan is not always at the top of the agenda for regional expansion. However, according to ShopBack’s co-founder, where Taiwan might fall short in brawn, it makes up in brains.

“Taiwan is ahead in terms of technical talent—there’s no debate about that. Harnessing Taiwan’s rich reservoir of human capital might be very beneficial to Southeast Asian startups, especially those at the growth stage,” emphasizes Leong.

Under the government’s new ASEAN facing initiatives (dubbed “New Southbound Policy”), Taiwan will direct more effort on promoting and anchoring its economic clout among ASEAN nations. Taipei City, for example, has created the “Southeast Asia Startup Star” program that aims to attract all unicorns and centaurs in the region to setup tech teams and R&D centers.

Naturally, as Taiwan strengthens its ties in the region, a larger pool of startups will begin to realize that there’s plenty of room to play in Taiwan. “Some startups such as Shopee, Carousell, and Honestbee—the early adopters—have already done that. Those are good starts. Overtime more will surely follow suit, eventually creating a seamless bridge between both sides of the strait,” Leong envisions.

Calling all growing startups across Greater Southeast Asia, visit AppWorks Accelerator for more details on how we can help facilitate your market entry in Taiwan.