Hard to steer investment in Mekong startups, say global investors

A panel at the Mekong Entrepreneurship Ecosystem Summit

While tremendous investments are often focused in the US, global investors are also trying to navigate the Asian startup market.

However, funding differentiates within this continent, mostly and increasingly funneling to countries like Japan, China, Singapore and India. The lower part of the Mekong region falls behind despite its potential, said several market matchers during the recent Mekong Entrepreneurship Ecosystem Summit.

Quan Nguyen, venture partner at Inspire Ventures, a $25 million venture capital firm with investment teams in Thailand and Vietnam, sees great potentials in the Mekong market, which has a young population, growth of internet usage and an improving environment towards freer market model.

There are opportunities in the Lao market, said Aditta Kittikhoun, deputy managing director of Vientiane-based Sengdara Communications. “In terms of tech, there are many to explore.”

While the panelists attending the summit agreed about the diverse potential of Mekong region, they also pointed out that the area was hard to navigate. Lao and Cambodian startup markets are too young and small. Even in a more mature ecosystem like Vietnam, it is difficult to make investments, because not many investable companies are available, they added.

Nguyen does not see enough deal flows in the Mekong area, even with his fund looking to disburse up to $3 million for each series A round.

The common obstacle for both local and global investors is the market size. Not only does the scale matter, the purchasing power also counts. A Lao panelist took Burger King as an example. It entered East Timor, a territory smaller than Vientiane, the capital city of Laos, where Burger King is not available.

“It is really challenging to push the ecosystem,” he said.

Meanwhile, Nguyen added: “There is a good number of middle-stage funds and angel money, but startups do not know how to get to them. Those who have the money, don’t know how to deal with it.”

Capital is available, but the startups are not compelling enough.

They are still thinking too much about the tech, according to Channarong Buristrakul, vice chairman of the Khon Kaen Chamber of Commerce, Thailand. Meanwhile, investors look for not only great ideas and unique products but also a business model that will work and the ability to scale up.

“A lot of startups don’t know how to build the value for stakeholders. So mentoring could be helpful,” Nguyen said.

In countries like Laos and Cambodia, funding is provided from non-for-profit organisations such as the International Finance Corporation, who is proactive in supporting small and medium-sized enterprises. However, there is a need to raise the awareness of the method to access to investments.

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