Despite current global economic headwinds and private funding in the region declining to its lowest levels in six years, the startup ecosystem in Southeast Asia and India remains resilient, demonstrating significant signs of maturity, a study showed Tuesday.
HubSpot said in a statement that its new report reveals that on average, about half (53 percent) of startups across the region found it easier to grow their businesses in the past year compared to previous years.
Notably, startups recognize the need to balance growth and profitability, with the majority of regional startups agreeing that a clear path to profitability (98 percent) has become more important in the last year as compared to the years prior.
This resilience is characterized by an interesting dichotomy: while geographical expansion presents challenges, with 23 percent of startups finding it harder to enter new markets, customer acquisition and retention have become more manageable.
Although 18 percent mentioned that acquiring customers has become more challenging, more than half (55 percent) of startups report improvements in customer acquisition and retention.
Increased competition (31 percent), stricter customer demands (31 percent), and access to capital (29 percent) were cited as the key challenges to customer acquisition among those who mentioned acquiring customers have gotten harder.
“These signs of growing resilience are a testament to the region’s entrepreneurial spirit and adaptability,” said Laurence Butler, Global Senior Director, HubSpot for Startups.
“While digital transformation has been a focus among the region’s small and medium-sized businesses (SMBs) in recent years, the digital-first nature of modern startups empowers them to swiftly adapt to volatile market conditions by leveraging data analytics and foundational technologies such as CRM platforms,
“Most startups now recognize the critical importance of having a clear path to profitability, marking a shift towards focusing on core markets and building robust customer relationships, which are crucial for long-term sustainability,” he added.
The survey findings also revealed that startups in the region have built a robust foundation of technology and are leveraging their tech stack to collect, structure, and analyze customer data to drive business growth.
Almost all (99 percent) startups say they are using at least one customer relationship management (CRM) tool and eight in ten (81 percent) startups are satisfied with their tech stack.
Consequently, 71 percent of startups surveyed perceive that they have an adequate amount of data at their disposal to identify new opportunities for business growth.
The collective use of data and technology is not only helping drive innovation and build better customer relationships, but may have also contributed to the enhanced resilience and adaptability of startups in the backdrop of a persisting global funding winter.
The report also uncovered a disparity between countries surveyed. More than a third of startups (38 percent) in the Philippines reported a lack of sufficient data on their business prospects and the customer journey.
Only 58 percent of startups in the Philippines indicated satisfaction with their tech stack, the lowest among all countries surveyed.
This could have contributed to local startups’ inability to collect the right data for better decision-making and also their growth prospects.
Meanwhile, nearly half (48 percent) expressed that it is more difficult than before to grow their companies, almost double the regional average of 25%.
Amid ongoing economic uncertainties, the findings collectively suggest that the most successful startups will be those that adopt the relevant technologies to collect and leverage customer data, boosting their growth or expansion prospects.
The study also showed the emergence of artificial intelligence (AI) is fundamentally transforming the startup landscape in Southeast Asia and India.
AI is increasingly seen as a pivotal element in the future strategies of companies, automating repetitive tasks and creating new roles that demand advanced skill sets, said the study.
However, this technological advancement comes with its own set of challenges, particularly in the area of talent acquisition.
The majority of startups across the region (98 percent) agree that AI is important in their future strategy, particularly among those in India and Indonesia.
73 percent of respondents in India and 63 percent in Indonesia strongly agreed with this statement, the highest sentiments registered among all countries surveyed.
32 percent of startups see AI as a way to bring products to market faster, while 30 percent believe AI can help in delivering products more quickly.
In additon, 30 percent view AI as a tool to level the playing field against bigger competitors and incumbents.
“Today, AI is viewed as the single largest economic opportunity since the start of the internet, and data is the currency of AI,” explained Butler.
“Residing in some of the world’s fastest growing digital economies, digital-native startups in the region are well-positioned to tap on their established tech infrastructure and quality data that form the basis for effective AI solutions,
“By leveraging AI, startups can quickly identify gaps in their business models, better anticipate customer needs, and improve their overall ability to deliver highly personalised customer experiences,” he added.
These findings were based on responses from 600 startup founders and decision makers across Singapore, Indonesia, the Philippines and India to understand their biggest challenges and opportunities for growth conducted from February to March 2024.