Start-up Asia

Asia is home to the world’s second largest start-up scene, accounting for 23% of all venture capital (VC) investments in 2021-23. Asia’s start-up trajectory took place during a worldwide boom in venture investments that reached a staggering 0.5% of world GDP in 2021-23. In tandem, start-ups have been mushrooming in developing and emerging economies, encouraged by rapid digitalisation and the implementation of targeted public policies. However, the region’s story is unique in terms of scale and speed. Factors such as a large, connected and dynamic market, accumulated manufacturing capacities that allow for start-up experimentation, and a corporate sector that is investing in innovation and start-ups have been key.

Asia is far from a homogeneous region, and the same holds true of its diverse start-up hubs. Growth in start-ups first took hold in the People’s Republic of China (hereafter “China”) and India, two of the world’s largest hubs, and Singapore, which has grown into a connecting hub for financing start-ups in the region. A more recent wave saw several newcomers growing at record speed: it took Indonesia, Viet Nam and Thailand between 2 and 4 years between the first large investments and the moment when total VC reached over 0.1% of GDP, a trajectory that took 15 and 13 years in China and India respectively.

Despite their rapid growth, start-up ecosystems in Asia remain below their potential in terms of density. For example, in Asia, there are on average around 3 start-ups per 100 000 inhabitants, compared to almost 40 on average in OECD countries. Opportunities also tend to concentrate in capital cities and be more accessible to male entrepreneurs. Globally, only about 19.1% of start-ups had at least one female founder in 2023 and in Asia this share stood on average at 15.4%.

This report focuses on four distinct ecosystems: India, Indonesia, Thailand and Viet Nam, where start-ups are opening opportunities for more innovative and inclusive development pathways. Despite their differences in terms of size, maturity and geography, these four ecosystems share several commonalities:

• The bulk of investments flow to areas with strong consumer potential, such as e-commerce, fintech and transport, in line with regional trends.

• Financing is growing hand-in-hand with services. Corporate venture capital (CVC) is playing a key role in these ecosystems, particularly in Thailand and Indonesia, where they accounted for 36% and 40% of all deals in 2020-22 respectively, compared to 17% in Viet Nam and 7% in India.

• Social inclusion and environmental impact are priorities for start-ups. India is relatively more specialised in renewables than other Asian countries, featuring the highest share of renewable energy start-ups (1.6%), on par with China, and above the regional average of 0.9%.

All four countries also have targeted policies and institutions to support start-ups. In this respect, 2016 was a landmark year, with the implementation of Start-up India, co-ordinated by the Department for Promotion of Industry and Internal Trade; the 1 000 Digital Start-ups Programme by Indonesia’s Ministry of Communication and Information Technology, accompanied by initiatives by at least four other ministries; Start-up Thailand co-ordinated by the National Innovation Agency; and the Project 844 – Initiative for the startup ecosystem in Viet Nam until 2025, where the National Agency for Technology Entrepreneurship and Commercialization Development plays a key role. The policy mix for supporting start-ups in the four ecosystems has thus become more articulated, combining various tools aimed at providing financing and business services to start-uppers, facilitating connections among stakeholders, boosting demand for products and services by start-ups, updating regulatory frameworks and encouraging a cultural shift towards embracing start-ups as part of the entrepreneurial ecosystem.

Looking forward, start-ups in India, Indonesia, Thailand and Viet Nam are facing an increasingly challenging environment: a so-called “capital winter”, geopolitical tensions and technological uncertainty. To consolidate their development, address structural challenges in start-up ecosystems and step up their contribution to sustainable and inclusive development, it will be important for governments to:

• Update and diversify the policy mix. The smart use of conditionalities could help focus resources and support on addressing territorial disparities, supporting entrepreneurs who are traditionally underrepresented such as women or from marginalised communities, and encouraging the development of advanced technologies, which is often overlooked in less mature ecosystems in favour of more market-ready products and services. There is also potential in better linking start-up measures to production development policies, to encourage better synergies between the two areas, and spark innovation. Strengthening monitoring and evaluation will also be paramount.

• Mobilise financing in line with innovation ambitions. Even relatively low-cost initiatives such as revising regulatory frameworks or setting up mentoring and networking mechanisms can go a long way in kick-starting start-up scenes. However, as ambitions change over time – from incentivising start-ups to take root, to supporting more technologically sophisticated ecosystems – financial resources need to be revised.

• Leverage partnerships to foster learning and pool resources. Regional co-operation for instance can help countries in Asia learn from each other, share best practices, and transfer lessons learned to their own specific context. Stepping up such partnerships can also help create new markets and make it easier for start-ups to take a cross-border approach to their business models and diversify their funding sources. International partnerships can also play an important role in this respect.

Beyond start-up policies, India, Indonesia, Thailand and Viet Nam should continue investing in wider innovation, industrial, entrepreneurial and educational policies to support the development of quality start-ups.