Employees stand in front of a Carsome building in Malaysia. (Carsome Malaysia / Facebook)

Rise of Unicorns in Southeast Asia


Tham Siew Yean examines the state of startup developments across Southeast Asia, delving deeper into the success of unicorns in Singapore and the newest unicorn hub of Indonesia.

Privately-held startup companies with a value of over US$1 billion are hotly pursued by Southeast Asian economies. These unicorns contribute towards employment generation, innovation, productivity gains, and cross-border trade for the country that is hosting them. They also draw in investments due to their high growth potential and expected future gains in the event of a buy-out. It is not surprising then, that countries, including developing economies, aspire to mint unicorns. Several ASEAN economies harbour similar ambitions. Indonesia, for example, seeks to bring forth three new unicorns in the Medium-Term National Development Plan (MTNDP) for 2020–2024. Following the achievement of this target, Indonesia has raised its ambition to foster 20 more new unicorns, similar to Gojek and Tokopedia, by 2025. Likewise, Malaysia aims to have five unicorns in 2025, while Vietnam targets to have five tech unicorns by the same year and another five by 2030. 

The Importance of a Conducive Startup Ecosystem

The startup ecosystem of a country is an important factor in minting unicorns. Singapore is currently ranked eighth in Startup Genome’s latest global startup ecosystem ranking. Indonesia is ranked 41st, followed by Malaysia (43rd), Thailand (52nd), Vietnam (58th), and the Philippines (59th). It is therefore not a surprise that Singapore leads the pack of unicorns emerging in ASEAN. It is already the financial centre in the Asia-Pacific, ranking third in the Global Financial Centre Index 2022, after New York and London. These supporting conditions enable it to be a leading destination for venture capital funds to domicile and operate, thereby attracting foreign and home-grown entrepreneurs. In 2022, it was reported that Singapore had approximately 4,000 tech startups, over 400 venture capital managers, and an estimated 700 family offices.

Singapore’s unicorn growth is plateauing. The city-state only minted three new unicorns in 2022 compared to seven new unicorns in 2021. At the end of 2022, there were 26 unicorns in Singapore, with the largest number minted in 2021. More than 40% of these unicorns are in finance as well as finance-related (including insurance) sectors and e-commerce, in line with the region’s needs. However, the unicorns in Singapore are much more diversified compared to the rest of ASEAN, as these unicorns do not just cater for the local or regional market alone.

Indonesia is the Next Hotbed for Unicorns

As of 2022, Indonesia has the second largest number of unicorns in ASEAN after Singapore, totalling 15, with two decacorns (companies with a value of more than US$10 billion), namely GoTo and J&T Express. The former is a merger of two of Indonesia’s oldest unicorns, ride-hailing and payments giant Gojek and e-commerce leader Tokopedia.

Indonesia’s large domestic market, rising middle class and digital-savvy young population contribute to the growth of startups and unicorns, thereby attracting investors to these ventures. At the micro level, Indonesian startups focus on building brands that are local, accessible, and familiar to domestic consumers, thus contributing towards the scaling that is necessary for the birth of unicorns. For example, Gojek was able to make inroads in e-hailing by capitalising on the popular use of motorbike taxis – a common service for urban citizens in the county.

Sector-wise, financial technology (fintech) has a larger share of unicorns in Indonesia. According to an estimate, 51% of Indonesian citizens are unbanked (without access to banking or financial institutions), while the underbanked (people with access but choose to use alternative financial services) stands at 26% due to its archipelagic status. Traditional banks face considerable challenges reaching those residing far from the cities and on remote islands.

Indonesia also has the largest digital economy, with approximately 40% of the total regional market share. The COVID-19 pandemic, which has accelerated the use of technology, also provided the opportunity for startups and unicorns to make inroads into e-commerce. Tokopedia, which was founded in 2009 as an e-commerce platform, became an essential service provider during the pandemic before its subsequent merger with Gojek in 2021. It is expected that Vietnam will follow next. Currently, Vietnam has four unicorns. Other ASEAN economies, such as the Philippines, Malaysia and Thailand are latecomers. They minted their first unicorn only in 2021 and 2022 respectively.

GoTo stocks, taken in March 2023, in Indonesia. (Peace-Loving / Shutterstock)

2021 was a Bumper Year for Unicorns

Overall, 2021 was a bumper year for unicorns in ASEAN, driven by the increased use of smartphones, accelerated digitalisation due to the COVID-19 pandemic, an expanding middle class, as well as greater efforts by regional governments to boost the digital economy.

Private equity played an important role in boosting the number of unicorns. Bain & Company reported that the deal value in the Southeast Asia private equity market reached an all-time high of US$25 billion in 2021, rebounding sharply from 2020 which was negatively affected by the pandemic shutdowns in the region. However, in 2022, this dwindled to US$13 million due to global uncertainties, rising interest rates, and challenging exit conditions.

What Happens After Acquiring Unicorn Status?

Unicorns may remain private entities if founders wish to retain control over their companies. Alternatively, founders may also choose to exit through an Initial Public Offering (IPO) or a mergers and acquisitions exercise. Carsome of Malaysia reportedly delayed its proposed dual listing plans in Singapore and the US in 2022 as it was concerned that its valuations may be affected by waning macroeconomic conditions.

For Singapore, four of the unicorns have been publicly listed. The first is Razer which went public on the Hong Kong Stock Exchange in November 2017. Garena, rebranded as SEA in 2017, was listed on the New York Stock Exchange in 2017. Nanofilm, founded by a Singaporean entrepreneur, was listed in the Singapore bourse in 2020 and Grab was the latest to be listed on the Nasdaq in December 2021. Two other unicorns, Lazada and Bigo Live, have been acquired – one by giant Alibaba (Lazada) and one by Chinese streaming powerhouse YY (Bigo Live). In Indonesia, two unicorns have been listed. The first is Bukalapak, which debuted on the Indonesian Stock Exchange in 2021, while GoTo was listed in 2022.

Sustainability of Unicorns

Startup overvaluation is a global concern. The somewhat arbitrary one billion dollar threshold for unicorn status reflects investors’ aspirational valuations as opposed to pure empirical assessments. Research at Stanford has indicated that unicorns in Silicon Valley can be overvalued by as much as 51% above their real worth. Crunchbase has further reported that many of the unicorns that emerged in 2021 have found “internal valuations revised downward, often drastically, for highly valued unicorns.”

There is no similar study conducted for ASEAN’s startups and unicorns. Data is limited because most unicorns are privately held. In the end, valuations will have to meet the test of the markets after the unicorns are listed. Profitability is often overtaken by the need to scale and grow rapidly. While investors may justify investing in loss-making enterprises based on the potential for growth and future profitability, this belief can be stretched a tad too far in the wake of a weakening global environment, heightened uncertainties, and rising interest rates. Thus, while a public listing is a landmark achievement in an entrepreneur’s journey from a startup to unicorn status, it can bring with it new challenges as shareholders’ demand for profits and returns to their investments create additional pressures.

Ultimately, the time-tested model for business success remains one based on sustainability, product quality rather than price competition, and positive cash flow. It is, therefore, not surprising that there is an increasingly popular call for startups to follow the “camel” model rather than the unicorns. Compared to their more glamorous cousins, camel companies are more handy, resilient, sustainable, and enduring.

Editor’s Note:
This is an adapted version of an article from ASEANFocus Issue 2/2023 published in September 2023. Download the full issue here.

Tham Siew Yean is Visiting Senior Fellow at the ISEAS – Yusof Ishak Institute and Professor Emeritus, Universiti Kebangsaan Malaysia.