Entrepreneurs dreaming of success in Asia-Pacific have several reasons to be optimistic that their hopes may one day translate into reality.
Asia is seeing rapid growth in both output and consumption—creating a promising economic backdrop. Levels of education in some countries are among the highest in the world—providing a good skills base, in theory, for expanding businesses. For some industrial sectors, funding is strong at various stages of the journey from startup all the way to large-scale international expansion.
There are two main factors that drive Chinese outbound investments: The growth and development of China's internal market and the export of China's excess capacity.
Growth in China, the world's second-largest economy, was officially running at 6.7 percent in the first quarter of 2016, though many economists think that it might, in reality, have been a little lower than this. Growth in India was an impressive 7.9 percent, with entrepreneurs seeing particular opportunities in underdeveloped consumer markets, such as financial services.
In Australia and in other mature economies, the hope is that rapid growth in some Asia-Pacific markets will benefit entrepreneurs wherever in the region they begin their operations. The increasing interconnectedness of Australia with other Asia-Pacific economies is part of this broader trend.
The Trans-Pacific Partnership, signed in February but not yet in force, aims to create a huge single market that would dwarf the EU. It includes 12 countries with Pacific coastlines, including the US and Japan as well as Australia. There is a tremendous talent pool in Asia-Pacific, supported by high-quality education systems. In its most recent international rankings for mathematics and science, the Organisation for Economic Co-operation and Development (OECD) ranked Singapore, Hong Kong, South Korea, Japan and Taiwan as top of the list.
Financing future innovation
A further cause for celebration is the strong access to private finance in a range of countries. It is this, as much as its strong skills base, which has made Singapore a hub of entrepreneurialism encompassing most of Southeast Asia as well as the small nation itself.
The value of assets managed by Singapore private equity and venture capital houses has been growing steadily, and Singapore is a financing hub for Southeast Asia.
In China, meanwhile, there is a wealth of private equity money, with more than 500 private equity managers, according to some estimates. Much of it emanates from wealthy Chinese families, though there is also strong international interest. Private equity funds are generally happy to offer growth capital where the entrepreneur retains a majority stake. There's also a vibrant M&A market for entrepreneurs who are willing to cede control.
According to Xiaoming Li, partner and head of the White & Case China practice, there are two main factors that drive Chinese outbound investments: The growth and development of China's internal market and the export of China's excess capacity.
The scale-up challenge
But despite these positive factors and the strong economic case for entrepreneurship in Asia-Pacific, scaling up from a promising startup to a large-scale operation remains difficult.
A key challenge is funding, and there are still gaps in the financing of Asian entrepreneurs who are looking to expand.
If even just one Japanese startup comes up with a truly disruptive innovation, then there will likely be a very dramatic shift in the attitudes of corporate Japan towards entrepreneurship.
One such challenge is the market in initial public offerings. The mainland Chinese IPO market is notoriously stop-go: The government has called a halt to IPOs nine times, most recently in July 2015.
A bigger, more general issue across much of Asia is the lack of requisite experience—both at the lower levels of an expanding company's workforce and at the very top. The phenomenon of "degree disease" is common in fast-growth economies, where many people have university degrees but lack practical skills. In some countries, there is also a dearth of suitable senior executives to help entrepreneurs expand their businesses rapidly.
However, lower-level coding and programming is increasingly important for Asia-Pacific's aspiring tech multinationals in e-commerce, gaming and other areas, and requires basic practical skills rather than university degrees. These skills can be learned relatively easily by ambitious entrepreneurs with the will and drive to succeed.
The region's tech giants, such as Alibaba, Baidu and Tencent, provide a strong pipeline of senior-level talent for ambitious startups seeking rapid growth and new recruits with the right experience. Silicon Valley companies looking to Asia for workers performing high-skilled tasks in fields such as research and development will help create new talent pools in the region.
The proliferation of new technology giants in the San Francisco Bay area has created a unique virtuous circle, in which the fast-growing companies of one generation breed experienced managers for the next generation. In Asia-Pacific, this virtuous circle may not yet be working, but there are growing pockets of talent in countries such as Japan, for example.
Traditional systemic barriers in corporate Japan are also slowly breaking down, notes Brian Strawn, partner, White & Case Tokyo. "Ironically, many Japanese blue-chip technology companies have been active as corporate venture capital investors in places like Silicon Valley, but traditionally they have ignored Japan," he says. "But there are signs over the last couple of years that they are looking for opportunities at home, particularly in areas such as regenerative medicine and robotics. If even just one Japanese startup comes up with a truly disruptive innovation, then there will likely be a very dramatic shift in the attitudes of corporate Japan towards entrepreneurship."
Indeed, there are already several examples in Asia-Pacific where disruptors have overcome many obstacles and found success—including Grab, a mobile e-hailing service that is dubbed as "Southeast Asia's answer to Uber." Set up four years ago in their home country by two Malaysians, Anthony Tan and Tan Hooi Ling, it spread to five other countries in the region, and has even entered the US. First stop: Malaysia. Last stop: The world.