India-First-Global-Insights-Analysis -Sharing-PlatformIndia-First-Global-Insights-Analysis -Sharing-Platform

Expanding to Asia holds big promise for German founders

, October 26, 2017, 0 Comments

german-founders-asia-marketexpress-inAn increasing number of German entrepreneurs are taking their startups to Asia. Christian Geissendoerfer, CEO of German Accelerator Southeast Asia, talks to DW about the dos and don’ts when striking out in the Far East.

E-commerce, chat apps or delivery services: Large parts of Asia are booming, not least due to a solid number of startups and millions of more people gaining access to the internet on a monthly basis.

Trying to capitalize on this trend, more and more German entrepreneurs set up shop in Bangkok, Singapore or another city with a thriving startup ecosystem. Although their number is still relatively small, many of these pioneers have found business success in one of Asia’s growing markets, building bridges between Europe and Asia in the process.

Christian Geissendoerfer is a prime example of a German founder who capitalized on this opportunity. Seven years after he expanded his mobile advertising firm YOOSE from Berlin to Singapore and Vietnam, the founder knows the ins and outs of an expansion from Germany to Asia. That’s why he was named CEO of German Accelerator Southeast Asia, which supports German startups in entering the emerging markets in Southeast Asia. With a base out of Singapore, the government-funded organization provides access to mentors, office space, connections as well as the knowledge and expertise to scale.

Founders’ Valley talked to Geissendoerfer about opportunities and pitfalls of taking your startup to Asia — and why you should hand over your business cards with two hands. The interview has been edited for length and clarity.

DW: Why did you decide to expand your startup to Southeast Asia?

Christian Geissendoerfer: I was going back and forth between Berlin and Singapore in 2008 and 2009 because my ex-wife got a job in Singapore. The city state’s startup scene was very nascent at the time. I also understood the opportunity of mobile advertising and mobile technologies for consumers in Southeast Asia in general. That, in combination with the personal motivation, made me move to Singapore in 2010. It’s a small but central market, both geographically and logistics-wise. Plus, a lot of relevant companies are headquartered there. Another boon of living in Singapore is Changi airport, from where you reach any major destination in Southeast Asia in one to three and a half hours. Those factors have allowed me to use Singapore as a springboard into the region.

Aside from the high cost of living, what are some of the other challenges of building a business out of Singapore?

Building a team there is also tricky. Getting work permits is straightforward and regulated, but it’s also not getting easier to get foreign talent, especially for small startups. Companies like Google, which have offices with several thousand people, obviously have different financial means and hire more and more top talent, especially tech engineers. That’s why I started looking into alternative locations to build the team. I then step by step moved my startup to Ho-Chi-Minh City in Vietnam.

How would you describe the German startup scene in Southeast Asia overall?

When I arrived in 2008, there were only a handful of German startups in the region. Over time, their number has grown. Germans here usually have one or more startups under their belts and then moved to Southeast Asia, but I also see people building their startups out of Southeast Asia. Those folks are now looking to invest and bring their knowledge there. With German Accelerator, I want to help build that community further. Being a small community is good in a way — people know each other across countries and sectors, not only in Singapore but also in Bangkok, Vietnam, Jakarta and Manila. Unfortunately, female founders are still few and far between.

 Can you talk a little bit more about those other centers of gravity in Asia?

Russia, India, China, South Korea and Japan are really the markets where a lot of things are happening. Shanghai, for example, also has a large German community. Hong Kong tries to compete with Singapore but lacks the benefit of the city state’s advantageous geographic location, government support and its setup as a whole. India and China are huge, high-growth markets, but both are challenging for startups. In terms of business culture, for instance, India differs significantly from other regions: The many languages, the caste system and government bureaucracy make it a tough nut to crack. Startups ought to either go all in or not expand to India and China at all. Simply setting up a representative office there won’t cut it.

What are German startups with expansion plans generally lacking?

Many German startups don’t know enough about Southeast Asia as a business region. It’s not a single market but a little bit like the European Union, where you have a lot of different countries with different cultures and languages. The go-to-market strategy for German companies is really about getting educated about this opportunity. What really makes it interesting is a combination of not only that go-to-market and the sales aspects, but also looking at part of your value-creation chain. In my mind, this is a possibility for building up an offshore software development team in a country like Vietnam or the Philippines. I’m not necessarily talking only about outsourcing but really building it as a part of your own team. Or make facilities here part of your production. Brille 24, for example, is producing all its glasses frames in Thailand. That’s by and large unknown territory to many of the German startups, and where I see a huge need for education.

What are some differences between Southeast Asian countries German startups should be aware of?

In terms of IP protection, for instance, especially in China, you’re copied faster than you can blink with your eye. Singapore’s IP protection, on the other hand, is very similar to a Germany’s, but that’s worth nothing in Thailand or Vietnam. This makes it, to a degree, about speed of execution. Basically, you’re able to get your product out there and build partnerships, which is both an opportunity and a risk. In Germany, the features of your product and the quality are important for sales. In Asia, on the other hand, you have to build trust with the people you’re trying to sell to first. This takes time. In Germany, it’s probably 90 percent product and 10 percent human interaction, whereas in Asia, generally speaking, it’s probably 60 to 70 percent product, so human interaction and building relationships matters a great deal more.

What are some potential pitfalls for German founders?

Underestimating the differences between the countries and the time it takes to build those trusted business relationships are two big ones. Another trap is trying to roll out your startup here too much with a German way of thinking and doing business. When you present your product here thinking it will sell itself because it is that great, you will fall flat on your face. Another mistake is having just one partner for the whole region. The significant differences between countries and cultures require a trusted local partner in each country. In other words: You need at least one dedicated local for each of the key markets. You also need to be very open-minded and understand the local habits by absorbing them. To give you an example, in Southeast Asia, you exchange business cards before you even say hi and then start a conversation. And handing over business cards usually happens with two hands. When I started doing that in Germany, people look at me quite puzzled. But all of this doesn’t mean you have to act like a local — that could come across ridiculously.

Is learning the local language necessary?

It certainly helps if you settle in one country long-term, but I wouldn’t call it essential. Again, you need a local partner. English has been the language of choice in each of the business environments I’ve moved to. In Singapore, English is the major and official language. In other countries, it’s by and large the same. Many business meetings in Vietnam and Indonesia I’ve attended with local sales partners and staff, half of the conversation happens in the local language. What matters is that you’re there in person and show them respect, not so much that you converse with them in their mother tongue.

What does it take to incorporate your startup in Southeast Asia?

Singapore is probably one of the most advanced places in the world, both in regards to setting up a company and the time it takes to get it up and running. It’s also much faster than Germany. Moreover, it’s a very easy market in terms of execution, logistics, and so on. It’s much more difficult to set up operations in one of the other major countries. Of course the ecosystem needs access to capital and talent. You have to choose wisely. Building that bridge from Germany to Southeast Asia, I would always choose Singapore as a springboard because you don’t necessarily need a company set up in each individual market. You can work with agents instead of setting up sales partnerships, and so on. That’s where I think it’s good to use Singapore as a base for expansion.

Aside from German Accelerator, what are some of the other initiatives and resources German startups can tap into?

The German Haus in Vietnam is a good example. There’s Germany Trade and Invest, and the German Chambers of Commerce abroad are ramping activities geared towards startups, but they focus more on the Mittelstand [small and medium-sized businesses, SMEs]. We don’t have enough initiatives yet, but there’s good ground for collaboration. Lately, German embassies in the region have been collaborating more, and we also get a lot of support from different Singaporean government agencies. The Economic Development Board (EDB) helps foreign companies launch in Singapore, while SPRING and International Enterprise Singapore help local Singapore-based companies expand. Oh, and Daimler recently launched an accelerator called Startup Autobahn. Trying to collaborate with corporates is a good way to go forward in Southeast Asia as well.

What should startups know about funding in Southeast Asia?

The majority of VCs are in Singapore. Risk capital is less developed compared to Europe and the US. It’s getting there, but risk profiles and risk appetite are way different, especially with Angel investors. Overall, funding in Asia is challenging, especially for early-stage startups. In Singapore and a few other places, early-stage funding works through government support. It’s easier if you’re later-stage, but I wouldn’t rely on that. As a general remark, I see Southeast Asia as an expansion market to scale up but definitely not as a replacement to having a base in Germany.

What is your best advice for German startups looking to expand to Asia?

Two points. Be clear about what you want to do there, and why you want to go there, rather than expanding to the US or another market. In other words: Do your due diligence and set a goal. The second piece of advice is: Come here! Take a week or two and explore two or three cities like Singapore, Ho-Chi-Minh, Bangkok or another place that have vibrant startup ecosystems. Attend a few of the many events, speak to people and then evaluate whether you can achieve your goals.

After living in Paris for seven years that included a stint in the corporate world, Christian Geissendoerfer in 2008/2009 launched a mobile-location-based advertising business out of Berlin. When he moved to Singapore for personal reasons one year later, he decided to expand his startup to Vietnam and other countries. This summer, Geissendoerfer was named CEO of German Accelerator Southeast Asia.