Over the past few years, the Asia-Pacific region has been getting more attention from venture capitalists around the world. In 2014 alone, as much as $38.9 billion was invested across 1,357 deals, up from just $9.4 billion the previous year, according to data from research firm Aranca. Zoe Henry from inc.com said in her report that, the region recorded the biggest gains in average fund values in 2014.

Analysts point to the area’s massive talent pool of skilled engineers coming from top schools like the University of Hong Kong, and the Indian Institute of Science in Bangalore. The support of national governments also plays a key role. Technology and e-commerce are leading sectors in the Asia-Pacific, with tech capturing nearly 27 percent of VC investments last year. Notable startups include Devsisters, a South Korean mobile game developer, and Hi-Target Digital Cloud, a Chinese manufacturer specializing in 3D laser applications. They ranked first and second, respectively, on Deloitte’s list of the fastest-growing companies in Asia.

Still, much of the region’s infrastructure is underdeveloped, and many cultures don’t necessarily value risk-taking. These factors make starting up in, say, Kuala Lumpur, more difficult than starting up in Silicon Valley. Compass, a San Francisco-based research firm, recently ranked the top 20 global startup ecosystems. It evaluated regions based on their startup experience, successful exits, VC investments, market reach, and talent pools.

These were the top-scoring startup hubs on the list:

1. Singapore
The city-state of Singapore was named the best startup ecosystem in the Asia-Pacific region. It has about 3,600 active startups, with strong growth in e-commerce, gaming, and social media. Overall, Singapore ranked No. 10 on the list, rising from No. 17 when the report was previously released in 2012. It’s also one of the best places globally to become a millionaire, outpacing Hong Kong. Singapore has long been a thriving business center, and is home to the Asian headquarters of major U.S. companies such as Google, Uber and Facebook. Situated on the major sea route between India and China, the city has a huge potential for market reach, with nearly half (49 percent) of startup customers living abroad.

It’s also worth noting that Singapore has the highest mobile penetration of any nation globally. Almost nine out of 10 people have access to a smartphone, according a recent survey by Deloitte. That provides new, exciting opportunities in e-commerce. Still, natives warn that it can be difficult to expand one’s startup beyond the borders of Singapore. “Rules may change, and it’s not clear what the rules might be, can be, or will become,” noted Kuo-Yi Lim, a partner at the VC firm Monk’s Hill Ventures, which invests frequently in Singaporean and Malaysian companies.

2. Bangalore
With 4,900 active startups, and $2.3 billion worth of VC investments, the Indian city of Bangalore is the second best place to do business in Asia. It boasts the multibillion dollar “unicorn” company Flipkart, an e-commerce site, which was launched by Sachin and Binny Bansal in 2007. The company is now valued at $15 billion, having raised $550 million in a May funding round led by Tiger Global Management. “Unlike Silicon Valley, Bangalore has the concentration of people, engineers, investors, and a more easy-going culture where information is shared more easily than in other parts of the country,” noted Dev Khare, the managing director of Lightspeed India Partners Advisors. Bangalore’s strong Internet penetration doesn’t hurt, either. By 2017, India is expected to have roughly 500 million Internet users, according to the Internet and Mobile Association of India.

programmers-iga3Startups thrive especially in Bangalore’s Koramangala neighborhood, where there are several incubators and co-working spaces for new startups. The city, like much of India, however, suffers from extreme poverty–even alongside its thriving tech culture. About 22 percent of the Indian population currently still earns less than $1.25 a day.

3. Hong Kong
Located in southeastern China, Hong Kong is a runner up on the Compass list. With roughly 2,000 early and late-stage startups, the city’s proximity to Mainland China gives companies a competitive edge. Startups there also get support from major incubators like Hong Kong Science and Technology Parks and Cyberport. As a major international finance center, with a GDP accounting for about 0.47 percent of the global economy, Hong Kong has seen a growth of financial technology companies (about 52 total as of 2015). “Startups are an important component of the disruptive innovation process that is redefining the global economic, social and political order,” said Professor Richard Wong, who teaches at the University of Hong Kong, in the Compass report.

 

hongkong“Historically, Hong Kong has always been very successful in capturing business opportunities by integrating and harnessing the talents and resources in the region and around the world, especially in manufacturing, trading and services. We have now arrived at a stage when Hong Kong will perform this role in innovation,” Wong added. Analysts note, though, that while there’s plenty of capital in Hong Kong, investors are wary of giving that funding to tech startups, as relatively few exits have occurred to date.

Kuala Lumpur4. Kuala Lumpur
The Malaysian city of Kuala Lumpur, with a population of just under 2 million, is also a runner up in the Compass report. The economy may be smaller compared to, say, that of Delhi, but its proximity to the large Southeast Asian markets makes it an attractive place to start a business. Kuala Lumpur has an especially supportive government. In 2013, for example, the prime minister of Malaysia, Najib Razak, created MaGIC, one of the largest startup accelerators in the Asia-Pacific region. GrabTaxi is one notable startup success story. The ride hailing service launched officially in Malaysia in 2011 (it has since moved its headquarters to Singapore). Today, it operates in six countries worldwide, counts more than 3.8 million app users, and is valued at more than $1.5 billion. “Malaysia is a good place to grow regional businesses. It needs to believe in its strong offering within the South East Asia ecosystem,” noted Hugh Batley, a managing partner at the digital marketing agency Lion & Lion, which is based in Kuala Lumpur, in the Compass report.

“From a rules and regulations perspective, it is relatively easy to employ foreign talent in Malaysia, especially with the recent introduction of the MSC Status that permits startups to hire up to 20 foreign employees without restriction,” he added.

First seen and source: inc.com

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