Startups from China, Taiwan, the Philippines, Taiwan, Nepal and Israel took to the stage at the WiT Bootcmap held in conjunction with WiT Singapore 2018 conference last month to share their stories and the state of the startup ecosystem in their countries.
In this first part of the report we focus on China, Taiwan and the Philippines.
China: Is winter coming for startups?
Discussing China (from left): TravelDaily’s Joseph Wang, Ctrip’s Margaret Feng, uBingo’s Norman Tan, iGola’s George Zhang, Flightsroutes24’s Nancy Zhou
Foreign companies are making a beeline for China and investing in its various industries, from travel to technology, food and construction, to have a share of its economic success. One would think that some of the investments would flow to the numerous Chinese startups, which are also contributing to their country’s success, or fund aspiring startups. But that does not look like the case.
“They (startups) seem to be abandoned by venture capitalists. This is despite a significant increase in the amount of investment flowing into mature businesses in the country.” said Joseph Wang , chief commercial officer of TravelDaily, at the panel discussion with startups from China.
“So what went wrong? Give us some insight into what happened in the past two years.” he asked the panellists.
“It’s not happening just in the travel industry; it’s happening everywhere,” said Margaret Feng, head of Oasis Lab, Ctrip, adding that some VCs are avoiding investing in digital marketing, e-commerce and social networks.
Norman Tan, CEO of uBingo, a smart hotel solution and management system, opined that “it’s a normal cycle. There is always an uptime to and after a heated spot, it starts to cool down.”
He noted in the last couple few years, a lot of money has been pumped into the travel industry like Uber and other travel-related companies. “Many people are trying to get a share of the pie and a lot of not so sophisticated investors are coming, and there are not many good startups coming in. So right now, winter is coming, funds are getting away and startups are failing. But the ‘good’ companies are still surviving,” citing Ctrip as one of “the best” (company).
iGola International, a creative metasearch for instant real time flight search and bookings, raised US$18.7 million dollars in a Series A funding round in December 2016. Its CEO George Zhang recalled that despite the company doing just ticketing, as some investors may not be inclined to put their money in a company focused on one activity, what makes the difference is it is also technology-driven.
He said while winter is coming for tech startup funding, the Chinese domestic and outbound tourist markets are still booming, auguring well for his business. He also sees good growth in the inbound market, with the numbers coming from Europe and the US. “Even with the trade war between the US and China, the flights between the two countries are fully booked. Our business in Europe is growing fast, and our number one market is still the UK.”
Asked if iGola plans to add new products like high-speed rail travel, which is becoming very popular among Chinese tourists, to meet changing market trends, Zhang said iGola would still focus on ticketing. “There is still a long way to go.”
Nancy Zhou, co-founder Flightroutes24, a leading global air tickets contents aggregator, said that in general, VCs are not making any mistakes as they tend to look for instant benefits from their investment. However, the travel industry cannot do that. She said travel is different from other industries as it needs time to build up its service, improve efficiency and build up user profiles using big data, so results cannot be instant.
“We don’t see it as the winter season, but it’s just that investors need to understand more about the travel industry. There should be more communication and relationships between investors and startups”.
The panellists do see opportunities for startups in China and for their companies in the near future. For uBingo’s Tan, it is how to put together all the big data the company has to create a complete profile of the customer from planning to booking. “I don’t think in China, we have that yet. We have a lot of people, we have a lot of data, so we can put all the data together and make the best out of it.”
Zhang of iGola will focus on virtual interlining and airline add-ons as he sees plenty of room to grow in China.
Flightroutes24’s Zhou said it is finding a way to apply the success of the company’s business model to other countries, and expand its business.
On the biggest challenge in the next five years, Ctrip’s Feng said ‘top talent’, as even this largest OTA in China has to “fight” with Internet companies in the country to find talented employees. For Zhou of Flightroutes24, it is “global expansion”.
uBingo Tan said as a startup, its biggest challenge is differentiation from big giant companies, “how we can make our products, content and service better and to make it more social.”
Zhang said that as iGola is ‘the only one in the world with 100% instant booking for flight metasearch, the challenge for us is how to go global quickly.’
Taiwan: Small and growing, needs to go global
The Taiwan session (from left) RTM’s Cheng, AsiaYo’s CK Cheng, Vpon’s Arthur Chan, KK Fund’s Kuan Hsu, Niceday’s Justin Pai, Owlting Group’s Darren Wang
Compared to China, Taiwan is small not only in size but in population numbers, with just 24 million compared with the former’s 1.42 billion. However, it has a lot of pluses — a healthy outbound market with 11.4 million tourists holidaying abroad for the first eight months of this year, a strong inbound market with 7.1 million arrivals (up to August this year) and tourism receipts of US$12.5 billion for 2017.
The Taiwanese government is expected to inject US$3.3 billion into local community revitalisation for tourism in 2019.
This was the snapshot of the country given by Daniel Cheng, founder and president of RTM (Redefine Tourism Mixer), when introducing the startup session on Taiwan. RTM is the biggest non-government organisation that helps develop travel startups and tourism tech entrepreneurs in Taiwan and the region.
Taiwan’s startup market, though growing, is not as vibrant as the travel industry. In the last two years (2017 and 2018), the total funding raised in Taiwan was just over US$40 million, with ongoing efforts to increase the number. There are currently eight startup companies with over 30 people, with more expected in the future.
Despite having resources that are conducive for a startup eco-system including travel assets and high-quality software engineers, the latter attracting tech giants like Google, Facebook, LINE and Rakuten to go to Taiwan to recruit them, the travel startups have not really taken off.
What is holding Taiwan startups back? The panellists listed some of the factors as limited domestic size, weak international branding, weak investors and lack of government and traditional tourism corporate support.
“Taiwan is also not a startup hub like Hong Kong and Singapore, hence for startups, they face more challenges fund raising,” is another reason given by CK Cheng, founder of AsiaYo, the largest vacation rental platform in Taiwan. The company, which has a presence in Korea, Hong Kong, Thailand, Malaysia and Japan (its biggest market) and a strategic partnership with Rakuten, raised US$3.3 million in A round last year.
Arthur Chan, COO of Vpon Big Data Group, an Asian leading big data ad tech company, added that most Taiwan startups, whether in travel or non-travel industries, focus completely in the domestic (Taiwan) market and this limit their growth.
“When we talk about Internet business, we talk about large population sizes, so that places a lot of limitations for them (due to Taiwan’s small population) to raise capital or to expand their business.” Vpon was also localised when it started in Taiwan about four years ago, but Chan took the company to Hong Kong, Japan, China and Singapore, and it now has about 60 million travel status data covering most of Asia.
For Niceday, the leading experience and activities online booking platform in Taiwan, not being to spread its wings internationally is not by choice but more of a corporate decision. The company was acquired by the Fullerton Group, a corporate company in Taiwan, two years ago.
Its CEO Justin Pai said the biggest challenge for Niceday is the market size. “Because we’re part of Fullerton Group and the parent company strategy is just doing business in Taiwan, it is very hard as a platform.” However, the company found an opportunity to grow due to the lifestyle change in the country especially among millennials who tend to spend more on lifestyle development products. The B2B and 2C experience platform decided to do something more than just offer regular tour activities, coming up with programmes to meet the changing demand like summer camps, which are doing very well.
Darren Wang, founder of Owlting Group , which raised US$19 million in Series B funding this year, said the company does not have any Taiwanese investors, because “when we talk about blockchain, nobody understands what is blockchain even after teaching them for two hours,” he related with a laugh. Founded eight years ago, Owlting is a blockchain innovator providing blockchain solutions to agriculture and travel, e-commerce platform to consumers, and PMS (property management system) to hotels.
However, there is interest in helping tech startups in Taiwan as shown by KK Fund, a venture capital fund investing in seed stage Internet and mobile startups across South-east Asia and Hong Kong.
Apart from travel, the fund also invests in fintech, logistics, but travel is going to be a key component. “We recently launched a Series A and B fund focus on the region, and one of the key sectors will be travel, media and entertainment. We do cheque size from US$500,000 to US$5 million,” said Kuan Hsu, KK’s co-founder and general partner.
He noted that Taiwan has a lot of “amazing assets when it comes to travel” and leveraging technology to uncover and share some of the assets is a key component of what can be done in the country. “I am personally very excited. I have three portfolio companies in Taiwan that are travel-related and hope to invest in more travel-related startups in Taiwan.”
Sharing an investor perspective on the challenges facing startups in Taiwan, Hsu said while the technology is good, it is only one part of the equation. The challenge is how to combine the business model, and more importantly, given the market size, how to expand overseas.
“As an investor looking at the startups in Taiwan, I often see that going overseas is one of the challenges and if you’re not in the B2C space but offering the 2B services, then how do you really break into countries like Japan where the propensity to spend is there but is incredibly difficult to enter and, as a startup, you don’t have the resources. It’s not easy to do that. That is the biggest challenge we face.”
The key is how to leverage the resources and the talent that Taiwan has to offer and build a business that can become a bridge between North Asia and South-east travel, he added.
“Or go B2B and expand internationally. Then you will be competing with the big boys. How do you do that?. Love to look at more startups in Taiwan that will be able to address these issues.”
To the question by moderator Cheng on what the future holds for the Taiwan travel market, and if it will see a unicorn in the country like Hong Kong’s Klook and Indonesia’s Traveloka, the quick answer was, “They have to go global.”
The reasoning is the key differentiation between the unicorns and Taiwan local tech players or travel tech is, from day one, companies like Klook or Handy aimed for global domination. It is crucial to have a global mindset at the very beginning, no matter which area the startup aims at.
However, AsiaYo’s Cheng is more optimistic. “If you look at industry development in Taiwan, the majority of the tech sector is what we call ‘hidden champions’, which means they are very good in one particular segment and work with global supply chains, and that trend is going to happen in the travel industry in travel as well.”
Due to the market size, Taiwan will not be able to produce a large OTA or large market place, but the country can be a tech enabler or a key strategic partner to bridge some of the big countries such as China, Japan or Korea. Due to common language and culture, Taiwan can also easily communicate with South-east countries like Singapore or Malaysia, he said.
“We can be a bridge to work with US, Japanese or Chinese companies as a key strategic partner to grow the pie and grow together.”
Yet despite the reservations, the panellists have confidence in Taiwan, for when asked if they will start up in Taiwan again, the answers were “yes”, “definitely”, with Wang of Owlting Group adding “it will my last time.”
The Philippines: Catering to a young, social, mobile market
Rod Cuthbert leading the Philippines’ session (from left) TripClub’s Mench Dizon, HolidayHey’s Justin Razon, Tralulu’s Andrew Cua
“Baby companies, they’re all very young, they’re just getting started and they are here to learn” was how Rod Cuthbert, founder & former CEO & chairman of Viator and former CEO & chairman of Rome2Rio, described the three Philippines startups – Tripclub, Tralulu, HolidayHey– sharing the stage with him at WiT Bootcamp.
About the country, he said it is “tremendous market, amazing place, very colourful political scene. It’s all that and more.
The Philippines, with a population of 105.7 million, is one of the fastest growing economies in the world with a robust travel market. It has 61 million unique mobile users with most owning more than one smartphone, and 62 million are active mobile social users.
Of the 67 million active social media users in the country, most are on Facebook as it offers the product for free. People everywhere, even in the countryside without an Internet connection, can access this social media platform with just data on their phones.
“In the Philippines, Facebook is the Internet,“ was how aptly Mench Dizon, CEO & founder of TripClub described the importance of this platform in the country.
Startups in the country not only have to cater to this highly mobile, very young (average age 23) and very social population, they also have to take these facts into consideration:
- 95% of mobile users use prepaid cards with limited calls and text to the same network with many having dual SIM phones so they can have two networks to communicate with other people in other networks, as well as to have unlimited data.
- About 29% have bought something online.
- Cash on delivery is popular, preferred over credit cards or online payments as Filipinos are more comfortable with cash payments.
- Apart from concern over security for online payment, only 3% of the entire population has access to credit cards, and there is also low penetration of bank accounts.
- People pay for online purchases by cash or go to outlets like 7-Eleven for over-the-counter payment, which is connected digitally.
- Payments are starting to gear towards mobile especially in this cash-intensive community.
- 95% of most activities in the Philippines are booked offline.
- There is a growing middle class evident from the number of retail stores, restaurants and a large number of travellers going around the country.
For the three young startups, their flexible model with emphasis on online and mobile are moulded to cater to the needs of this rather unique market.
TripClub is a business travel concierge for high-frequency travellers and SMEs, initially funded as part of a venture programme. On its website, it says: “Your laptop can wait for serious business. Search, book, keep and organise all your trip details in your phone.”
Dizon explained: “We focus on building the concierge platform where we allow women who have parted with their careers as mothers and wives to go back to the workforce as concierges to service the travellers. This is important in a country where a lot of people brave traffic three to five hours a day.
In its first year of operation, the company is on track to hit its targets. It is now in the second phase of development, which is the concierge backend. “It’s really a conversational interface at the front end, and we’re now automating the concierge platform,” she added.
Tralulu, which is bootstrapped raising a small amount of fund, is a booking platform for local experiences and local guides “specifically within the Philippines and with a little presence in Myanmar,” is how its founder and chief visionary Andrew Cua described the company.
The platform makes it easy for travellers to book online authentic experiences with the locals, especially in some of the islands where there is little opportunity for the residents to make a living. It thus helps to alleviate poverty through tourism apart from exposing the islands and their local way of life to travellers.
“For every tourist to the Philippines, two jobs can be generated. So with the platform, we can generate 100,000 tourists a year, and help create 200,000 jobs,” Cua revealed.
He is also turning to creative ways to cater to the market like using blockchain to transfer money. “There are many new technologies emerging, especially blockchain, that we believe will be revolutionary for travellers and the e-commerce platform as well.”
HolidayHey, launched this year and also bootstrapped, is a Philippines outbound tour packaging booking platform. It is helping to digitise the travel agencies and tour operators because “they are very old” and they do not have an online platform, said its founder and CEO Justin Razon.
“We digitise their tour packages and aggregate their packages online so clients can book and compare prices easily. We’re also currently working on partnerships with tour operators abroad.”
Razon said although the company has an online platform and high transaction size, it is conducting business offline like local travel agencies as Filipinos are not yet comfortable booking online. “We have to convince more travel agencies and clients to book through an aggregator to get the best prices and the best tour packages.”
To the question of where geographically startups, in general, are looking for funding, Tralulu’s Cua answered: “different sources” – bootstrapped, angel investors with many family businesses, which are the traditional investors, starting to explore tech ventures. He said there are huge opportunities in the Philippines for investing in tech startups, specifically travel tech because that space is empty.
He elaborated that many ventures entering the Philippines are mostly foreign startups, predominantly from the US. It is easy for a foreign company to expand, but it is not localised, so there is a huge travel gap especially in localised startups and also funding for them.
TripClub’s Dizon said about US$25 million were raised in the Philippines in the last five years and there few exits. “There is really a huge opportunity to grow funding, primarily from regional funds, as we don’t have local VCs. Access to the funding is an opportunity for the Philippines as well. There is hardly any travel tech, it’s mostly fin tech mainly because of the opportunity in financial institutions.”
Which led Cuthbert to quip: “After this session, I expect a rush of investments to the Philippines!”
Next week: Focus on Nepal and Israel
• Featured image credit: BeeBright/iStock-Getty Images
