While Silicon Valley is still the epicenter of entrepreneurship and the destination for college grads who want to build a company, the venture capital that fueled the startup economy the past few decades is starting to flow elsewhere.
New York and London still get the lion's share of what doesn't flow to Silicon Valley; and India and China have made substantial gains. But in the emerging markets of Malaysia, Vietnam, Indonesia and Philippines, investors are finding more and more reasons to invest.
Rebecca Hwang, co-founder and CEO of YouNoodle, a startup that helps corporations and governments identify high-performing entrepreneurs and talent, says one reason these secondary emerging markets appeal to investors is that they are ideal testing grounds for new products, where the young population is connected to social media. “Countries like Malaysia, Vietnam, Philippines and Indonesia have great technical and entrepreneurial talent,” notes Hwang.
Hwang helped to organize Startup Malaysia, held in Kuala Lumpur in October, and has assisted the Malaysian government in investing in tech entrepreneurs. She says she has been receiving an increase in queries from government leaders in Asia and South America to find companies and entrepreneurs who are based in secondary emerging markets.
While venture capitalists are by nature risk-takers, why would they want to up the risk factor by entering markets where the infrastructure can be less than reliable? “Investors have the chance to enter underpenetrated markets that are not swarming with VC money—that way they can get the first look at some of the hottest companies,” says Hwang.
Paul Bragiel, a partner at start-up incubator i/o Ventures, said, “I’m bullish about any economy that is growing, especially one that [is transitioning from] a pure outsourcing play to one fostering innovation.”