HSBC boosts support for ecosystem of innovation focused on helping fast-growing early-stage companies expand

WITH Asia Pacific attracting more than a quarter of the total global private investment, the region is rapidly catching up with North America as the leading producer of unicorns – referring to startup businesses with valuations exceeding US$1bil.

The Covid-19 pandemic spurred a massive shift towards digital consumption, which opened new economy sectors for businesses across the value chain to fill the gaps in the market – from payments and logistics to customer experience.

The 2022 Emerging Giants in Asia Pacific report by HSBC and KPMG, which looks at new economy businesses and the economic and investment landscape in Asia Pacific, found 10 leading emerging giant businesses in each of the 12 key markets evaluated, which included over 6,472 technology-focused startups with valuations of up to US$500mil.

The findings represent the magnitude of high-value startups seen in Asia Pacific, even in markets considered by investors to be at their nascent stage. This includes South-East Asia whose innovative startups continue to attract investors looking for new expansion prospects.

HSBC South and South-East Asia commercial banking head Amanda Murphy and HSBC Malaysia commercial banking head Karel Doshi share how new economy businesses can become a key driver of economic growth in South-East Asia, highlighting growth opportunities for Malaysia’s new economy startups and the support available to foster the ecosystem’s development.

What are your views on the current state of the startup ecosystem in South-East Asia?

Murphy: Despite the challenging global macro environment, South-East Asia’s “digital decade” has well and truly begun.

To put things into perspective, the region’s digital economy is expected to reach as much as US$1tril by 2030 in gross merchandise value (GMV).

New economy companies are driving growth in the region, powered by these three key factors: digitalisation, dynamism, and demographics.

The rapid adoption of digital technologies, widespread internet access and growing smartphone usage have created a fertile ground for digital startups, leading to the growth of online commerce and digital payments.

In the past three years alone, 100 million internet users have come online, totalling 460 million in 2022. Heavy adopters of new digital services and products consist of new generations of urban affluent and young digital natives. This demographic trend creates a large and growing market for startups to target.

Moreover, with a growing entrepreneurial and tech-enabled population, South-East Asia is becoming a global sandbox for innovation.

What are some of the growth opportunity areas for companies in this space?

Murphy: Our latest Global Connections research report shows that the region’s digital economy is a key attraction of South-East Asia. The shift to direct-to-customer model gives companies better control over sales, marketing, and customer data.

Our survey data shows one in three businesses believe that Asean is leading in e-commerce and digital platforms, ahead of AI and cybersecurity (both at 29%). Digital payments are seen as a regional strength as well.

Given the potential upside, international businesses are investing heavily in their technological development. Digital transformation underpinned by proliferation of real-time payments will fuel growth.

From blockchain and sustainable fashion to health and green tech – these are all growth opportunity areas driven by evolving consumer behaviours, technological advancements, and emerging trends. E-commerce, transport, food, travel, online media and fintech have been leading the charge in terms of growth, creating broader and diverse subsectors.

What is the state of the startup landscape in Malaysia?

Doshi: Malaysia is putting itself at the forefront of Asean’s thriving startup ecosystem with a focus on becoming a hub for high-performing businesses in the region. As part of the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030, the country has a goal to generate 5,000 startups, including five with unicorn status, by 2025.

The rise of these startups is further fuelled by the country’s strong economic fundamentals, growing and diverse middle class, a massive increase in the purchasing power of consumers along with a burgeoning technology landscape.

Structural shifts driven by imperatives such as the transition to Net Zero, the fourth industrial revolution and Web 3.0 are redefining businesses regardless of their industry and size, and opening access to new business opportunities in areas such as e-commerce, e-payments and online healthcare.

What are the key factors crucial to supporting the growth of new economy startups?

Doshi: Startups require funding, access to digitalisation grants, and opportunities for capacity building. These are fundamental in empowering emerging ventures to thrive and expand.

Fostering an environment that accelerates digital adoption and cultivates the next generation of tech innovation companies is paramount. To remain competitive on a global scale, investments in technology and innovation should be prioritised.

The integration of sustainability practices is vital for the long-term success of startups. Investors are increasingly incorporating environmental, social, and governance (ESG) criteria into their screening processes, while global multinationals are looking into their supply chain and whether they are ESG-compliant.

Increased investments in technology will facilitate a smoother transition towards sustainability.

Startups that demonstrate strong sustainability commitments can enhance their corporate image and brand trust and attract capital or financing from investors.

How has the Malaysian government contributed to the growth of the startup ecosystem?

Doshi: The various government initiatives laid out as part of the Madani Framework, SUPER 2021-2030 and Budget 2023 are testament to the government’s commitment to bolstering the development of startups through investor-friendly policies and financial incentives – including grants, tax exemptions and low-interest loans.

The New Industrial Master Plan 2030 highlights the goal of turning Malaysia into a digitally vibrant nation by helping industries “tech up” through the acceleration of digital adoption.

Additionally, the National Energy Transition Roadmap could spur the growth of new economy companies in the climate tech space and new industrial segments such as electric vehicles to reduce greenhouse gas emissions.

How is HSBC supporting the startup ecosystem in Malaysia?

Murphy: HSBC has stepped up our support for the new economy startups across the region with dedicated funds, tech-led agile solutions, and expertise.

We have structured ourselves to support new economy firms and emerging giants through their growth journey. Setting up our tech and startup funds across Asia is one aspect of this, but our support goes beyond funding.

The strong partnership approach which we have in place means that we can offer more than basic banking services such as dedicated teams with specialist knowledge and bespoke solutions that can help startups evolve and scale up.

In recent times we have seen VC companies placing greater emphasis on revenue and cash flow and we are keen to work with them. We are supportive of new economy companies who are looking to scale and grow. Whether it’s through funding, networking, capital advisory or banking solutions, that’s where HSBC can support their growth and business models.

What makes HSBC the suitable choice for facilitating the growth of these businesses?

Murphy: As the world’s largest trade bank with a powerful global network, HSBC can help our clients scale. Our network captures more than 90% of the global GDP and trade flows connecting South and South-East Asia to the rest of the world from SMEs to large corporates and multinationals.

We are also one of the largest banking and financial services organisations in the world with assets of US$2.992bil and have announced US$6bil investment in Asia - half in South and South-East Asia including in Commercial Banking.

Our heritage in supporting entrepreneurs and scaling businesses in the region for over 150 years is another reason why.

HSBC New Economy Fund

Recently, the bank launched a RM500mil HSBC New Economy Fund to provide high-growth, new economy businesses across Malaysia access to funding solutions – enabling them to innovate and scale. The fund will primarily support lending to tech-led businesses and emerging startups from Series B stage and beyond which are capitalising on opportunities within Malaysia’s growing digital economy.

“A key ingredient for startups to scale is the investment to grow,” says Doshi.

“On top of that, for startups to expand and succeed, it is also crucial to connect them to other parts of the world as well as bring other parts of the world to them.

“We are in a strong position to support emerging entrepreneurs of today who will spur the next generation of tech innovation companies that will be crucial to the development of the new economy landscape in Malaysia.”

HSBC launched similar funds in other parts of the region, namely Singapore with a US$200mil tech fund to help high-growth companies expand into South-East Asia and beyond, and a US$250mil tech fund in India to invest in tech-led startups.