New Markets German startups find fertile ground in Asia

The German government is sending young companies to Southeast Asia to reinvent themselves for new markets. The challenges are substantial, but so is the support.
Singapore all aglow.

Once upon a time, Bastian Lossen stayed in luxury hotels when he traveled to Singapore for Credit Suisse. This time around, he landed in a youth hostel. Mr. Lossen, the CEO of fintech startup Werthstein, is one of three German startups setting up shop in Southeast Asia since March.

With funding from the federal economy ministry and support from regional Asian governments, the German Accelerator program is helping three young companies enter the Southeast Asian market via Singapore. The program started in 2014, sending German companies to the United States.

Singapore was an obvious choice for the Germans, offering more intellectual property protection than China and easy access to the 600 million people living in Southeast Asia, where annual growth has held at 5 percent for years. However, the diversity of the region remains a challenge: Consumer buying power in Singapore is 20 times higher than in Vietnam. It doesn't work to just offer the same product as in Germany, said Claus Karthe, the founder of German Accelerator's Asia office. Without a dedicated Asian strategy, startups are doomed to fail.

Germany's government has dedicated €1 million ($1.2 million) annually to supporting the startups' international endeavors. From 13 applicants, the first class of three startups includes last-mile logistics company Tiramizoo and sensor technology company iNDTact Würzburg in addition to Werthstein. They get five months of free office space, paid travel, business consultations and mentorship.

For Werthstein, adapting to the new market started with its name: In Asia, it's called Wealthstone. Mr. Lossen and his team also had to localize their investment offerings, provide different pricing structures and, most importantly, become intimately familiar with Singapore's financial regulations. Thanks to the connections they made through the German Accelerator, they were able to find the capital partners necessary to found their new venture within a matter of weeks.

"It would have been cheaper to enter other markets in Europe like France first," Mr. Lossen said, but the strong growth in Southeast Asia convinced Werthstein to make the leap.

Quelle: Handelsblatt
From left: Mr. Lossen, Mr. Kellermann and Mr. Karthe.
(Source: Handelsblatt)

Southeast Asia is a veritable petri dish for startups. Manila has 100 fintech startups, and Singapore has almost 270, according to a report by Startup Genome. Local delivery service Grab basically chased Uber out of Malaysia. Venture capital invested in Southeast Asia nearly tripled from 2016 to almost $8 billion in 2017. And it's not only VC funds who see the value: Singapore's central bank has invested $225 million in fintech startups, and Thailand introduced a four-year "smart visa" for tech entrepreneurs this year.

At the same time, infrastructure and bureaucracy can be a hassle in many of these countries. But Tiramizoo found a way to turn that into a positive. "The traffic problems in these megacities are actually huge opportunities for us," said Tiramizoo's Julian Kellermann.

He has had to reimagine the pricing structure and contracts for his company's transportation logistics software. But luckily Tiramizoo already struck a partnership with Shell. The oil giant wants to optimize delivery of consumables to its gas stations in the Philippines. Mr. Kellermann would like to get into the market of aiding logistics for shopping centers, which can be as large as small towns.

That isn't to say that just because they're getting a boost from their government that the German entrepreneurs have it easy. They're practically running two companies in parallel across two different time zones. Mr. Lossen runs his Singapore venture until the afternoon — just in time to catch the start of the workday in Germany.

Frederic Spohr is Handelsblatt’s correspondent in India and Southeast Asia. This story was adapted into English for Handelsblatt Global. To contact the author: [email protected].