In my opinion, the startup culture in Kenya has seen a significant growth over the past 10 or so years, owing partly of course to the increased use of technology, including mobile phone adoption, better access to computers and the ever decreasing cost of using the mother of all information, the Internet. I believe that this has encouraged curious, brilliant, energetic and risk-taking young minds to come up with ideas, solutions and companies using technology.
As a business owner, expanding and growing your business is probably something that you think about daily, especially if you want to reach the global market. Asia is a place that you might want to consider. Being one of the most populated continents, the consumption potential of your product or service will definitely be massive. But how can you tap into that market, especially if you have no ties or networks there?
Nest’s COO Lawrence Morgan and Aaron Fu, Managing Partner for Africa sought to demystify the idea of expanding businesses to the Asian market last week at a talk that brought together a number of startup founders at the Nairobi Garage, where Nest have set up shop. Nest is a venture capital firm that offers incubation, capital investment, mentorship and strategic insights in scaling your business.
I’m sure some of you reading this are wondering why a startup would want to join an accelerator based in Hong Kong, so far away from its customers. Well Lawrence gave two compelling answers on that. According to Lawrence, joining Nest is one way of accessing the Asian market. Asia Development Bank estimates that by 2030, Asia’s annual consumption will reach $32 trillion. This is almost half of all global consumption. Why wouldn’t you want a piece of that? Of course you cannot go in blindly, that is why Nest is there to guide you through it.
Secondly, Lawrence said that they are out to bring relevant companies to Asia. Having a corporate accelerator where a brand sponsors a 12 week program of education and brings startups into innovation hubs or spaces allows those startups in a certain field to get mentorship and resources both from Nest and the corporate. “We run one with Infinity which is a luxury car brand with Nissan in the urban mobility and smart city sector, we run an accelerator with AIA, the insurance company in health care and remote diagnostics and we run one with DBS Banking in fintech, so depending on what vertical your startup is focusing on, then it is a great way to basically see like-minded global talent.” Says Lawrence.
Right Time To Expand To Asia
“If you want to go global, then it makes sense to move over to Asia…I don’t think that scaling to Asia should be considered in terms of geography, I think you should think about your resources and how you can tap into the Asian market”
According to Lawrence, you can view this in two different ways. One is the customer base targeted by the startup. “If you want to go global, then it makes sense to move over to Asia. What we have found out in Nairobi is that people are making scalable products and services that they want to take to the world and it just happens that the first market will be East Africa and then they want to scale rather big. I don’t think that scaling to Asia should be considered in terms of geography, I think you should think about your resources and how you can tap into the Asian market”
Another thing to consider, especially if you are producing a hardware product is the inefficiencies of manufacturing anything in our country. Manufacturing in Asia is not something that only African countries can currently benefit from. “We have a lot of hardware startups from Silicon Valley moving their manufacturing over to Shenzhen, which makes total sense because of the low cost of manufacturing there.”
There are a lot of resources available for startups in Asia. Hong Kong for example has 48 co-working spaces, all available for startups. In addition to this, the government, through InvestHK , provides a platform or rather provides various services and opportunities for new businesses. However you need to be careful. “Don’t just go to Hong Kong and start a business because the InvestHK won’t help you. They cannot say that they brought you in. This will lock you out of so many sponsorship opportunities as well as resources.” Advises Lawrence. So what can you do? He says that before starting a company, get involved online. Enquire on visa sponsorships, on the grants available and basically what the government is doing to attract more and more businesses to the country.
Therefore, as soon as your resources allow you to go global, then just do it.
Legal Headaches
“Singapore and Hong Kong are cheap as chips! You can incorporate your company with USD 1000 in a matter of days.”
So how easy is it for you to set up shop in Asia? Lawrence says that it is cheap. “Singapore and Hong Kong are cheap as chips! You can incorporate your company with USD 1000 in a matter of days.” Why is it this cheap? Well they want to create a competitive environment and also attract the world’s talent to their countries but some legal issues, especially working visa’s proved to be unattractive to foreigners wishing to expand business to Asia. “We as Nest, approached the Hong Kong government to restructure their visa system.
Before, they were more focused on how much tax a business will pay and how many locals they will employ. For a startup hoping to move to Hong Kong, this is an issue. You may not know how many people you will need to employ or even if you will be profitable to support the taxes. This whole system was broken. Therefore it has now been restructured so that lots of people can come in for 3-6 months to see if the customer base is worthwhile before they incorporate.”
Furthermore, Nest is always there to help iron our any legal issues. With a wide network of partners and professionals like KPMG, you are sure to get advice and guidance on legal, tax or any other issues that you come across. Also having Nest by your side is an added advantage because they know how the market works in different Asian markets.
“In China you have to register your company. You can do a WFOE (Wholly Foreign Owned Enterprise), which most foreigners do, that requires you to put up a certain amount capital into the business. When you get the certificate of incorporation, this figure is added there. It might seem obvious for you to just put in the minimum amount required. However when you go into business and show this certificate and they see you have just put in the minimum, well they will take it as a sign that you are not committed and are not well capitalized to do business in the future.” He says.
Working with Nest will therefore prove beneficial as you can use their wide networks and wealth of knowledge in tackling any legal and cultural hiccups.
Tools You Need To Move Over
“Singapore is the best run company that is actually a country”
Well first of all working with Nest is something that a business should really consider when going into the Asian market. Not only will they give you funding opportunities, they will also help you with the necessary tools that you need in order to scale your business in Asia. Furthermore some country governments such as Singapore will prove very advantageous to have on your side.
“Singapore is the best run company that is actually a country. They can tell you what they will be doing in 2020. They are very structured in that way. If you can tap into their vision, so many resources will come to you.” Lawrence advises.
Knowing your product and the various competitive landscapes of the different Asian countries is also something to take into consideration. “Look at your products or services and then find a country that will make a natural fit for it. Fintech is big in Hong Kong, it is the 4th largest stock market in the world, and therefore you might say you want to go to Hong Kong because it is a huge financial center or you might say that competition is massive because of that”
Moving your company to any other place, even if it means expanding to Nakuru from Nairobi does come with its own challenges and risk factors, however in order to scale and reach new heights, it is necessary. Nest have seen something in Africa and have chosen Nairobi to open up chances and opportunities for taking our products and services to a global level.
“As Nest, we don’t want to be passive investors who just buy equity and leave you only to find out two years later whether you have been successful or have lost the money. We want to provide structure for people who have entrepreneurial talent and want to go out and express it. We want to show them how to go about it and give them a pathway to follow.” says Lawrence.
So if you want to take your product global, Asia is definitely a market you want to tap into and Nest is offering to hold you hand through that.
