Posted on

China’s Software-As-A-Service (SaaS) Market Offers Tremendous Growth Potential

A column chart showing China's cloud computing market size in billions of yuan. China's cloud computing market was valued at RMB 9.7 billion in 2015, RMB 17 billion in 2016, RMB 26 billion in 2017, RMB 41.3 billion in 2018 (forecast), RMB 60.8 billion in 2019 (forecast), RMB 84.3 billion in 2020 (forecast), and RMB 110.9 billion in 2021 (forecast).

The public cloud market is growing at a rapid clip around the world. The worldwide public cloud services market is projected to grow from US$ 182.4 billion in 2018 to US$ 331.2 billion by 2022 representing a CAGR of 16.08% according to research from Gartner. The fastest growing market segment is expected to be cloud system infrastructure services, also known as Infrastructure as a Service (IaaS) which is expected to grow from US$ 30.5 billion in 2018 to US$ 76.6 billion by 2022, representing a CAGR of 25.89%. The second fastest growing market segment is expected to be Cloud application infrastructure services, also known as Platform as a Service (PaaS), which is expected to grow from US$ 15.6 billion in 2018 to US$ 31.8 million by 2022 representing a CAGR of 19.49%. Meanwhile the market for cloud application services, also known as Software-as-a-Service (SaaS) is expected to grow from US$ 80 billion in 2018 to US$ 143.7 billion by 2022 representing a CAGR of 15.77%.

The story is the same in China where, much like the rest of the world, China’s cloud market has also been on an uptrend.

A column chart showing China's cloud computing market size in billions of yuan. China's cloud computing market was valued at RMB 9.7 billion in 2015, RMB 17 billion in 2016, RMB 26 billion in 2017, RMB 41.3 billion in 2018 (forecast), RMB 60.8 billion in 2019 (forecast), RMB 84.3 billion in 2020 (forecast), and RMB 110.9 billion in 2021 (forecast).

China’s IaaS market is the fastest growing cloud computing segment and is dominated by homegrown tech giants Alibaba (NYSE:BABA) and Tencent (HKG:0700). And although the country’s SaaS market has received relatively little attention compared to the IaaS segment, it is a significant part of China’s overall cloud computing market, being estimated to reach a market value of RMB 47.3 billion in 2020 which accounts for about 56.1% of China’s cloud market which is estimated to reach market value of RMB 84.3 billion the same year.

China’s SaaS market has been growing steadily over the past several years.

A column chart showing China software-as-a-service market size (in RMB billions). China's software-as-a-service market was valued at RMB 3.49 billion In 2013, RMB 5.98 billion in 2014, RMB 9.89 billion in 2015, RMB 12.75 billion in 2016, RMB 16.87 in 2017, RMB 23.21 billion in 2018 (forecast), RMB 33.7 billion) in 2019 (forecast), and RMB 47.34 billion in 2020 (forecast).

Yet, there is still ample potential for growth. China’s SaaS market is expected to reach approximately RMB 47 billion (US$ 6.7 billion) in 2020 according to Statista while the global SaaS market is expected to reach US$157 billion by 2020. This means China would account for just about 4% of the global SaaS market while accounting for about 16% of global GDP indicating ample potential for growth.
Furthermore, according to a 2019 report issued by Alibaba Cloud Research Center, while the number of Chinese companies is 3 times that of the United States, China’s SaaS output is just 24% of the U.S.

There are several growth drivers to support China’s SaaS market. Unlike in the west, a growing number of Chinese firms are not tied to legacy IT infrastructure and they are increasingly moving directly to the cloud, leapfrogging the traditional enterprise software generation in much the same way Chinese citizens leapfrogged the desktop/laptop phase and went straight to mobile. In the medium term, the COVID pandemic may prompt SMEs to accelerate cloud adoption to control costs, facilitate remote working, and online sales. Over the longer run, the industry is likely to enjoy tailwinds thanks to China’s made in China 2025 initiative which aims to upgrade China manufacturing base by developing high-tech Industries including electric cars, robotics, artificial intelligence, agricultural technology engineering new synthetic materials. Cloud computing is among the many technologies expected to drive this development (others include big data and IoT).

Opportunities for local and international SaaS companies

China’s higher end SaaS segment is largely dominated by foreign SaaS behemoths such as Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and SAP (ETR:SAP) whose product offering often comes with a hefty price tag. Homegrown SaaS companies such as Kingdee (HKG:0268), Digiwin, and Yonyou (SHA:600588) on the other hand are not as powerful in terms of functionality compared their foreign counterparts, however their product offering has been improving in terms of sophistication and capabilities, and they are usually significantly cheaper which makes them a very compelling option to fulfill the needs of China’s Small and Medium Enterprises (which make up almost 99% of business establishments in China) as well as state enterprises. This has helped local SaaS providers carve out a niche for themselves in China’s nascent SaaS market while competing against foreign, well-established players.

The country’s SaaS market is highly fragmented the top 10 vendors accounting for only about 30% that the market as of 2018 according to research from PR Underground. Local rising star Kingdee dominated the market with a market share of just 5%, followed by Microsoft, SAP, Salesforce (NYSE:CRM), Oracle, Veeva Systems (NYSE:VEEV), Zoho, Beisen, Yonyou, and Newdo which collectively made up the top 10.

Pie chart showing the market share of China's SaaS vendors during the first half of 2018. Kingdee was the market leader with a 5.1% market share followed by Microsoft (5%), SAP (4.3%), Salesforce (4%), Oracle (3.8%), Veeva Systems (2.6%), Zoho (2.6%), Beisen (2.2%), Yonyou (2%), Newdo (1.8%), and others accounted for the balance 64.5%,

Many of China’s SaaS market verticals are also dominated by homegrown companies. Kingdee for instance, leads in HR, ERP, and accounting. Beijing-based Forceclouds, and Shanghai-based MacroWing lead in document and data management tools for the clinical research, pharmaceutical, and medical device industries. Beisen and DOIT provide CRM solutions in partnership with Tencent.

America boasts a number of SaaS behemoths; in one category America has born-in-the-cloud SaaS companies such as Salesforce, Workday (NASDAQY:WDAY), ServiceNow (NYSE:NOW), Splunk (NASDAQ:SPLK), and Atlassian (NASDAQ:TEAM); in another category there are established software giants with a growing cloud business such as IBM (NYSE:IBM), Oracle, Microsoft, SAP, and Adobe (NASDAQ:ADBE); and finally there are IT vendors with a growing SaaS cloud offering such as Google (NASDAQ:GOOGL) and Cisco. The world’s top three SaaS companies are American; Microsoft, Salesforce, Adobe with market shares 17%, 12%, and 10% respectively of in 2019 when the SaaS market reached US$ 101 billion according to analysis by Synergy Research.

Chinese SaaS companies on the other hand are still at a relatively early stage of growth. However, in much the same way America’s SaaS market growth spawned a number of homegrown SaaS giants, there is potential for Chinese SaaS companies to blossom along with the growth of China’s SaaS market. Notable SaaS companies worth watching include:

Kingdee

Kingdee is one of China’s largest providers of ERP software with a focus on SMEs, and is one of China’s leading SaaS players with a market share of 5%. Kingdee first started out as an ERP software company building a large user base of enterprise customers. This user base helped Kingdee’s cloud transformation, enabling it to introduce its own cloud products to its existing user bas

In FY 2019, Kingdee’s cloud services revenue grew 54.7% year-on-year accounting for 39.5% of revenue during the year up from 30.2% in 2018 according to their 2019 annual report. Cloud revenue’s share of total revenue is likely to increase going forward as traditional ERP customers migrate to the cloud. Traditional ERP systems are gradually being replaced by SaaS which is generally more cost-efficient and easier to use and manage compared to traditional ERP systems. Notable enterprises upgrading to Kingdee’s “Kingdee Cloud Cosmic” (a cloud platform for large enterprises) include one of China’s largest courier companies SF Express (SHE:002352), Chinese edtech unicorn VIPKid, and Chinese state-owned defense corporation Norinco. The company is targeting cloud revenue to contribute 60% to total revenue by 2020.

While it may seem that cloud can cannibalize Kingdee’s traditional software business, according to figures from its annual report, it is evident that this is not the case with much of Kingdee’s cloud growth being driven by new customers During FY2019, of Kingdee’s “Kingdee Cloud Galaxy” (a digital cloud service platform for medium and large enterprises, and fast-growing enterprises) customer base, 77% of clients were new to ERP, 13% were from competitors, and just 10% were existing clients.

Armed with a wide product range of cloud software spanning e-commerce, supply chain and intelligent manufacturing, a healthy balance sheet (the company’s borrowings stands at RMB 199 million while it has a cash pile of RMB 3.18 billion), a strong brand name among local SaaS companies, and an impressive user base of SMEs as well as large enterprises suggest Kingdee is well placed to capitalize on China’s growing SaaS market.

Posted on

Chinese EdTech Startups With Tremendous Growth Potential

Bar chart showing leading edtech unicorns worldwide in 2020, by valuation, (in US$ billions). The startups are ByJu’s (from India) valued at US$ 5.8 billion, VIPKid (from China) valued at US$ 4.5 billion, Yuanfudao (from China) valued at US$ 3 billion, Duolingo (from the United States) valued at US$ 1.5 billion, Udacity (from United States) valued at US$ 1.1 billion, and iTutorGroup (from China), Guild Education (from United States), HuJiang (from China), Huike (from China), 17zuoye (from China), Zhangmen (from China), Knowbox (from China), Age of Learning (from United States), and Coursera (from United States) valued at US$ 1 billion each.

Chinese edtech startups accounted for 50% of all global VC investment in edtech, during the period 2016-2018 according to market research firm HolonIQ.

Chinese have traditionally placed tremendous importance on education. The gaokao, China’s notoriously tough entrance examination, is known as one of the toughest exams in the world, and gaokao scores are now being increasingly accepted in universities worldwide for admissions purposes. The sheer competition for top schools, and jobs, is driving demand for tutoring Chinese parents spare no expense so it is not surprising that education is big business in China.

However, the distribution of quality educational resources to match demand for such resources is inconsistent; urban students generally have greater access to top-notch educational resources while their rural peers often do not.
Experienced, highly qualified teachers also tend to teach in urban schools while schools in lower tier cities generally grapple with lesser-experienced teachers, and some schools suffer shortages. But the problem is not just limited to urban vs rural educational resource distribution. Even within urban cities, the distribution of English teachers for instance is inconsistent, with some cities and schools being able to hire native English teachers while others struggle.

Online education is a feasible solution to these problems. Online education offers numerous other benefits as well. Lesson schedules can be made flexible, lessons can be customized to suit the student’s learning pace and existing knowledge, artificial intelligence and other technologies can be utilized to make the learning experience more fun,
and parents can be given updates on the child’s progress, and areas that need to be improved. VIPKid for instance, a leading platform connecting Chinese children with English tutors from North America provides progress data to parents such as what the child has learnt, and what needs to be improved.

With, more and more Chinese students having access to the internet, mostly through smartphones, and some others through desktop devices such as laptops and PCs, long-sighted edtech startups have been quick to capitalize on the opportunity of using the internet to bring forth a more even and equitable distribution of online resources to match demand which has been growing along with rising disposable incomes which enable a growing number of China’s ambitious tiger parents to shell out top dollar for online after-school supplemental education resources.
China’s after-school tutoring revenue has grown from RMB 2 billion in 2011, to RMB 3.9 billion in 2017, representing a CAGR of 11.6% according to figures from research firm Frost & Sullivan. The market is expected to reach RMB 5.6 billion by 2021, representing a CAGR of about 9% during 2017-2021.

This has helped spawn a vibrant edtech market, which has emerged to be one of the biggest in the world. Of the 14 leading global edtech unicorns, 8 are from China (five from the United States, and one from India).

Bar chart showing leading edtech unicorns worldwide in 2020, by valuation, (in US$ billions). The startups are ByJu’s (from India) valued at US$ 5.8 billion, VIPKid (from China) valued at US$ 4.5 billion, Yuanfudao (from China) valued at US$ 3 billion, Duolingo (from the United States) valued at US$ 1.5 billion, Udacity (from United States) valued at US$ 1.1 billion, and iTutorGroup (from China), Guild Education (from United States), HuJiang (from China), Huike (from China), 17zuoye (from China), Zhangmen (from China), Knowbox (from China), Age of Learning (from United States), and Coursera (from United States) valued at US$ 1 billion each.

Online education accounts for just about 10% of China’s overall education market according to Deloitte. However, as online learning gains acceptance, this share is expected to climb in the years ahead. The number of online education users in China is expected to climb to 263 million by 2022, up from 42 million in 2012 according to research from iResearch.

Column chart and line graph showing the number of online education users in China, 2012-2022 (estimate), (in millions of people). The number of online education users in China is expected to reach 263.7 million people in 2022, up from 42 million in 2012. Data from iResearch.

Here are some notable startups poised to grow along with China’s online learning opportunity.

VIPKid

Backed by tech giant Tencent (HKG:0700), VIPKid connects Chinese students (aged 4-15) and English teachers from around the world (predominantly North America). VIPKid has been a notable beneficiary of China’s demand for English language training for children; in 2018 the market was valued at RMB 21.3 billion (approximately US$ 3 billion), registering a 104% growth year-on-year. The number of users jumped a whopping 168% from 5.7 million in 2017 to US$ 15.3 million in 2018 according to a 2019 report from data monitoring firm Trustdata.

Founded in 2013, and launched in 2014, the startup was one of the first to capitalize on the shortage of native English speakers in China at the time. While taking advantage of what seems to be very strategic timing, VIPKid also established a strong brand for itself by building a reputation for maintaining high quality standards with all tutors undergoing a rigorous assessment before being accepted as VIPKid teachers (the startup reportedly receives about 20,000-30,000 teacher applications per month, and 90% of them are rejected).

This focus on quality, as well as its first-mover advantage, among other reasons helped VIPKid’s meteoric rise to unicorn status in less than five years. VIPKid boasts 700,000 students, 100,000 teachers, a student retention rate of 95%, and according to data in a 2018 Chinese Online Youth English Education white paper published by the Chinese Academy of Sciences, VIPKid has been noted as a market leader with a market share of 67.2%. According to a report by Trustdata, VIPKid held a market share of 68.4%, followed by 51Talk (11.6%), Da Da English (7.8%), and vipJr (5.7%) as of 2018.

Pie chart showing leading online English education platforms in China by market share (%) in 2018. VIPKid led the market with a market share of 68.4%, followed by 51Talk (11.6%), DaDa English (7.8%), vipJr (5.7%) and others (6.5%) according to figures from market research firm Trustdata.

English language training (ELT) is still very much in demand by parents of school-aged children in China; the ELT market is expected to grow from US$ 41.51 billion in 2017 to US$ US$ 75 billion in 2022, representing a CAGR of 12.56% according to Statista with much of that being driven by the online English education segment as noted in a research report by research firm Global Information Inc.

While demand is growing, the supply side on the other hand is not expected to keep pace. China has tightened regulations on teachers’ backgrounds and qualifications which may have the effect of smaller language schools struggling to recruit qualified foreign teachers.

This suggests plenty of runway left for VIPKid’s growth story. However, competition is increasing, particularly with online learning giants such as TAL Education and New Oriental Education rolling out their own online English education courses. Furthermore, VIPKid’s one-on-one classes are generally not as profitable as group classes so VIPKid, which has so far yet to turn a profit, may find itself struggling with greater losses as it fights for market share.

However, VIPKid has made efforts to differentiate itself, for instance all of VIPKid’s teachers are from North America ; by comparison, 69% of 51talk’s teachers are from Southeast Asia. Additionally, VIPKid is working to increase the efficacy of its teaching materials (such as syntax, vocabulary, accents etc) by utilizing its vast trove of data from the more than 2 million English classes it offers monthly. VIPKid has also taken its global model a step further by aiming to bring quality native speaking Chinese teachers to students overseas where demand for Chinese language education is growing in leaps and bounds. VIPKid has already gained some ground as an education platform in North America so the startup may find it easier to enroll overseas students compared to most of its rivals who have a very limited presence beyond China’s boundaries.

Makeblock

STEM education and robotics startup Makeblock develops hardware, software, and robotics hardware targeted at schools, educational institutions, hobbyists, children, and families. With a userbase of more than 10 million, Makeblock are sold in more than 140 countries, and its products are used in more than 25,000 schools around the world. The robotics education market is expected to witness tremendous growth in the coming years driven in part by schools’ continuing emphasis on STEM (Science, Technology, Engineering, and Mathematics) education. Market research firm HolonIQ foresees the global robotics education market to nearly triple to US$ 3.1 billion by 2025, from US$ 1.3 billion in 2019.

The market is riding on the back of a large and fast-growing robotics market in the Middle Kindgom; Chinese companies installed 154,000 industrial robots in 2018, more than double that of Japan’s 55,200 and more than triple that of the United States’s 40,400 according to the International Federation of Robotics. This strong performance helped China maintain its position as the world’s largest industrial robot maker for the sixth consecutive year, accounting for 36% of global robot installations. By value, China’s robot installations grew 21% year-on-year to reach US$ 5.4 billion in 2018. China’s robot density (the number of robots per 10,000 persons used in the manufacturing industry) has also been on an uptrend, growing from 68 in 2016, 97 in 2017, and 140 in 2018.

Bar chart showing the number of installed industrial robots per 10,000 employees in the manufacturing industry in 2016, by leading countries. At 631 industrial robot installations per 10,000 manufacturing sector employees, the Republic of Korea had the highest robot density in the world, followed by Singapore 488, Germany 309, Japan 303, Sweden 223, Denmark 211, United States 189, Italy 185, Belgium 184, Chinese Taipei 177, Spain 160, Netherlands 153, Canada 145, Austria 144, Finland 138, Slovenia 137, Slovakia 135, France 132, Switzerland 128, Czech Republic 101, Australia 83, United Kingdom 71, China 68, Portugal 58, Hungary 57. Data from the International Federation of Robotics.
Bar chart showing the number of installed industrial robots per 10,000 employees in the manufacturing industry, 2017. At 710 installed industrial robots per 10,000 manufacturing sector employees, the Republic of Korea had the highest robot density in the world in 2017, followed by Singapore (658), Germany (322), Japan (308), Sweden (240), Denmark (230), United States (200), Chinese Taipei (197), Belgium (192), Italy (190), Netherlands (172), Austria (167), Canada (161), Spain (157), Slovakia (151), Slovenia (144), Finland (139), France (137), Switzerland (129), Czech Republic (119), China (97). Data from the International Federation of Robotics.
Bar chart showing the number of installed industrial robots per 10,000 employees in the manufacturing industry, 2018. At 831 installed industrial robots per 10,000 manufacturing sector employees, Singapore had the highest robot density in the world in 2017, followed by the Republic of Korea (774), Germany (338), Japan (327), Sweden (247), Denmark (240), Chinese Taipei (221), United States (217), Italy (200). Belgium (188), Netherlands (182), Austria (175), Slovenia (174), Canada (172), Spain (168), Slovakia (165), France (154), Switzerland (146), China (140), Finland (140),Czech Republic (135). Data from the International Federation of Robotics.

Since 2017, China’s robot density has exceeded the world average.

Column chart showing China’s robot density (number of industrial robots per 10,000 employees in the manufacturing sector) vs world average. In 2016,2017, and 2018, China’s robot density was 68, 97 and 140, respectively while the world average was 74, 85, and 99 respectively. Data from the International Federation of Robotics.

China’s robot density is expected to continue its upward march in the years to come. With China’s robotics industry growing at a rapid clip, the need for skilled robotics professionals and talent will no doubt increase in the future, suggesting bright prospects for Makeblock.

Posted on

Breonics’ Disruptive Organ Repair Technology: Potential Solution To Transplant Organ Shortage

Are chart showing the number of donors, transplants, and people on the transplant waiting list in the United States, 1991-2018. The number of organ donors in the United States increase from 6,953 in 1991 to 17,554 in 2018. The number of transplants performed in the United States increased from 15,756 in 1991 to 36,529 in 2018. The number of people on the US transplant waiting list increased nearly five-fold from 23,198 in 1991 to 113,759 in 2018. Data from the US Health Resources and Services Administration (HRSA)

Of the few options available to End Stage Renal Disease (ESRD) patients, transplantation is the most cost effective and offers a relatively better quality of life. Yet, the supply of transplant organs falls far short of demand and as a result the transplant waiting list has continued to increase over the past few decades. American bio-science company Breonics’ Exsanguinous Metabolic Support (EMS) technology, which is a medical device that could repair donor organs and test their viability, aims to address the global transplant organ shortage, starting with kidneys (more than 80% of patients on the U.S. transplant waiting list were waiting for kidneys). The company is currently raising its Series A capital to fund clinical trials.

The demand for organ transplantation has increased worldwide over the past few decades due to increased incidence of organ failure. However the supply of organs for transplantation has remained relatively stagnant resulting in an escalating shortage of organs for transplantation over the past few decades. In the U.S. alone there were about 113,000+ patients on the national transplant waiting list as of July 2019, up from 23,198 in 1991 (representing a nearly five-fold increase), and every 10 minutes another person is added to the list. This is despite the number of donors increasing from 6,953 to 17,554, and the number transplants more than doubling from 15,756 to 36,529 during the same period.

Are chart showing the number of donors, transplants, and people on the transplant waiting list in the United States, 1991-2018. The number of organ donors in the United States increase from 6,953 in 1991 to 17,554 in 2018. The number of transplants performed in the United States increased from 15,756 in 1991 to 36,529 in 2018. The number of people on the US transplant waiting list increased nearly five-fold from 23,198 in 1991 to 113,759 in 2018. Data from the US Health Resources and Services Administration (HRSA)

Part of the reason for the stagnant transplant organ supply is due to the fact that under current medical standards of care, donors have to be free of certain illnesses, have to be below the age of 75, and donor organs have to be harvested within 30 minutes of death. However, of the more than 2.5 million annual deaths in the United States, just 2% occur under circumstances that meet this criteria; for instance the death takes place outside the hospital where the deceased’s organs could be preserved, or they suffer from conditions such as most cancers or certain incurable infections that make the organ unfit for donation. As a result, most organ donors in the U.S. are from living donors or from donation after brain death and this means that more than 95% of potential organs are not being considered for transplantation given the limitations of the current standards of medical care.

Pie chart showing the number of deceased and living transplant organ donors in the United States in 2018. In 2018, the U.S. had 10,722 deceased transplant organ donors and 6,831 living organ donors.

The desperate situation has spurred a search for solutions ranging from offering incentives for organ donation to development of technologies and methods to increase organ preservation. There is also a growing interest in using suboptimal organs from donors which are currently not considered for transplantation.

American bioscience company Breonics’ EMS platform offers a potentially ground-breaking solution towards addressing the global transplant organ shortage by expanding the window of opportunity for harvesting the donor organ. According to Breonics, under the 30-minute window, less than 4% of all mortalities in the U.S. are potential organ donors, but with their technology, the addressable market expands to at least 15%. Although the technology can be used for the repair and regeneration of lungs and livers, Breonics is initially targeting kidneys which has the biggest waiting list and is the most transplanted organ. 83.7% of patients on the U.S. transplant waiting list are waiting for kidneys.

Pie chart showing the transplant waiting list by organ type in the U.S. As of July 2019. 83.7% of patients on the U.S. transplant waiting list were waiting for kidneys, 11.6% for livers, 3.3% for hearts, 1.2% for lungs, and 1.5% for other organs (pancreas, intestines, and combinations).

And at 21,167 transplants performed in 2018, kidney transplants were the most performed transplants in the U.S. last year, far exceeding the 8,250 liver transplants performed the same year.

Bar chart showing the transplants performed in the United States by organ type in 2018. Of the transplants performed in the United States in 2018, 21,167 were kidney transplants, 8,250 were liver transplants, 3,408 were heart transplants, 2,530 were lung transplants, 835 were kidney/pancreas transplants, 192 were pancreas transplants, 104 were intestine transplants, and 32 were heart/lung transplants.

The opportunity is not limited to transplant patients but also to the dialysis population in the United States which is estimated at over 600,000 people as of 2016, as well as those newly diagnosed with End Stage Renal Disease (ESRD) which is estimated at over 120,000 according to the National Kidney Foundation; 30 million or 15% of the U.S. adult population was suffering from Chronic Kidney Disease (CKD) in 2017 according to National Center for Chronic Disease Prevention and Health Promotion, and of the 30 million U.S. CKD patients, about 0.4% or 120,000 patients are in Stage 4 which will likely pave the way for ESRD or total kidney failure which means they will likely need a transplant or dialysis in the near future. CKD is an under-recognized public health crises that causes more deaths than breast cancer or prostate cancer.

Line chart showing the prevalence of Chronic Kidney Disease (CKD) stages 1-4 in the United States by year during the period 1988-2016 (% of prevalence). Between 1988-1994, U.S. CKD patients made up 11.8% of the population, of which 4.1% of CKD patients were in Stage 1; 3% were in Stage 2; 4.5% were in Stage 3; and 0.2% were in Stage 4. In 2015-2016, CKD patients made up 14.2% of the population of which 4.7% were in Stage 1; 3.4% in Stage 2; 5.8% in Stage 3; and 0.4% in Stage 4.

The incidence of ESRD has been on an upward trend in the United States which is the result of rising rates of diabetes and hypertension which are the two most common causes of kidney disease, according to data from the U.S. government’s Renal Data System.  The prevalence of ESRD more than doubled between 1990 and 2015, from 727 ESRD patients per million U.S. residents in 1990 to 2,087 ESRD patients per million U.S. residents in 2015 according to the United States Centers for Disease Control and Prevention – Chronic Kidney Disease Surveillance System, United States.

Column chart showing the incidence of end-stage renal disease in the United States from 1990 to 2015. In 1990 there were 727.4 end stage renal disease patients per million United States residents. By 2015 the figure had ballooned to 2087 point for end-stage renal disease patients per million U.S. residents.

There is no cure for ESRD and patients have three options: (i) no treatment which results in death; (ii) dialysis which generally has a negative impact on quality of life; and (iii) transplant which offers a relatively average longer life expectancy and better quality of life.

Dialysis is also more costly; the ESRD population in the U.S. represents 1% of the U.S. Medicare population, but they account for 7% of the Medicare budget. Medicare spending for ESRD patients stood at US$ 35 billion in 2016. 80% of this, equal to US$ 28 billion, was spent on hemodialysis care costs (approximately US$ 90,000 per patient annually). Spending for transplant patient care on the other hand stood at US 3.4 billion, equal to less than 10% of Medicare spend on ESRD patients. The U.S. government is reportedly exploring avenues to trim the relatively high cost associated with dialysis through measures such as improving care in the early stages of kidney disease, increasing access to kidney transplants and favor home dialysis over clinic-based dialysis treatment.  

Transplantation is generally accepted to be superior not just in terms of cost effectiveness but also in terms of life for the patient. However, the biggest barrier limiting greater access to transplants is the supply of suitable donor kidneys. 12 people die every day (roughly 5,000 annually) waiting for a kidney transplant according to the National Kidney Foundation.

Breonics is addressing this pressing problem by broadening the criteria for organ donation by expanding the window of opportunity for harvesting the organ from the current 30 minutes, to two hours post mortem. Under current medical standards of care (SOC) transplant surgeons cannot transplant kidneys that have been exposed to warm ischemia for more than 30 minutes as the damage caused to the kidney due the lack of blood supply for more than 30 minutes could potentially harm the patient. This is why the organ donor pool in the U.S. is currently largely dependent on living donors or donation after brain death (DBD) which represents just a small fraction of deaths from traumatic injuries each year, approximately 4%, while organs from deceased by cardiac arrest are not considered because the damage caused to the organs as a result of prolonged lack of blood flow make them unusable. In contrast, brain dead patients are usually in an ICU on life support until they are declared brain dead by brain criteria, and thus their organs do not experience significant warm ischemic damage because the restriction of blood flow to the organs is only for a relatively shorter period of time, often in terms of minutes.

Breonics’ EMS technology can repair damage to organs that have been damaged from warm ischemia for up to two hours. Thus, with Breonics’ technology, the donor pool can be expanded to include the currently huge yet untapped pool of potential donors who died from cardiac arrest and uncontrolled brain deaths (such as from a stroke) because the transplant team can be called to hospital immediately after the time of death, obtain family consent as needed and still harvest the organs within the expanded window afforded by Breonics’ technology. The company’s EMS platform is the first technology that can be used to intervene after cardiac arrest and repair ischemically damaged kidneys and other organs for transplantation. Brenonics’ perfusate medical device can also assess the viability of the kidney prior to transplantation, thereby reducing discard rates due to false negatives. The U.S. reportedly discards 3,500 kidneys annually, and 17% of donated kidneys were discarded during the 10 year period between 2004 and 2014. The reason for the waste was because doctors in the U.S. were less inclined to using lower quality kidneys, however a panel of transplanted experts found that as many as 50% of the kidneys that were discarded could have been transplanted according to the National Kidney Foundation. The discard rate has only been increasing according to the study; in 2016, the discard rate reached 20%. Breonics has successfully resuscitated and repaired over 100 human kidneys that were discarded for being too damaged for transplant. The company estimates its technology has the potential to increase the number of kidneys available for transplant in the United States from the current 19,000+ to an additional 150,000 per year by 2021. Breonics will be reimbursed by the Organ Procurement Organization for every kidney Breonics successfully repairs, and provides for transplant which is guaranteed under the Renal Care Act of 1982.    

Posted on

As Bangladesh’s Startup Scene Blooms, These Startups Are Poised To Thrive

Bar chart showing the top 10 countries with highest increase in Ultra High Net Worth (UHNW) population during the five year period between 2012 and 2017 according to data from Wealth-X. Bangladesh’s UHNW population grew 17.3% making the country with the fastest growing UHNW population during the five year period. Bangladesh was followed by China (13.4%), Vietnam (12.7%), Kenya (11.7%), India (10.7%), Hong Kong SAR, China (9.3%), Ireland (9.1%), Israel (8.6%), Pakistan (8.4%), United States of America (8.1%).

Bangladesh rarely comes to mind when thinking about startups but with a population of some 160 million (which makes it the world’s eighth most populous country) over 46% of which belong to the entrepreneurial and tech-savvy “Gen Z” generation of youngsters aged 24 and below (over 50% of the country’s citizens have internet access and 90% of them use the internet through their smartphones), and a stellar economic growth which has propelled Bangladesh to number one position in a number of indicators (such as the five year growth of UHNW people and per capita economic growth), could this rising South Asian nation emerge as a dark horse in the startup landscape?

Unlike its giant neighbor India, which is one of the most attractive countries for startup entrepreneurs and investors, Bangladesh doesn’t stand out as a startup nation and its startup ecosystem is at a relatively infant stage of development. However, with the frontier market having a number of ingredients that could potentially cook up a potentially vibrant startup economy, Bangladesh has potential to quietly emerge as an unexpected startup success story in the coming years.

Once one of the poorest countries in Asia, Bangladesh’s economy has been booming over the past few years so much that the South Asian nation has shot up to be the world’s fastest growing Ultra High Net Worth (UHNW) country according to studies by New York-based global UHNW market intelligence and research firm Wealth-X which measured the compound annual growth rate of UHNW populations across countries worldwide since 2012.

Bar chart showing the top 10 countries with highest increase in Ultra High Net Worth (UHNW) population during the five year period between 2012 and 2017 according to data from Wealth-X. Bangladesh’s UHNW population grew 17.3% making the country with the fastest growing UHNW population during the five year period. Bangladesh was followed by China (13.4%), Vietnam (12.7%), Kenya (11.7%), India (10.7%), Hong Kong SAR, China (9.3%), Ireland (9.1%), Israel (8.6%), Pakistan (8.4%), United States of America (8.1%).

Bangladesh’s HNW population is projected to grow at a CAGR of 11.4% between 2018 and 2023, the world’s third fastest growing HNW population behind Nigeria (16.3%) and Egypt (12.5%) but ahead of China (9.8%) and India (9.7%).

Bar chart showing the fastest growing HNW countries between 2018-2023 (CAGR %). Nigeria is expected to see the world's fastest growing HNW population with its HNW population growing at a CAGR of 16.3% between 2018 and 2023. Nigeria is followed by Egypt (12.5%), Bangladesh (11.4%), Vietnam (10.1%), Poland (10%), Kenya (9.8%), China (9.8%), India (9.7%), Philippines (9.4%) and Ukraine (9.2%). Data from Wealth-X.

Meanwhile studies from British weekly magazine revealed that Bangladesh registered a 45% increase in per capita income in terms of Purchasing Power Parity over the last five years, propelling the country to number one position along with China and India to emerge as the countries with the highest per capita economic growth globally during the period.

Bangladesh’s economic transformation has been helped in part by a thriving industrial sector (notably its garment sector which accounts for about 80% of the country’s export revenue and about 20% of GDP) as well as overseas remittances from Bangladeshis working overseas. The country’s economy grew 7.86% during FY 2018, up from 7.28% in 2017. The momentum is likely to continue with the country forecast to be the third fastest growing economy in the world in 2019 with a projected GDP growth rate of 7.4%, according to a report by the United Nations titled World Economic Situation and Prospects. Meanwhile, the country’s middle and affluent class (MAC) is growing at a rate of around 10%-11% per annum and if this pace of expansion continues, the MAC population is expected to nearly triple to about 34 million by 2025 (equal to about 12% of the population) from about 12 million 2015 (equal to about 7% of the population) according to Boston Consulting Group.

Apart from an exciting economic growth story, Bangladesh also boasts attractive demographics with a population of some 160 million (making it the eighth most populous nation in the world) over 46% of which are aged 24 years and younger. The median age is 27.1, making it the fourth youngest population in South Asia behind Afghanistan (which has a median age of 19), Pakistan (24.1), and Nepal (24.5) according to figures from the CIA. The total number of internet users in Bangladesh reached 91 million at the end of December 2018 over 93% of which are mobile internet users according to figures from the Bangladesh Telecommunication Regulatory Commission. Yet, with internet penetration at less than 60%, there is still ample potential for growth in internet users. This tech-savvy, youthful generation presents a potentially major driving force for the country’s digital economy and as they climb up the income ladder and their buying power grows, they could potentially drive Bangladesh’s consumer market as well opening tremendous opportunities. This suggests Bangladesh, which has so far been off the radar of international startup entrepreneurs and investors, could become an increasingly important market going forward.

Flight Expert

Founded by a company that has been an active player in Bangladesh’s travel industry for over two decades, homegrown Online Travel Agency (OTA) startup Flight Expert which helps travelers find, compare and book flights and accommodation, leveraged its advantage of being backed by a company with years of experience and knowledge about the local travel industry, as well as an established reputation in the country’s travel agency industry to successfully position itself as one of the most popular OTAs in Bangladesh.

Like most other emerging and frontier markets, Bangladesh’s travel market is on the rise and with Bangladeshis becoming increasingly digitized, the country’s nascent online travel market is taking off as well, propelled by a growing appetite for travel thanks to rising incomes and rising internet penetration among its young and increasingly tech-savvy workforce.

There is reason to be optimistic about the sector’s prospects going forward. With a direct contribution of just 2.2% to the country’s GDP as of 2017 (lower than neighboring South Asian countries such as Nepal (4%), Sri Lanka (5.3%), Pakistan (2.9%), India (3.7%), and Maldives (39.6%)), Bangladesh’s travel and tourism sector was valued at BDT 427.5 billion in 2017 (about US$ 5.3 billion) according to data from the World Travel and Tourism Council (WTTC) – suggesting ample potential for growth in the long run. The WTTC forecasts Bangladesh’s travel & tourism sector to expand by 6.2% between 2018 and 2028 to reach a value of BDT 824 billion (about US$ 10.2 billion), making it the fifth fastest growing travel and tourism market in the world during the 2018-2028 period, and the second fastest in South Asia behind India.

Bar chart showing the market value (in US$ billions) of the travel and tourism sector in 2017 and 2028e in selected South Asian countries. India’s travel and tourism market was the biggest with a value of US$ 91.3 billion in 2017. India was followed by Pakistan (US$ 8.8 billion), Bangladesh (US$ 5.3 billion), Sri Lanka (US$ 4.5 billion), Maldives (US$ 1.5 billion) and Nepal (US$ 0.9 billion). By 2028, it is estimated that India’s travel and tourism market will be valued at US$ 194.7 billion, Pakistan (US$ 16,4 billion), Bangladesh (US$ 10.2 billion), Sri Lanka (US$ 8.2 billion), Maldives (US$ 2.7 billion), and Nepal (US$ 1.5 billion).

This bodes well for OTAs and Flight Expert, as one of the pioneering OTAs in Bangladesh is poised to benefit. A report by ResearchAndMarkets expects Bangladesh’s mobile travel booking industry (which includes offline and online bookings) to witness a CAGR of 21.4% to reach US$ 9.65 billion by 2025. Meanwhile Flight Expert CEO Salman Bin Rashid estimates OTAs will account for about 45% of Bangladesh’s travel market by 2025, up from an estimated 3%-4% currently.

ShopUp

Bangladeshi social commerce platform ShopUp helps small businesses with online stores on social media (notably Facebook) automate their businesses by providing solutions to business processes such as automating inventory and order management, invoice generation, accounts, etc.

The startup’s automation services are provided free of charge, a godsend for the thousands of Bangladeshis who struggle to find a job and aspire to earn a living selling products online but are hampered by limited capital. ShopUp has helped jumpstart tens of thousands of social commerce entrepreneurs who used the platform’s services to automate the backend processes in online store management, enabling them to focus on other aspects of the business such as product development etc.

The company’s chief revenue stream comes from fees charged for marketing and delivery and there is ample scope for growth in this area as Bangladesh’s social commerce scene continues its upward march. Like many other countries in Asia such as Indonesia and Vietnam, social commerce, particularly F-commerce is a sunrise industry in Bangladesh and over the past few years, the country’s growing social commerce sector has given birth to thousands of social commerce businesses (estimated at over 150,000 compared to just about 2,5000 formal e-commerce businesses according to data from the E-Commerce Association of Bangladesh).

And the growth story is just beginning. Hootsuite’s Digital 2019 report revealed that despite having an internet penetration rate of about 55% (with an internet userbase of about 91 million), just 37% of these internet users (equal to just about 34 million) are active social media users, representing a social media penetration rate of just 20%.

Bar chart showing the active social media user penetration rate (%) as at January 2019 in selected Asian countries. Brunei has one of the highest active social media user penetration rates with 94% of its population actively using social media. Other Asian countries and their respective active user penetration rates are: South Korea (85%), Singapore (79%), Philippines (71%), China (71%), Vietnam (64%), Japan (61%), Indonesia (56%), Bhutan (51%), Myanmar (39%), Laos (39%), Nepal (33%), Sri Lanka (30%), India (23%), Bangladesh (20%), Pakistan (18%) and Afghanistan (10%). Data from Hootsuite and We Are Social.

And the number of internet users making online purchases is even smaller. According to a 2018 report by IDLC Finance Ltd, online sales account for less than 1% of Bangladesh’s retail sales, compared with 5%-6% for India. Meanwhile on the seller side, less than 30% of Bangladesh’s workforce is female according to the International Labour Organization which represents a tremendous untapped market of potential social commerce entrepreneurs for ShopUp.

However, the more exciting part of ShopUp’s growth story is not in Bangladesh’s social commerce landscape but in the country’s nascent fintech sector, which has tremendous potential to grow thanks to a huge unbanked population (estimated at 70% of the total population), increasing smartphone penetration and a relatively undeveloped financial system. Having started out by providing solutions for the automation of business operation processes such inventory control and order management, over the past few years ShopUp has successfully transformed its product offering to include automation services in the areas of credit assessment for small business owners who are generally left out of the formal credit system. Using algorithms and big data, ShopUp’s automated credit appraisal platform aims to solve this challenge for the majority of Bangladesh’s 10 million Micro, Small and Medium Enterprises (MSME) who lack access to much needed working capital.

REPTO Education Center

The global educational technology market is on an upswing (Frost & Sullivan foresees the global education technology market growing from US$ 17.7 billion in 2017 to US$ 40.9 billion by 2022, representing a CAGR of 18.3%) and in Bangladesh which suffers from low educational attainment, edtech could well be a key solution to address the country’s imminent skills shortage as the country transforms into middle-income country.

Bangladesh’s own homegrown online education platform REPTO Education Center, which is a graduate of Bangladeshi startup accelerator GP Accelerator, offers online courses, classes and training, focused on tertiary level students, and working adults, somewhat similar to Udemy and the startup appears well placed to capitalize on what promises to be a potentially substantial opportunity.

In Bangladesh, education demand is on the rise and there is a greater need for education opportunities, particularly higher education and skills-based education. According to education sector market intelligence company ICEF Monitor, tertiary enrollment in Bangladesh tripled between 2000 and 2012 and surpassed two million students in 2012. Yet, as of 2012, just 13.39% of Bangladesh’s college-age students were enrolled in tertiary education, compared with 27.18% in China, 24.37% in India, 30.66% in Indonesia, 37.21% in Malaysia and 61.46% in Japan the same year according to data from the World Bank indicating ample potential for increase in the years ahead as Bangladesh’s education system matures along with a growing economy.

Bar chart showing gross enrollment ratio in tertiary education (% of college-age population) in selected Asian countries, in year 2000 and 2012. The percentage of college-age students enrolled in tertiary education increased from 48.74% in 2000 to 61.46% in 2012 in Japan, from 25.74% in 2000 to 37.21% in 2012 in Malaysia, from 14.88% in 2000 to 30.66% in 2012 in Indonesia, from 9.55% in 2000 to 24.37% in 2012 in India, from 7.72% in 2000 to 27.18% in 2012 in China, and from 5.45% in 2000 to 13.39% in 2012 in Bangladesh. Data from the World Bank.

Of Bangladesh’s 160 million plus people, 46% are aged 24 years and younger according to data from the CIA and they are becoming increasingly digital. For most of these young adults, skills development institutes are out of reach, either due to cost constraints (most of the courses are unaffordable for the majority of working adults in Bangladesh which ranked 176th in the world out of 228 countries in 2017 in terms of per capita income according to data from the CIA), or geographical constraints (most of these institutes are located in Bangladesh’s capital city Dhaka), or language constraints (foreign courses offered by online education platforms such as Coursera or Udemy are primarily conducted in English, a language most Bangladeshi’s are not proficient at; Bangladesh ranks 63rd out of 88 countries in education company EF Education First’s English Proficiency Index).

REPTO Education addresses all these problems for Bangladesh’s burgeoning workforce; the online courses can be accessed online anywhere, are generally more affordable than courses offered by traditional brick-and-mortar educational institutions, and most of the platform’s courses are offered in Bangladesh’s official language, Bengali.

Posted on

Blockchain Startups Disrupting The Real Estate Industry

Bar chart showing Asia Pacific cross border commercial real estate investments, capital outflows by source (in US$ billions), in 2017. China was the biggest source of outbound capital into commercial real estate, with US$ 31.5 billion of cross border commercial real estate investments originating from China. China was followed by Hong Kong (US$ 20.5 billion), Singapore (US$ 19.9 billion), South Korea (US$ 8.6 billion), Japan (US$ 3.1 billion), Taiwan (US$ 1.7 billion)< Australia (US$ 1.7 billion), Thailand (US$ 1.1 billion), Malaysia (US$ 0.5 billion), and India (US$ 0.3 billion).

Having revolutionized banking, blockchain, the underlying technology behind Bitcoin, is set to bring change to the multi-trillion dollar real estate industry.

The global real estate industry, estimated to be worth trillions of dollars, could prove to be a lucrative industry to disrupt considering the current systems related to land titling which involves mountains of documents into which data and information on land transactions are manually inputted, is a time-consuming process that is susceptible to fraud and clerical errors. The inefficiencies and inadequacies in the current land titling system is the driving force behind the multi-billion dollar title insurance industry; IBIS World estimates the US title insurance industry is worth about US$ 17 billion while data from the American Land Title Association (ALTA) reveal that nearly US$ 4 billion in title insurance premiums were generated in the US during the third quarter of 2017 alone.

Propy

Country: United States of America

California-based real estate marketplace startup Propy uses blockchain to maintain a decentralized title registry in an effort to enable people to buy and sell real estate in any location, from anywhere without the problems associated with international real estate transactions such as fraud.

Properties listed on Propy can be purchased using regular fiat currency or cryptocurrency; using the latter enables the usage of smart contracts and a blockchain-powered decentralized, immutable registry which ensures that all aspects of the transaction, as well as title deeds and property rights, are stored forever, in a tamper-proof database. In 2017, Propy made headlines when it announced it had completed the world’s first real estate purchase on Ethereum blockchain, when TechCrunch founder Michael Arrington purchased an apartment in Ukraine using smart contracts, in Ethereum cryptocurrency and PRO (Propy) tokens.

Cross border real estate has been on an upward trend and is likely to continue doing so. According to a report by Knight Frank, cross border real estate transactions accounted for 32% of all real estate transactions by volume, up from 25% during 2009-2011.

In Asia, cross border real estate transactions are at a 10 year high according to Real Capital Analytics and according to Knight Frank, 2017 marked the first time since tracking the markets in 2007 where Asia-Pacific has overtaken Europe and North America as the top source of cross border capital outflow. Real estate buyers from China were the biggest source of cross border capital, followed by Hong Kong and Singapore according to Knight Frank while the US, UK and Germany were the top destinations for inbound capital.

Bar chart showing Asia Pacific cross border commercial real estate investments, capital outflows by source (in US$ billions), in 2017. China was the biggest source of outbound capital into commercial real estate, with US$ 31.5 billion of cross border commercial real estate investments originating from China. China was followed by Hong Kong (US$ 20.5 billion), Singapore (US$ 19.9 billion), South Korea (US$ 8.6 billion), Japan (US$ 3.1 billion), Taiwan (US$ 1.7 billion)< Australia (US$ 1.7 billion), Thailand (US$ 1.1 billion), Malaysia (US$ 0.5 billion), and India (US$ 0.3 billion).

Propy is positioned to capitalize on this lucrative trend; of Propy’s approximately 50,000 monthly website views, about half come from China, from prospects looking to invest in real estate outside their home country.

Furthermore, according to Propy’s whitepaper, initially, the Propy Registry will mirror the records in local land registries in which land transfers are recorded. Going forward however, the startup aims to have the Propy Registry as the official ledger of record for the relevant land registry department. Propy earns a percentage of the final purchase price of every transaction completed using Propy’s platform.

If Propy does succeed in its ambition of getting jurisdictions to adopt the Propy Registry, then Propy’s PRO tokens could potentially hold more value since the Propy platform will be required (as opposed to being merely an option) to conduct real estate transactions. Whether this ambition actually materializes however, remains to be seen.

Zebi

Country: India

Having been selected by Andhra Pradesh to deploy its blockhain-based solution to digitize the state’s land registry, Indian blockchain-based big data solutions startup Zebi is now reportedly in talks with several other state governments to introduce its blockchain-based big data solution to digitize their land records easing buyer concerns over real estate fraud such as fake land certificates, a very real problem considering India has a 69% bribery rate (the highest in Asia Pacific) according to a survey by Transparency International and was ranked the most corrupt nation in Asia in 2017.

According to Indian government official J.A. Chowdary, an estimated US$ 700 million is paid in bribes to land registrars across India and about two-thirds of all civil cases in India are disputes related to land and property.

With transactions rising in India’s real estate sector and projected to continue rising over the next decade driven by the country’s young population reaching home buying age and rising disposable incomes (Morgan Stanley forecasts India’s property market sales to grow at a 14% CAGR during 2016-2020 and 18% during 2020-2025), Zebi’s Ethereum-based technology solution as well as its token (ZCO) could grow more important as it increases the reliability and transparency of India’s land registry, thereby reducing potential problems such as property related fraud.

ChromaWay

Country: Sweden

Swedish blockchain startup ChromaWay has tied up with the Swedish Land Authority (Lantmäteriet), consultancy group Kairso Future, real estate search portal Svensk Fastighetsförmedling, telecom Telai Sverige, IT firm Evry. and a group of participating banks namely SBAB and Landshypotek Bank to conduct a pilot program to demonstrate how a private blockchain network could carry out real estate transactions. Each step in the transaction process is verified, and stored securely and immutably on the blockchain, and all participants in the real estate transaction – the banks, the government, buyers, sellers – will be able to securely track and trace the state of the transaction as it progresses from start to completion.

Consultancy firm Jairso Future estimates the blockchain solution could save Swedish taxpayers US$ 106 million a year by eliminating paperwork, cutting transaction times and reducing fraud.

Posted on

The Digitization Of Global Agriculture And Agtech Startups Poised To Profit

Bar chart and scatter chart showing livestock products consumption (Kcal/person/day) and beef and mutton consumption (Kcal/person/day) and percentage change in 2016 and 2050 (forecast). From 2006 to 2050, world livestock products consumption (Kcal/person/day) is forecast to increase 23% while world beef and mutton consumption (Kcal/person/day) is forecast to increase 30%.

The agtech startup scene is booming with venture capital funding climbing steadily over the past few years. According to data from PitchBook and US fund Finistere Ventures, the agtech industry raked in US$ 1.5 billion in investments in 2017, most of which were in early stage startups.

The flurry of interest in agtech startups is driven by a number of reasons. From climate change to increasing water scarcity, the global agriculture industry faces numerous long term challenges which, if unaddressed could affect global food availability in the future due food supply growth being far outpaced by food demand growth which is driven by a growing population and rising income levels.

Today’s approximately seven billion population is forecast to grow to 8.5 billion by 2030 and 9.7 billion by 2050, according to data from the United Nations Department of Economic and Social Affairs (UN DESA). Consequently, the demand for food is projected to be 60% greater than it is today.

Global rice consumption is poised to increase by around 1.1% annually from 2016 until 2025 when rice consumption is expected to reach 570 million tons according to market research firm IndexBox.

Per capita meat and dairy consumption is expected to see tremendous growth, particularly in China and India according to information from the World Resources Institute; global per capita, per day livestock products consumption is forecast to grow 23% while global per capita, per day consumption of beef and mutton is projected to grow 30% between 2006 and 2050.

Bar chart and scatter chart showing livestock products consumption (Kcal/person/day) and beef and mutton consumption (Kcal/person/day) and percentage change in 2016 and 2050 (forecast). From 2006 to 2050, world livestock products consumption (Kcal/person/day) is forecast to increase 23% while world beef and mutton consumption (Kcal/person/day) is forecast to increase 30%.

Yet, resource availability is growing increasingly scarce due to pollution and climate change among other reasons. Globally, agriculture uses 70% of freshwater worldwide according to data from the National Groundwater Association, making it the biggest consumer of the world’s freshwater. Water consumption for domestic use is second, accounting for about 10% of global freshwater consumption.

With agriculture having to feed a population of more than 9 billion by 2050, water demand from the agriculture sector is expected to increase substantially in the decades to come; without improved water-use efficiency measures, water consumption by the agriculture sector is expected to increase 20% globally by 2050. However with climate change affecting rainfall patterns, the world’s freshwater resources are being depleted faster than they are being replenished by rainfall.

About 50% of the world’s habitable land is used for agriculture. However, soil erosion and pollution have resulted in the loss of nearly 33% of global arable land in the past 40 years, at a rate faster than the ability for natural processes to replenish diminished soil, according to a study by the University of Sheffield’s Grantham Centre for Sustainable Futures. The study found that soil erosion had been occurring at a rate of up to 100 times faster than the rate of soil formation.

Environmental challenges coupled with rapid population growth and urbanization has resulted in a steady decline in arable land per capita; according to data from the Food and Agriculture Organization (FAO), arable land per capita declined from 0.35 hectares per person in 1965 to about 0.19 hectares per person in 2015, which is about a 40% decline over four decades.

Line graph showing global arable land (hectares per person) from 1961 to 2015. From 1961 until 2015, global arable land per capita has declined by about 40%.

Therefore, in order to feed the world’s population that is growing in number and purchasing power, the agriculture industry is compelled to solve these challenges by achieving greater productivity gains such as by reducing input cost, increasing yield, and increasing environmental sustainability and thereby increase food supply with limited resources.

Technology is emerging as a key solution and this growing digitization of the global agriculture industry is an opportunity numerous agtech startups are working to profit from. According to a report by Accenture, the market for digital agriculture services will expand 12.2% between 2014 and 2020 to reach US$ 4.55 billion.

WeFarmUp – France’s Airbnb of agriculture

Launched in 2015, French startup WeFarmUp could be described as the Airbnb of agriculture. The farm machinery rental platform allows French farmers with underused machinery to rent equipment to other farmers in need of such machinery which ultimately boosts farmer bottom lines since underutilized machinery could be converted into assets generating extra income and farmers can be relieved of the potential debt burden that comes with purchasing costly farm machinery.

Although France is the biggest recipient of EU farm aid under the EU’s Common Agricultural Policy (CAP), French farmers struggle with debt and weak farm incomes which are more volatile than wages and salaries in other sectors according to a report from the European Commission.

With the UK, a net contributor to the EU budget, reportedly not contributing to the CAP after 2020, the subsequent budgetary gap could result in a downward review of the Common Agricultural Policy which represents one of the biggest expenditures under the EU budget.

It has been estimated in 2016 that without the current level of subsidies under the CAP, more than 50% of all French farms would not break even, which suggests that any reduction in subsidies under the CAP could result in bigger losses for France’s farmers. This presents an opportunity for a platform such as  WeFarmUp which indicates bright prospects for the startup. WeFarmUp is currently focused on France but plans to expand to Belgium.

 Gold Farm and EM3 AgriServices – disrupting India’s agri sector with Farming as a Service (FaaS) platforms

Agriculture is one of the most important sectors of India’s economy. The country has the world’s second largest amount of agricultural land after the United States, is the world’s second largest producer of horticultural crops and fruits after China, and is the world’s largest producer and consumer of dairy.

However, the industry is challenged by low productivity and low profitability. While at least 50% of the country’s workforce depends on agriculture, the sector contributes just about 15% of India’s gross domestic product.

India lags behind countries such as China in terms of crop yields. For instance, India produces 2.4 tons per hectare (t/ha) of rice (nearly half of China’s yield of 4.7 t/ha) and 3.15 t/ha of wheat (compared with China’s 4.9 t/ha).

According to data from the World Bank, as of 2016, agricultural value added per worker in India amounted to US$ 1,202, far behind the world average of US$ 16,730, ranking India 119th in terms of agricultural productivity out of 155 countries.

Farm mechanization could help boost crop productivity however, much of India’s farmers have small-scale farming operations and are often heavily in debt, which constrains their ability to invest in expensive farm machinery; almost half of India’s agricultural households are in debt and the average farm land size in India is estimated at 1.15 hectares according to India’s Agriculture Census conducted in 2015. 65% of Indian farmers are marginal farmers holding less than one hectare of land, while less than 1% have large land holdings of 10 hectares or more.

The challenge is an opportunity for Indian agtech startups such as EM3 Agri Services and Gold Farm which manage platforms that aim to improve India’s poor farm mechanization levels by allowing farmers to rent, rather than purchase, expensive but much needed farm machinery. Using their respective mobile apps, farmers choose and book the machinery required and pay based on the amount of time the machines are used (hence the term Farm as a Service) which cost-efficiently boosts farm productivity.

Of India’s approximately 120 million farmers, just about one-quarter or roughly 30 million are equipped with smartphones. However, smartphone and mobile internet penetration are on an uptrend among rural Indians, including rural segments such as farmers, aided by increasing affordability of smartphones and mobile data, as well as government initiatives to help digitize Indian farming as part its Digital India program, such as the Government of India’s AgriMarket app.

This factor coupled with an increasing trend among younger Indians to move away from agriculture, rising input costs and rising labor costs, could result in greater demand for FaaS solutions such as the outsourced farm mechanization services offered by Gold Farm and EM3 Agri Services. According to data from Bain & Company, total investor funding into FaaS startups in India is currently about US$ 105 million to US$ 115 million, and more than 40% of funding rounds are at “series stage”.

Gold Farm partners with local entrepreneurs and farmers who have the financial wherewithal to invest in farm machinery and helps them with demand generation by renting out the machines to India’s rural, small-scale farmers through the Gold Farm platform, creating a win-win situation for all parties. The payback time for the entrepreneur is reportedly around two years.

Stellapps – improving productivity along India’s dairy supply chain through IoT and Big Data

 India is the world’s largest producer and consumer of dairy and the country has been the largest milk producing country in the world since 1997.

However, despite per capita milk consumption in India steadily rising over the past few years, there is still ample potential for growth; Indian per capita milk consumption is just about half that of countries such as the United States, Australia and New Zealand.

Bar chart showing annual per capita milk consumption (kilograms per capita) during 2012 and 2017 in Ukraine, New Zealand, Australia, United States Russia and India.

As India’s middle class expands and incomes grow, protein needs are expected to grow as well which should drive demand for milk and milk products. India’s urban dwellers being wealthier on average tend to consume more milk per person than the average rural Indian.

But with just about 31% of the one billion plus Indian population living in urban areas, there is tremendous potential for growth in per capita milk consumption as India’s remaining half a billion or so population urbanize over the longer term.

While India could meet this additional demand by growing its huge livestock population which is already the largest in the world (58% of buffaloes and 15% of cattle), the country may be better served by increasing efficiency and productivity in its dairy industry; according to India’s Agriculture Ministry, the average milk yield for cross-bred cattle stands at around 7.1 kg per day which is significantly lower than developed countries such as the United Kingdom, the United States and Israel which boast daily milk yields of 25.6, 32.8 and 38.6.

Indian agtech startup Stellapps Technologies, which is backed by the Bill and Melinda Gates Foundation is aiming to address this issue. The company’s solution uses technologies such as IoT, Big Data, Cloud and data analytics to help dairy farmers, cooperatives and private dairies optimize their dairy operations and covers all aspects of the dairy supply chain across milk production, procurement, cold chain, animal insurance and farmer payments. The full dairy technology solution, brand named SmartMoo™ uses different types of sensors which gather data through wearable devices. For instance, on the farm, data on the animal’s health and yield is gathered,  while data on milk quality (such as fat content) is gathered at dairy collection sites which assists with pricing. The data is automatically sent to relevant parties across the supply chain such as the dairy farmer and dairy companies with the ultimate aim of helping participants improve efficiency, quality and productivity by improving milk yields, improving animal health, reducing pilferage, spoilage etc.

Posted on

5+ Startups Using Blockchain To Transform Our Food Chain

Bar chart showing blockchain investment by industry according to a 2017 survey by PwC

The complexity of today’s food chains has resulted in problems such as food fraud (which is estimated to cost US$ 30 – US$ 40 billion a year according to PwC), food waste (which is estimated to cost US$ 750 billion annually to local food producers according to the United Nations), and food safety problems such as food contamination (which is estimated to result in an estimated 600 million people falling ill and 420,000 deaths every year, resulting in the loss of 33 million healthy life years according to the World Health Organization).

Blockchain, the underlying technology behind Bitcoin is increasingly being considered as a solution to address the above food chain problems. Although the technology is still at its infancy and has several challenges to overcome such as high computing and energy needs, major food corporations such as to name a few, Walmart (NYSE:WMT), Chinese e-commerce giants Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD), French retailer Carrefour (EPA:CA) and UK retailer Sainsbury’s (LON:SBRY) are all testing or have incorporated blockchain technology into their supply chains.

According to a 2017 survey conducted by global consulting firm PwC, just about 1% of companies in the retail and consumer sector are making substantial investments in blockchain today. However, in three years’ time, the number of companies in the sector making substantial investments in blockchain technology rises to 6%.

Bar chart showing blockchain investment by industry according to a 2017 survey by PwC

Food safety concerns and increasing demand for food supply chain transparency are key growth drivers in the food traceability market which uses technologies such as RFID tags, sensors and blockchain to track food products from farm to fork. Market research firm MarketsandMarkets projects the global food traceability market to grow to US$ 14 billion by 2019 and Research and Markets expects the market to reach US$ 16 billion by 2021.

Tech giants including Microsoft, Accenture and notably IBM (NYSE:IBM) have rolled out blockchain solutions. IBM has formed a blockchain collaboration with food companies including Walmart, Dole, Driscoll’s, Golden State Foods, Kroger (NYSE:KR), McCormick and Company, McLane Company, Nestle (NESN:VTX), Tyson Foods (NYSE:TSN), and Unilever (NYSE:UN) (LON:ULVR).

IBM has also partnered with Walmart, China’s Tsinghua University and Chinese e-commerce giant JD.com to form the Blockchain Food Safety Alliance which aims to use blockchain technology to achieve greater food safety, tracking and traceability in China

A Blockchain Enterprise Survey conducted last year by Juniper Research revealed that IBM had the strongest blockchain credentials, while Microsoft (NASDAQ:MSFT) came in second and Accenture (NYSE:ACN) was placed third; amongst enterprises either actively considering, or in the process of deploying blockchain technology, nearly half (43%) ranked IBM first while 20% selected Microsoft (20%).

While major tech companies grab headlines with their blockchain solutions, a number of startups are also vying for a share of the food blockchain market. Here is a list of noteworthy startups to watch.

bext360

Colorado-based startup bext360 is on a mission to re-invent today’s coffee supply chain using technology such as artificial intelligence, the Internet of Things (IoT) and blockchain to introduce greater transparency, improve coffee quality and better compensate coffee farmers.

bext360 has partnered with Great Lakes Coffee (a Uganda-based coffee sourcing, milling and exporting company) and Coda Coffee (a Denver-based to conduct a pilot program using bext360’s “bextmachine”, a mobile kiosk that uses machine learning and artificial intelligence to evaluate coffee cherries and beans from farmers, and grade them based on quality. Coffee farmers can view the grading results using a mobile app, accept payment offers and receive payment electronically immediately. This a revolutionary change from the current status quo in which coffee farmers would deliver their coffee crop to buyers that would manually inspect and grade the beans, and pay farmers days or sometimes months later.

The system then follows the coffee’s journey to the end consumer, tracking relevant data along the way. The bext360 platform uses blockchain to store an immutable record of transactions in real time, which all actors in the supply chain such as coffee farmers, coffee roasters and consumers can view.

bext360 has also partnered with Moyee Coffee, the world’s first FairChain coffee brand to launch a full-scale revenue generating program to trace coffee from Ethiopia to Amsterdam as well as payments made to coffee farmers in Ethiopia using the startup’s bext-to-brew platform which is built on Stellar.org’s blockchain technology.

The partnership makes Moyee Coffee Europe’s first blockchain-traceable coffee brand. Moyee Coffee fans will gain an unprecedented level of transparency, gaining access to verified data such as the origin of the coffee, while Moyee Coffee gains by being able to reduce overheads as the bext360 system eliminates the requirement for time-consuming, error-prone documentation etc.

The opportunity is substantial. The global coffee market is worth US$ 81 billion and growing. However, while global coffee revenues jumped from US$ 30 billion in 1991 to US$ 81 billion in 2016, small-scale coffee farmers who make up the majority of the world’s coffee producers, saw their incomes drop from 40% to under 10% during the same period, according to Fairtrade International. Most of the farmers’ families live on less than US$ 2 a day.

The winds are changing. Millenials and other coffee drinkers are increasingly seeking greater transparency fueling growth in the fair trade coffee market. According to the Tropical Commodity Coalition, ethically certified coffees accounted for 6% of worldwide coffee production in 2008, up from just 1% in 2002. And retail sales of Fairtrade coffee beans have soared 250% in the decade from 2004 to 2014.

Ripe.io

Californian startup Ripe.io says it is building the “Blockchain of Food”, a food supply chain solution that uses the Internet of Things (IoT) and blockchain to provide real time monitoring and collection of crop data such as location, environmental conditions and quality factors such as ripeness and taste.

The solution aims to solve food supply chain problems such as transparency, wastage and food quality by providing food supply chain participants a historical record of validated crop data which could be used for analytical purposes; farmers for instance could use the data to decide when a plant is ready to be harvested and once the plant has been harvested based when it reached optimal ripeness, this information can be communicated to participants along the supply chain.

The startup conducted a pilot project with Ward’s Berry Farm in Massachusetts, placing tomatoes on the blockchain to track their ripeness, color, PH levels, sugar content which is used to assess the quality of the tomatoes in an effort to reduce spoilage and deliver verified higher quality and more flavorful produce for the farm’s customers such as fast-casual salad chain Sweetgreen which participated in the pilot program.

ZhongAn Technology

Innovative Chinese startup ZhongAn Technology, which is the technology unit of Alibaba-and-Tencent-backed Chinese insurtech giant ZhongAn Online Property & Casualty Insurance (HKG: 6060), which made headlines as the world’s first insurtech IPO when it filed for a listing in Hong Kong last year, has developed a blockchain-based technology to track chickens, recording important information such as the age of the individual bird, its location, the food it eats and how much exercise it gets daily. Each chicken wears an anklet since the day of its birth which connects wirelessly to a blockhain-based network that records and stores data on a blockchain ledger in real time about the chicken. Customers can download a smartphone app that enables them to track the chicken’s journey along the supply chain.

Known as Gogochicken, the technology offers a solution for customers to validate chicken producers’ claims such as “hormone free chicken”, “free-range chicken” and “cage-free chicken”. For chicken farmers, the technology allows them to sell free-range, hormone free chicken at higher prices which consumers are able to pay a premium for but are hesitant due to a general lack of trust in locally produced food and the inability to validate claims on product labels.

As of September last year, ZhongAn has worked with 200 farms. By 2020, the company expects to increase the number over ten-fold to 2,500. The startup believes its technology could be expanded to pigs, cows and other livestock. The opportunity for the startup’s solution is substantial. Food safety is a key concern for consumers in China which is the world’s second largest poultry market, and the world’s largest pork consumer, importer and producer.

Advanced Research Cryptography Ltd (Arc-net)

Founded in 2014, Northern Irish startup Advanced Research Cryptography Ltd (Arc-net) offers a cloud-based traceability solution through its arc-net platform which uses blockchain technology to enable food corporations to validate the authenticity and provenance of food products as it moves along the supply chain thereby empowering the food industry to tackle food fraud.

The startup has teamed up with Scottish distillery Adelphi Ardnamurchan Distillery to place their new Ardnamurchan 2017AD spirit on Arc-net’s platform which would securely store information on the product’s production process from seed to bottle thereby allowing the brand as well as the brand’s customers to trace the product’s journey across the food chain; each bottle of limited edition Ardnamurchan Spirit 2017 AD features a unique QR code which, using blockchain technology, links to a digital, validated record of the bottle’s history, providing information such as the origin of the barley used to produce the spirit, the bottler and when the contents were bottled. This would help the distillery prevent or at least mitigate counterfeit products from stealing sales and diluting the brand’s reputation.

The tie-up could be just the tip of the iceberg for Arc-net. Counterfeit alcohol is a serious global problem; according to a news report by Interpol, in a joint Interpol-Europol operation conducted between 1 December 2016 and 31 March 2017 targeting counterfeit food and drink around the world, counterfeit alcohol was the most seized product, followed by meat and seafood.

Arc-net has also been selected as a technology partner in a £10 million pound EU-China food safety program. As part of the program, Arc-net is working with UK food producer Cranswick PLC (LON:SWK) to track pigs being exported to China. This could be a major revenue stream for the startup given that China is the world’s largest pork importer. The country’s pork imports are expected to grow 6% this year, according to Rabobank’s Pork Quarterly Q1 Report, and with China considering a 25% tariff on US pork imports, imports of European pork could potentially increase. In 2017, America exported US$ 1.1 billion of pork products to China and Hong Kong, making it the third biggest market by value. Arc-net has also partnered with global consulting firm PwC to help fight food fraud.

 

EZ Lab

Italian startup EZ Lab has partnered with management consulting firm EY to create a “Wine Blockchain”, a blockchain-based traceability system for Italy’s wine supply chain. Data on the entire wine making process such as the location of the vineyards and cultivation of the grapes, the process of producing wine and its distribution, and information related to the final product such as organoleptic characteristics are recorded on the system which can be viewed by all actors along the supply chain from the wine producer to the customer. Using their smartphones, customers scan a QR code on the wine bottle to retrieve the data.

The first wine to be tracked using “Wine Blockchain” is Falanghina Wine, which is produced by Cantina Volpone.

The solution is timely for Italy’s wine industry; according to a 2016 report by the European Union Intellectual Property Office (EUIPO) Italy’s wine and spirits manufacturers lose an estimated €162 million annually (equal to approximately 2.7% of the Italian wine and spirits market) as a result of counterfeiting and an additional €18 million is lost each year in excise duties.

Most of Italy’s prized culinary specialties such as Parmigiano-Reggiano cheese, traditional Italian balsamic vinegar, and Italian wine are certified by the Italian government for authenticity and quality. In the case of wines, certifications such as “D.O.C.G.” – Denominazione di Origine Controllata e Garantita (controlled and guaranteed designation of origin) and “D.O.C.” – Denominazione di Origine Controllata (controlled designation of origin) are awarded by Italian government-licensed committees and these wines tend to command extremely high prices. However, their high prices make them an attractive target for counterfeiters. EZ Lab’s “Wine Blockchain” solution is expected to help Italian wine producers (particularly those with such certifications), protect their brands and fight counterfeit products. 

The solution is also a boon for Italy’s wine connoisseurs; reportedly nine out of 10 consumers said they would like to have more information about Italian wine, their certification criteria and origin and more than 70% are willing to pay a premium for a guarantee of certification and origin. 

Italy is the world’s leading wine producer and with the country’s wine industry on an upward trend, EZ Lab looks positioned to ride on this growth too with its “Wine Blockchain” solution. Italian wine exports have increased 74% between 2006 and 2016 and the momentum shows no sign of slowing down; Italian wine exports grew by 7% in 2017, reaching a record high of around €6 billion, according to Italian agricultural organization Coldiretti. 

 

Everledger

London-based blockchain technology startup Everledger rose to prominence with its blockchain solution which tracks the provenance of diamonds to fight counterfeits in the diamond industry. Since 2015, Everledger has placed more than 1.6 million diamonds on its blockchain solution and the company is adding other luxury goods to its platform such as fine art and fine wine.

The startup has partnered with renowned wine expert Maureen Downey to jointly create Chai Wine Vault, a blockchain-based solution that uses Maureen Downey’s TCM (The Chai Method) wine authentication method to track the authenticity and provenance of fine wines. Downey’s method of wine authentication involves collecting more than 90 data points on a bottle in addition to high-resolution photographs and records of the bottle’s ownership and storage which are permanently and securely recorded in Everledger’s blockchain platform to create a permanent, verified digital record of the wine bottle which can be accessed throughout the bottle’s lifetime to verify its legitimacy, thereby securing the investment value of the wine asset for centuries. The first bottle to be certified on the Chai Wine Vault is a bottle of 2001 Margaux. 

The solution is aimed at combating counterfeit wine which Downey estimates accounts for much as 20% of wine sold globally.

FoodLogiQ

American food traceability startup FoodLogiQ offers a Software-as-a-Service (SaaS) solution which uses blockchain to provide services such as food traceability, food safety, and supply chain transparency solutions on a single platform to participants in the food industry such as food distributors, food importers, growers, restaurant operators, grocers and food retailers.

The startup is reportedly among the leading vendors of food safety, traceability, and supply chain transparency software, having racked up an enviable customer list which includes names such as Amazon.com Inc, Whole Foods, Buffalo Wild Wings, Chipotle Mexican Grill Inc, CKE Restaurants, Jac Vandenberg and Nature’s Finest to name a few, and the company has launched a blockhain pilot program in partnership with AgBiome Innovations, Subway/Independent Purchasing Cooperative, Tyson Foods, and Testo (the last two of which are also investors in FoodLogiQ) to conduct a pilot program FoodLogiQ operates in a market that is ripe for disruption; consumers are increasingly demanding greater transparency and visibility into the origin and processing of their food and FDA regulations are becoming increasingly stringent, compelling players in the food supply chain to seek and  invest in technologies that facilitate compliance and satisfy consumer demand while protecting their bottom lines.

An effective traceability system could help reduce liability costs, reduce product waste, improve food recall efficiencies, and improve consumer confidence.

According to forecasts from BIS Research, the global food traceability market is expected to grow from US$ 11.63 billion in 2016 to reach US$ 16.09 billion by 2022, representing a CAGR of 5.56% from 2016 and 2022 driven by increasing concern about food safety and quality, thereby triggering greater demand for food traceability solutions.

IndustryARC projects the global food traceability market to grow at 8.1% CAGR between 2017-2023, reaching US$ 17.05 billion by 2023. Although Asia-Pacific is expected to be the fastest growing market, North America is expected to remain as the biggest market for food traceability solutions. While barcodes are the dominant technology in the global food traceability market, blockchain-based solutions such as those offered by FoodLogicQ could emerge as an alternative option given its merits such as its ability to produce and store a chain of immutable records.

Posted on

Southeast Asia: Emerging Wave Of Opportunities In Booming Digital Economy

Bar chart showing people aged 0-24 (number., and percentage of the country's population) in Southeast Asian countries namely Indonesia, Philippines, Vietnam, Myanmar, Thailand, Malaysia, Cambodia, Laos, Singapore, Timor Leste, and Brunei.

Venture capital funding into Southeast Asian startups tripled in 2017 from US$ 2.52 billion in 2016 to US$ 7.86 billion in 2017 according to data from Tech in Asia.

The flurry of activity in Southeast Asia’s startup scene is not surprising; the 11-country region has a population of about 650 million, about 42% of which are aged 24 and below according to data from the CIA World Factbook, and about 51% of the total population (equal to about 260 million) are active internet users with about 90% of them accessing the internet using their smartphones according to a report by Google and Temasek.

Bar chart showing people aged 0-24 (number., and percentage of the country's population) in Southeast Asian countries namely Indonesia, Philippines, Vietnam, Myanmar, Thailand, Malaysia, Cambodia, Laos, Singapore, Timor Leste, and Brunei.

HSBC revealed that Southeast Asia is the world’s fastest growing internet region with nearly four million users coming online for the next five years, representing a user base of 480 million by 2020.

Southeast Asians are also growing increasingly wealthy; in 2012, Southeast Asia’s middle class population (people with disposable income of $16-$100 a day) was estimated at 190 million people. According to Nielsen, by 2020, the figure is expected to more than double to 400 million.

With a youthful, increasingly digitally savvy population along with rising disposable incomes, Southeast Asia has the ingredients to fuel a major expansion of its digital economy over the next few years thereby triggering a wave of investment opportunities, making the region an attractive location for investors and entrepreneurs exploring opportunities in the digital space.

The digital revolution has already given birth to a number of homegrown unicorns such as Alibaba-backed Lazada (Southeast Asia’s e-commerce leader), Google-and-Tencent-backed-Go-Jek, Grab, Razer, Tokopedia, Traveloka and Sea to name a few however the region’s blossoming startup ecosystem is in good position to produce numerous more in the coming years. A report by Google and Singapore’s sovereign wealth fund Temasek found that that Southeast Asia’s digital economy is growing at a CAGR of 27% and is expected to expand four-fold from about US$ 50 billion in 2017 to US$ 200 billion by 2025.

By destination, Singapore and Indonesia raked in the lion’s share of 2017 funding dollars, while by sector, fintech, e-commerce and gaming took in the most investments according to Tech in Asia. However, there are untapped opportunities in other countries within the bloc and in other sectors.

 

Education

Education is big business in Southeast Asia and private education is on the rise partly thanks to an expanding middle class. Private education spend in Southeast Asia is estimated to have reached nearly US$ 60 billion in 2015 according to a report by global advisory firm EY. Education technology or “edtech” has tremendous potential in the region; London-based consultancy firm IBIS Capital estimates the global edtech market will expand three-fold between 2013 and 2020 to reach $252 billion in 2020. During that time, it is expected that the Asia-Pacific region will see its edtech market go from 46% of the global market to 54%.

Much of the growth is likely to stem from India and China which have the world’s largest and second-largest youth population i.e. those aged 10-24 (India has 356 million and China has 269 million people aged between 10-24).

However, Southeast Asia is also poised to ride the opportunity driven partly by Indonesia which is home to 67 million 10-24 year olds, the world’s third largest youth population. And unlike the hyper-competitive markets of ride-hailing, e-commerce, travel, food delivery and mobile payments, Southeast Asia’s “edtech” market is a relatively uncontested territory; while China and India both have an edtech startup to their list of homegrown unicorns (China has Yuanfudao and India has Byju’s), Southeast Asia has yet to find its own. There are however a few startups worth watching. One of them is Indonesian edtech startup Ruangguru (literally means “teacher’s room” in Indonesian) which is reportedly the largest marketplace for private tutoring in Indonesia, a country which despite having the world’s third largest youth population, ranks relatively poorly education-wise; a study commissioned by the Network for Education Watch Indonesia (JPPI) reveals that the index of education services in Indonesia in 2016 is at the same level as Honduras and Nigeria but lower than the Philippines and Ethiopia.

 

Health

Southeast Asian’s healthcare market is a growth opportunity supported by solid fundamentals; a growing population along with the rise of an increasingly affluent middle class is leading to an increase in Non-Communicable Diseases (NCD) such as diabetes, heart disease and cancer. According to the World Health Organization, 55% of deaths in the region are due to NCDs. This is creating an increased demand for healthcare however in terms of supply, the availability of medical facilities, equipment and manpower is relatively inadequate with the exception of Singapore; a ranking of 191 countries by the World Health Organizations of the world’s health systems ranks Singapore in 6th position while other Southeast Asian countries appear down the list; Brunei is 40th, Thailand is 47th, Malaysia 49th, Philippines is 60th, Indonesia is 92nd, Vietnam is 160th, Laos is 165th, Cambodia is 174th, and Myanmar is 190th.

Singaporean startup DocDoc is a healthcare platform that enables patients to find and schedule appointments with healthcare professionals overseas. The platform holds promise as a solution to connect affluent patients in Southeast Asia (Indonesia is a priority for the startup) seeking quality treatment in neighboring countries.

Go-Jek-backed Indonesian e-health startup Halodoc has taken a more holistic view in tackling Indonesia’s healthcare system; founded by the son of the founder of Mensa Group, one of Indonesia’s largest healthcare companies, HaloDoc has built a network of nearly 20,000 licensed doctors and about 1,000 certified pharmacies, and forged partnerships with service providers such as Go-Med (a medicine delivery service owned by Indonesian ride-hailing startup Go-Jek) and ApotikAntar (a medicine delivery service) to offer  an integrated healthcare solution for patients.

 

Home Services

Asia Pacific is the fastest growing region in the world for sales of home improvement products according to Euromonitor International.

While China is the biggest market in the region, Southeast Asia is positioned to account for a significant share of the market driven by strong housing demand (a survey by PropertyGuru found that home ownership is a major aspiration for Southeast Asian consumers), and rising disposable incomes.

The opportunity is a boon not just for sales of home improvement products but also for home improvement services as time-strapped, middle class home owners turn to service providers for their home improvement needs.

However, as much of these service providers are small businesses and individuals, they often have little to no brand recognition and are often hard to locate which means customers are forced to find such professionals through referrals from friends and co-workers.

Malaysian startups Kaodim, ServisHero and Recommend.my are aiming to capitalize on the opportunity.