One question which we often address is whether the various countries of South-East Asia can be regarded as sufficiently similar to make it an attractive market for venture capital. Can a solution developed in one market be applied to different markets and take advantage of the 600mm+ population and high technology growth potential?

Many Asian investors have a perspective on this – China is highly homogenous, India less so but South East Asia is just a geographically linked bunch of disparate objects.. Nasi Padang served with sides of Adobo and Pad Thai and not nearly so tasty.

However, I would submit that the answer is yes there is Southeast Asian contiguity… and more importantly for VC now this contiguity is increasing…

Perhaps three aspects of contiguity are important for VC here:

Firstly geographic. Being close means being in touch. For entrepreneurs its often about having control over a quick rollout with some common resources. For VC investors, being close means getting closer to management, employees and local partners and getting involved more deeply. On this dimension, SEA obviously has a start, the countries are pretty close. Its not next door but with Singapore at its hub, the countries are never more than a short flight away, good discount landing rights abound and we have the wonderful APEC card to speed our entry and egress. Personally, I would rather take a Singapore-Bangkok than brave the US airport system to go New York-Boston.

Secondly cultural/political. Countries in the region start from very different places. Language, colonizing forces, political winds including things like the minority acceptance of upcountry majority voting. There are political ups and downs.

The differences in culture and politics are a legitimate concern for VC investors, sometimes these factors will facilitate competing startups that are built in native languages or spend up big on local media to make an early impact. The prevalence of these factors will often drive regional rollout priorities and help shape a differentiated strategy to out-execute small local competitors where the need arises.

But these constraints are being lowered. On the consumer side, I argue that there is a class of early tech adopters which are increasingly homogenous (see below). The promised land of an ASEAN Economic Community is planned by 2015 which will be particularly helpful for enterprise related software, online education and other technology enabled services (given the aim for open services markets and consistent qualification standards).

Which leads through to my own third aspect of contiguity relevant to Southeast Asian VC, the ingloriously named “Technology business model acceptance propensity” or slightly easier “Asiatrash factor”.

Here is a common element that is sometimes overlooked – there is a common class of higher-end youngsters that travel from city to city, have a western bent to their education and tastes. Asiatrash as an exaggerated analogy to eurotrash in that they typically have some cash and are willing to travel to anywhere that the Formula 1 decides to rest. They may also have been keen subscribers to my partner’s excellent AFC cable channel!

But in a broader sense, they and their direct connections are early tech adopters. They are willing to try the new solution if it gets in front of them in the right way. And their usage patterns can sometimes drive usage and brand perception down to the mass markets. The young and upwardly mobile classes in South East Asia are typically using the same hardware, have similar high expectations of technology design and performance and face a mix of first world and emerging markets concerns in their daily lives.  A bad payment interface is a bad payment interface. Bad traffic is bad traffic.

Thus a good solution in one of these markets can benefit from both the social connectivity of this class as well as a commonality of utility which has been shaped by similar forces. The similarity of concerns in Asian capitals are closer than what they have with Western markets. While Facebook and Twitter may create first level social connectivity, we believe the next layer of regional tech giants will be solving local issues with regional and local innovation.   And where a regional player gets a great product out there, there is little nationalism or inherent Western brand preference to get in the way of rapid acceptance.

Examples are growing in the regional landscape. To name just few, Reebonz is attractive to high end accessory seekers regionally.  Zalora and Lazada and the rocket crew are investing cross markets and creating a regional talent base.  Carousell is a light mobile solution for online classifieds moving into multiple markets, Grabtaxi is making a move in the taxi connection space. Chope is starting with Hong Kong given its city model but can quickly attack new markets.

But the true wave is just gathering steam now to match the massive improvements from hardware performance, software interface and cloud based infrastructure. Combined of course with talented entrepreneurs with global quality skills. People who can solve core issues like delivery convenience, payment convenience, information asymmetry, excessive paperwork can plug and play into multiple markets. Light infrastructure enables simultaneous multi-market rollouts. And large contiguous markets are there for the attacking. Execution on the back of some well applied capital is obviously also key.

Another question we are often asked is where is the best place to regard as a hub for this regional activity. Will address this question, Singapore’s advantages and the platform it creates for global level winners in following posts.