Corporates give start-ups much-needed boost in emerging markets

Inspired by local success stories like e-commerce platform Lazada and ride-hailing app Grab, some entrepreneurs are foregoing the traditional uphill climb in Silicon Valley, opting instead to find a foothold in the developing East. Emerging from the global financial crisis in 2009, the nations of South and Southeast Asia have built toward this moment particularly well and are currently experiencing something of an innovation boom.
Start-ups certainly deserve some of the credit for this progress.

The virtuous cycle
Beyond pure, direct job creation, young companies breathe life into their sectors, creating employment in related industries, inspiring innovation on the part of their competitors and larger corporate counterparts. And once a start-up gains traction and turns a profit, the fiscal rewards reverberate throughout the regional economy. The newly rich re-invest in the businesses of peers and partners and on it goes.
The region has been building on this kind of momentum for some time and a lot of credit goes to deeper Internet penetration - the result of better mobile networks, affordable connectivity and devices. With more economic opportunities and awareness of their options, a larger number of families can afford to send their children to bigger cities or abroad to work and study. While that kind of thinking used to mean an exodus of the brain trust, today's young people are more likely to return, looking to make an impact. Those who come home find a market ripe with problems to solve - and affordable resources to aid in the solving.
In a white paper for the Corporate Social Responsibility Initiative at Harvard's Kennedy School in 2010, Shannon Murphy observed that the increased presence of start-ups in developing countries isn't only acting as "an engine of innovation, efficiency and creativity in the market. ... Increasingly, entrepreneurial principles are being leveraged to solve complex public problems". Examples include the influx of microfinance providers and platforms in countries like Myanmar, where small and medium enterprises (SMEs) make up the overwhelming majority of the country's economy. Start-ups in the country responded to the need for credible, efficient microlending in a bid to lift more people out of poverty. 

A lit match
The need for start-ups in this region's developing economies is great and growing; their benefits are manifold. But an emerging start-up ecosystem is like a lit match. Without carefully placed fuel, oxygen and someone to tend to it, the resulting fire will either burn out quickly or burn out of control. This is where large, international companies have an important role to play.
A start-up's basic needs are fairly universal: funding and financial services, knowledge sharing and education, and access to a broad and relevant network. According to start-up analysis lab Startup Genome, though, the health of an entrepreneurial ecosystem requires more than the basics. Right now, for example, there's a lot of money pouring into emerging hubs of innovation, but there is a difference between quantity of investment and quality of investment.
Investment comes in all shapes and sizes, and one of them is becoming a coveted "reference client". Individual start-ups that have a bona fide "reference" hold power. Beyond the revenue from the contract, this backing becomes a kind of proof point for the start-up to show off to the ecosystem.
A corporate partner means they've reached product or market fit. Sourcing teams in other multinationals see that they're vetted. Start-ups can make their case to sell to smaller companies or build their brand to attract more investors. And all of that is to say nothing of the bottom line, as revenue for the "reference client" boosts valuation, and as start-ups get access to untapped networks of possibly millions of customers.
The doors swing open.
Start-ups get it. Boston Consulting Group found that more than 95 per cent of them look to develop a long-term partnership with a corporate, while StartupBootcamp found that 7 in 10 start-ups believe corporate partnerships are "very relevant". 
Their corporate counterparts, meanwhile, are happy to be supportive. A 500-Startups study of 100 innovation professionals at Fortune 1000 companies found that 53 per cent would allow the right start-ups to use them as "reference clients", just under half would support case studies, and 36 per cent would rev up their in-house PR engines to help. 

A lasting, bright burn
Corporates can make bigger differences in the health of start-up ecosystems in emerging markets than anywhere else. This is because they can help younger ecosystems in crucial areas like intellectual property rights, governance and infrastructure. They create an appetite for entrepreneurship by showing more traditional cultures that being a start-up founder is a viable career track.
The presence of large, international corporates in a developing start-up scene can also legitimise local growth efforts. And in environments when resources are slimmer, "frugal innovation" is forced. This is also seen in social entrepreneurship programmes that are burgeoning in so many developing markets. In such climates, start-ups and corporates have to co-innovate to provide access to novel technologies with smart solutions. 
Embracing the entrepreneurial spirit means nodding toward independence, self-reliance, and a willingness to take risk. Across emerging Asia, there's a hunger for this new way of thinking - among established institutions looking to reinvent themselves, and among the region's plugged-in youth, who have an awareness of possibilities beyond their own neighbourhoods and family businesses. Start-ups and corporates alike have the chance to contribute to and profit from the professional potential of Southeast Asia, but the real possibility for a lasting, bright burn lies in cooperation between the two.

Vegard Aas is head of innovation at Telenor Group, and based in Singapore. He is responsible for identifying ideas and start-ups that have the potential to become new engaging digital services for 174 million customers across Telenor's companies in Asia, the Nordics and Central and Eastern Europe.