Dash to digital powers Asia-Pacific start-ups

Eric Cheng, co-founder of south-east Asian online used-car platform Carsome, kicked off 2020 with big ambitions to expand his five-year-old business. Then Covid-19 hit, and he braced for the worst. 

But Carsome instead exceeded 2019’s revenue by more than 30 per cent to hit $400m, and expects to more than double that figure this year to $1bn after pushing deeper into its markets as demand exploded during the pandemic. 

“We thought it would put a pause on everything but it was the other way round,” Cheng says. 

Pre-Covid, Carsome was selling roughly 2,000 to 3,000 cars a month. By March this year, that number had passed 7,000. 

As one of the companies listed in the third annual FT Asia-Pacific High Growth Companies ranking, in 16th place, Carsome’s story is not unusual. Businesses that were already growing rapidly online have since been turbocharged by digitalisation during the global health crisis.

The 2021 ranking, compiled in conjunction with FT sister publication Nikkei Asia and Statista, a research company, lists businesses from the region’s most developed markets, according to their pre-pandemic compound annual growth rate (CAGR) in revenue, between 2016 and 2019. It does not claim to be complete, as some companies did not want to make their figures public or did not participate for other reasons. (China has been omitted due to difficulties in verifying data.)

But many from the tech-leaning cohort, like Carsome, have found that a strong performance before Covid-induced lockdowns helped them to keep growing through the crisis. “What we have seen in the past 12 months is an accelerated level of growth,” says Gianfranco Casati, chief executive of the growth markets business at consultancy Accenture. “There has been 10 years of progress in one year.”

Asian businesses have benefited from governments in the region handling the pandemic better than many in Europe, the US and Latin America. In addition, most western countries have higher numbers of traditional bricks-and-mortar companies that have had to fundamentally change their business models to suit the new reality. Asia, however, has been the “centre of gravity” for online platform businesses, Casati says. 

Asia was fortunate in that it had already many digital-first players in place, who could step up in the pandemic

Unsurprisingly, then, technology is once again the sector most represented in the ranking, accounting for 25 per cent of all companies. Following in second place, but far behind, is support services, with 4.4 per cent, then construction with 4.2 per cent. 

Many of the companies that prospered before the pandemic are doing even better now, despite a globally volatile situation and continuing travel restrictions. 

The second-hand car industry stands out, with Carro — another Singapore-based platform selling used cars to consumers across south-east Asia — placing top of this year’s list. 

Founder Aaron Tan says 2020 revenues at the company that he describes as the “Amazon for cars” were two-and-a-half times bigger than 2019’s total. “We expect to grow three more times again this year,” Tan says. “It was a challenge not being able to travel and things were a mess in the early days of Covid . . . but we expect even more spectacular numbers this year and next year.”

Asia’s strength going into the pandemic was that the region’s businesses and consumers were already ahead of the curve, especially in terms of smartphone adoption. Businesses’ main concern was ensuring their systems could cope with the surge in demand. 

“Asia was fortunate in that it had already many digital-first players in place, who could step up in the pandemic,” says Ken Chia, a lawyer for Baker McKenzie Wong & Leow, a law firm. “A lot of the big names did not have to change their strategy drastically. Businesses did not pivot because of Covid, they more used the crisis to scale.”

The figures speak for themselves. Research from McKinsey shows mobile already accounts for 74 per cent of ecommerce spending in Asia. Around 56 per cent of investment in internet-of-things start-ups and technologies is in Asia and the region holds 81 per cent of patents for mobile services and technology globally.

Taiwanese semiconductor distributor WT Microelectronics tops the FT ranking in 2019 revenue terms, with $10.8bn. The company says trends including social distancing, working from home and cloud computing have positively affected business. Revenue hit $12bn for the 2020 financial year, representing a CAGR of 25 per cent between 2016 and 2020. 

Taiwan has 54 companies on the list this year, up from 36 in the 2020 ranking. 

Taipei-based eCloudvalley helps companies to transition to digital using the cloud. It is looking to set up offices in Vietnam, Indonesia and Pakistan this year after the rapid adoption of cloud computing services boosted its business in 2020. Consolidated revenues for the first two months of 2021 rose 75 per cent year on year to NT$1.5bn ($53m). The company said it expects strong demand even post-pandemic. 

Financial technology companies again made a strong contribution to this year’s ranking, including Kioson, an Indonesian payments business, which places second on the ranking.

Fintech businesses offering digital payments have surged globally during the pandemic as lockdowns prompted consumers to go online.

“A lot of companies embedded financial solutions into the ecommerce experience,” says Anand Swaminathan, leader of McKinsey Digital in Asia. “The reason is simple: the desire to become a ‘super app’ [offering a variety of services to meet consumer needs] or to be an end-to-end service provider shot up through Covid.”

Financial services companies took a similar approach: moving into related areas, such as wealth management and insurance. India’s Razorpay, ranked 25th, is one example. The fintech has gone beyond payments into facilitating loans and insurance. 

Companies in other sectors, however, have been forced to make tough decisions to keep their businesses going as the pandemic cut spending.

RedDoorz, a budget hotel platform covering Indonesia, the Philippines, Vietnam and Singapore, ranked 19th on this year’s list. But founder Amit Saberwal says 2020 was “challenging” and required some fundamental changes, including salary cuts, downsizing and putting expansion plans on hold. “We had to move from top-line growth to revenue growth and cost cutting,” says Saberwal.

Today, the outlook appears much more sustainable, he says, but there is still a lot of uncertainty over how quickly travel will recover. “But at least we are spick and span and ready for growth.”