Did you know that more than half the world’s middle class will be in Asia by 2020? It is expected that by this time, Asian customers will account for more than 40 percent of global middle class consumption.
The growth of the middle class presents businesses and investors with exciting opportunities. As a result, a significant number of startups are now focusing on setting up or expanding into Africa, Latin America, Asia and the Middle East, where population growth presents huge untapped market potential.
Many emerging market governments are laying the foundations for a flourishing business environment. In 2012, the Ghanaian government revealed plans to construct a high technology park in Tema. This park will be a replication of the United States Silicon Valley, Egypt's Smart Valley and South Africa’s Innovation Hub in the hopes that startups will stimulate growth for the Ghanaian economy as Silicon Valley engines the growth of the American economy. Recently, the Kenyan government invested $10 billion in a digital tech hub. The Konza Techno City, close to Nairobi, has been nicknamed the Digital Savannah.
Are you aware that out of every eight people in the world, roughly three come from either India or China? Indonesia is the fourth most populated country in the world, with over 256 million people. The island of Java is the world’s most populous island. The population is young too, and this presents a chance to grow with the consumer along the product life cycle. In Bangladesh the median age is 24.3, in stark contrast to Australia where it is a much older 38.3.
A large population equates to more consumption. In the developing world, large populations have fuelled a consumption-driven economy with levels of economic growth not achievable in Europe or developed markets.
The operating costs in the emerging markets are much more competitive. The price to rent an office is only a fraction of the price in cities like San Francisco or London. The average price to rent an office in Ghana is between $35 and $40 per square meter. Compare that to the $2,194 per square meter demanded in London’s West End.
Labour costs are also substantially lower. In the Philippines, the average salary of a computer programmer is $4,927; contrast that to $69,000 on offer in San Francisco. Between staff and rent, your startup costs will be considerably lower, allowing a faster transition into profitability.
Leading the way
In the emerging world, your startup has the chance to be the first of its kind. With much less competition, you can either enter the market with first-mover advantage or become the market leader in only a short amount of time. By bringing pioneering technology, it is possible to eclipse the competition with relative ease; by the time they catch up, you will have established yourself as best in class.
Co-founder and Managing Director of Berlin-based startup Lamudi, Kian Moini, commented: “Since Lamudi launched in October 2013, we have become leader in a number of our markets, including: Ghana, Nigeria and Kenya. This kind of growth in such a short time would be much less likely in more established markets, where searching for real estate online is a more widespread practice.
“By introducing a service that is not yet available, startups have the opportunity to mould their industry, educate consumers, and lead market development,” he concluded.
Shift to mobile
Startups focused on the emerging markets can profit from the rapid increase in Internet penetration with the shift from desktop to mobile and apps. As a startup, if you have an easy-to use-app, you will be way ahead of the game. The high costs associated with Internet usage in many developing nations makes apps more appealing to interact with online companies. As a startup whose mobile application or mobile browser has a sleek interface in an increasingly online marketplace, you will have a key advantage.