Southeast Asia’s startup ecosystem has historically been formed by learnings from more mature markets. But the growth of the region’s digital economy has uncovered uniquely emerging market challenges that have given rise to new species of venture-backed startups. This article dives into one example, mental health tech company Intellect, as they leveraged their localized approach to the nuances of East Asia’s relationship with mental health to rapidly scale across the region.
- Amidst the short-term uncertainties, Southeast Asia will continue to be ripe for startup and venture capital opportunities, and among the venture-backed companies, endurance will be determined by solid business fundamentals and strong moats.
- Southeast Asia has seen clone and mutant business models rise in the region, but “new species” companies brought about by uniquely local needs pose greater possibilities to build not just localized product-market fit but also strong and sustainable moats for growth — essential to endure through short-term uncertainties.
- Asia’s fastest-growing and largest mental health tech platform Intellect is a “new species” company born out of an environment ripe for mental health tech adoption.
- As a “new species” company, it has leveraged the possibilities of strong, sustainable moats from a single market to multiple markets across East Asia through its tech platform, a network of local mental health care professionals, and the synergies across its multi-product ecosystem.
- More “new species” can be expected to emerge in Southeast Asia as more uniquely local demands and pain points are addressed by venture-backed tech companies.
While short-term uncertainties of interest hikes, geopolitical tensions, and the pandemic loom overhead, a recurring narrative we’ve had on this publication is that Southeast Asia will continue to be ripe for startup and venture capital opportunities regardless of the seasons.
Now the question is, which venture-backed companies stand to see the seasons pass and take advantage of the growth story fundamentals you should all be familiar with by now — growing middle income, talent influx, the region outpacing China’s GDP growth, etc?
Just as we wrote back in 2020 amidst the initial impact of the pandemic in articles like this (we write about fundraising in a bear market), this (we write about skyscrapers), and this (we write about the longevity of blue oceans), a lot of it will boil down to which companies will be able to justify real growth with their prices, leveraging solid business fundamentals, revenues, and strong moats.
First, a Taxonomy of Sorts for Southeast Asia’s Venture-Backed Companies
Stage 1: “Clones” leveraging market opportunity
Southeast Asia’s startup ecosystem has had a history of (or arguably found its origins in) playing host to Silicon Valley or European clones (i.e. building X or Y in Southeast Asia) that have largely ended up not faring too well. These clones simply saw the growth opportunity but didn’t truly localize (i.e. we’re not just talking about language here), possibly due to the bias of “why change the winning formula?” and the costs that come with pivots in new markets. In other cases, there were global companies that simply tried to set up regional operations or acquire these clones, but the results did not often pan out so well.
Stage 2: “Mutants” finding stronger product-market fit
Then mutants emerged, seeing the opportunity to surpass these clones by building specific to the nuances and needs of the local markets. The classic example is Gojek with their two-wheeled, ojek approach to scale ride-hailing services in Indonesia instead of the premium taxi vibes of Uber in the region. Many of these mutants were able to pull in funding primarily because of the “time machine” thesis where investors, seeing the success of very similar comparables in mature markets, make the conclusion that these Southeast Asia localized versions could fare similarly or even better with the region’s growth opportunity because they were able to find more sustainable product-market fit.
Stage 3: “New species” building stronger moats
The biggest challenge for mutants has been building strong enough moats to really force the hand of potential competitors, making them think twice about expanding resources to compete on the local advantages or unique proposition the incumbent company already has.
This is where new species come in, effectively flipping the script on the localization challenge and turning it into a localization moat against competitors. Instead of tweaking, let alone transplanting, existing models to local markets, new species are brought about local problems that necessitate a unique, innovative approach. The product itself might not be innovative, but more often than not in Southeast Asia, startups have to be creative with distribution and the way they package or deliver their value proposition.
Emerging markets are more likely to produce these new species, especially since we call them “new” relative to business models that have seen success in more mature and developed markets.
Payfazz is one example we’ve discussed in the context of finding growth in Indonesia’s historically underserved rural economy. As we wrote in this article and this article back in 2020, they leveraged a strong distribution network to build a “self-learning” platform and engineer “platform-driven growth” as opposed to “market-driven growth.” The agents serving as touchpoints for their financial services app became drivers of the platform’s product development roadmap (we cite a specific case study here).
One thing to note here is that these categories are not static states for any single company, especially for such dynamic organisms as startups. Clones and mutants can evolve even further to become new species, and some new species are not always born overnight.
And so in the context of an increasingly uncertain environment, “new species” lend themselves to greater chances of thriving and enduring.
When being a “new species” is the key to global scale
While the drivers for the internet economy across more previously niche, untapped, or stigmatized market segments have unveiled more local needs leading to the creation of more new species, in this article we write about the learnings from one such company, in particular, mental health tech company Intellect.
This is because instead of localization simply being an evolution designed to build stronger moats and thus more sustainable growth, Intellect’s localization of its mental healthcare offerings also importantly unlocked global scale. Their “hyperlocalization” as they call it, has been their key to scale beyond Southeast Asia and across the Asia Pacific, with multinational companies among their enterprise clients and app users from over 150+ countries, all in all, serving more than 3 million people.
Compared to how Southeast Asia’s startup ecosystem was populated, driven by learnings from more mature markets, these “new species” turn the tables on this narrative and pose a new one entirely: what can the rest of the world learn from Southeast Asia?
Specifically, we identify three key insights on how this “new species” evolution was able to unlock global scale for Intellect. These are outlined further below with excerpts taken from our interview with The Ken on their recently published piece on the company — a piece which also goes more in-depth into the industry as a whole:
- Environment drives the evolution of “new species”. Demand for mental healthcare in a region with a diversity of unique experiences and pain points made it ripe for a “new species” company like Intellect to emerge.
- Populating new markets as a “new species” goes beyond language localization and bears having the resources to cater to the differences across these markets. Intellect leverages technology and a network of local mental health professionals to expand their coverage across East Asia.
- Evolution needs to be fast short-term and sustainable long-term. Intellect is able to do this through synergies within its ecosystem of products and offerings.
Environment drives the evolution of “new species”
Evolution isn’t an isolated event; the environment also has to be conducive for these “new species” to emerge. There were shifts in consumer behavior and even business perception around mental health that would make it possible for Intellect to thrive in Asia in the same way that mental health companies have in the West.
As we wrote in a November 2021 article on healthtech, “Five years ago, there were hardly any investments in healthtech [in Southeast Asia]. With greater awareness of healthcare issues, rising healthcare spending, and greater trust in digital solutions, there’s more momentum for healthtech startups and this has attracted US$1.1B in funding in the first half of 2021.”
The issues in particular Intellect is addressing when it comes to mental health are not new but long-standing pain points: underserved segments (e.g. employees), high costs to access mental healthcare, and inaccessibility (i.e. not easily available).
In Asia, especially, there has also been the stigma associated with availing this kind of healthcare (which is now changing). We’ve also observed these same challenges and pain points in other subsectors of healthcare, like sexual and reproductive health. It’s worth noting that many of these pain points being unique to the region play heavily into the emergence of these “new species.”
As mentioned above, while the problems have persisted, what has changed are the attitudes and perception of mental health, especially in the workplace, with shifts like “The Great Resignation”, remote work, self-care movements putting the pressure on businesses to actively invest in their employees’ mental wellbeing and making them realize that employees’ mental well being has a direct impact on the bottomline.
Theo talks about the shift on our podcast, “It was not long ago, two or three years back, mental health…was a nice-to-have piece. Now, it’s become very clear that if companies don’t actively look after employees’ wellbeing, the ones that get affected are the companies themselves. So I think it’s become quite clear that workforces are looking at this in a way where, “It’s my people first,” but also…“How does this affect my business? And my bottom line as well?” So we actually can show very strong correlations that better well-being leads to better outcomes for companies.”
With pre-pandemic mental health spending in APAC more than tripling from US$100M in 2019 to US$310M in 2020, and projected to hit $US620M in 2025, Intellect sees massive opportunity in providing this hyper-localized solution built for Asia. There is clear demand for these solutions, but according to Theo on our podcast, there “are not enough players that are making a big enough dent in Asia in mental health care.”
If you can localize here, can you localize anywhere?
As we’ve previously discussed, the emergence of “new species” represents a form of localization that does not just adapt existing solutions but caters to uniquely local pain points and is able to build on existing infrastructure. In the case of Intellect, their hyperlocalization is not just about translating their app and programs but also partnering with local psychiatrists and psychologists, and positioning themselves as the platform for Asia, in an industry where most players come from the West.
As Theodoric shares on our latest podcast conversation with him, “I would say the challenges in what we’re trying to drive and move towards more quickly is hyper localizing it towards Asia-wide needs and use cases basically…Now we are live in 11 languages; we have therapists on-the-ground in twelve countries across APAC. The goal is not just English-speaking markets, but anywhere in Asia that needs access to care where a lot of our clients have a presence…A key thing is that we win by adding a nuance towards an Asian perspective on mental health. In the US It’s not without stigma, but it’s a lot more open than in Asia. With us here, we understand that by market, even between Singapore and Indonesia, or the Philippines and Thailand, there are different nuances. So we hyper-localize it. We get [our solutions] very much geared up for an individual in the local market with actual, live native professionals. That makes it very, very attuned to them.”
However, unlike the Alicia Keys song, if you can make it here (in one market), it doesn’t necessarily follow that you can make it anywhere. Covering multiple markets means being able to understand and cater to the diversity in the depth and nature of the environments in each of these markets.
Theo continues, “One interesting trend we see is that across the region, and there are many, many local nuances by country like Singapore differs quite a bit from Japan and Thailand, [but] the one thing holds true is that it is really stigmatized. For the most part, [mental health care] has been seen as a very, very clinically severe topic to touch on, and not so much [something] that’s everyday. But what’s been very clear as well is that for the markets or the countries that have been affected by the lockdown, it’s become very top-of-mind for them as well. A key part, as you just mentioned is that we hyper-localize it, not just translating the app, but making sure we answer the nuances of what each market struggles with.”
Evolve or perish
Even with these features and offerings localized to their target markets, the main question for Intellect’s evolution as a “new species” has been how to maintain this hyperlocalization while still scaling across the region and expanding its revenues. Without speed in populating and sustaining its growth, “new species” could easily die out or eventually fall prey to larger players.
For Intellect, the way to rapidly scale on top of its hyperlocalization approach has been to address the low adoption of mental healthcare benefits in businesses in Asia. Since launching their business-facing, digital-first programs in early 2021, Intellect has seen their revenue grow 20x year-on-year driven by enterprise clients availing these programs like foodpanda, Shopback, Singtel, Kuehne & Nagel, and Schroders. They have also established a strong commercial presence in Singapore, Hong Kong, and Australia, markets where multinational companies often set up their APAC headquarters.
Its go-to-market strategy of launching a consumer app and growing into a multi-product, platform approach has enabled it to create unique synergies across its offerings. For example, users of their consumer app are able to serve as evangelists for enterprise clients to adopt Intellect’s solutions company-wide. Essentially the B2C product builds the brand for the B2B product. On the other hand, Intellect’s enterprise business has allowed the company to scale quickly while also driving monetization and retention in a greater way vis-a-vis the consumer approach.
Expanding the pace and possibilities of “new species” growth
While Intellect’s self-guided mental healthcare app has more than 3 million users across 20 countries globally, serving as the foundation for the brand they have today, the focus for the company has always been to build a full mental healthcare system for Asia, recognizing the specific needs in markets across East Asian countries especially.
What Intellect has done thus far as a “new species” company is to expand the possibilities of having a strong, sustainable moat beyond the shores of a single market. Of course, the nature of its solution and the industry lends itself more easily to this rapid multi-market, multi-offering ecosystem (versus consumer financial services for example), but to have actually executed on these possibilities is a feat on its own.
While Intellect is leading the way in “making this dent” in Asia, and they have made significant headway quite rapidly over the past year, there’s still a lot more to be done in terms of driving adoption of both their consumer and enterprise products here in Asia and localizing it to the various markets in the region.
Intellect is just one of many more “new species” of companies that are coming out of Southeast Asia and that we will continue to cover here on Insignia Business Review, as more uniquely local demands and pain points are addressed by venture-backed tech companies.
Trace the journey of Intellect (YC S21) on our podcast:
👉 6 months after app launch (>1M users), launching enterprise program
👉 9 months after app launch, Theo with other founders talk team building and PMFs
👉 Post-YC (>2.5M app users, >20 enterprise clients)