U.S.-ASEAN Innovation Circle — Challenges Identified by Working Groups

Challenges to Innovation related to Women’s Entrepreneurship 

Challenge #1: How to address the lack of access to networking for growth of women-owned businesses?  

Challenge #2: How to address the lack of skills training and capacity building programs for women-owned businesses?  

 

Challenges to Innovation related to Digital Economy 

Challenge #3: How to ensure inclusive access to technology for all?   

Challenge #4: How to ensure a sustainable supply of human capital in the fast-changing digital economy?   

 

Challenge to Innovation related to Socially Responsible Business 

Challenge #5: How to ensure that socially responsible businesses can access adequate resources to become financially sustainable companies?   

 

Challenges to Innovation related to Fostering Start-Up Environments   

Challenge #6:  How to address the lack of access to early stage funding, so that investment does not come too late for start-ups in Southeast Asia?    

Challenge #7: How to address the lack of good start-up advisors and enablers in Southeast Asia who can help build companies that have potential to expand outside of the region? 

 


 

Challenge #1: How to address the lack of access to networking for growth of women-owned businesses?  

Although women entrepreneurs significantly contribute to the success of an economy in various nations around the region, various challenges hinder their entrepreneurial progress. The woman entrepreneur’s role is evident in growth leadership, management, innovation, research and development effectiveness, job creation, competitiveness, productivity, and the formation of new industries. Women entrepreneurship is increasing rapidly around the region and women are starting their business to take control of their personal and professional lives. However, there seems to be a lack of support in the form of entrepreneurship programs or networking for the growth of their businesses. Entrepreneurs are faced with many obstacles that limit their growth and survival and have to cope with negative prevailing social and cultural attitudes, lack of education and training, as well as gender discrimination.  

According to case studies released by Asian Development Bank and The Asia Foundation in 2018, the social–capital dimensions of women’s entrepreneurship ecosystems in Asia constrain the growth of women-owned enterprises throughout the region. Women’s access to business networks tends to lag behind men’s, thus limiting their opportunities to learn from the experience of others, develop useful business contacts, and gain market information. One study showed that women business owners in Malaysia, the Philippines, and Thailand who interact with business associations are 24% more likely to report plans to increase the size of their businesses within 3 years, but more than one-third of women business owners in those countries never interact with these associations at all (compared with 26% of men who never do). In Southeast Asia, women entrepreneurs report around 7% less access than men to business-oriented networks. Moreover, many mixed-gender networks and associations do not offer services tailored to the needs of their female members, and they often fail to accommodate the time constraints that women face. In Cambodia, for instance, there are various mixed-gender businesses and sector organizations, but they have no data on women’s membership, and they offer no programs that target women and their priorities.  

Influential women-only business associations and chambers of commerce are on the rise across Asia and the Pacific, particularly in Southeast Asia. But the limitations on mixed-gender networking can further confine women to low-profit, low-productivity sectors, rather than enabling them to branch out into more profitable sectors traditionally dominated by men. Findings from a recent study in sub-Saharan Africa highlight the potential of male role models—typically family and friends—for helping women to “break the metal ceiling” and enter more lucrative male-dominated sectors. Experts have also noted that mentorship by established businesswomen is an important strategy for expanding business opportunities for aspiring women entrepreneurs. However, some have noted that women around the world tend to be “over-mentored and under- sponsored,” meaning that actively facilitating useful connections and opening up networks for new entrepreneurs can have a greater impact than simply sharing experience and advice.  

   

Challenge #2: How to address the lack of skills training and capacity building programs for women-owned businesses?  

According to BCG research, globally, companies founded and co-founded by women often have more difficulty obtaining financing and have less starting capital than male counterpart ($935,000 for women- led companies vs. $2.1 million for men-led companies). Either access to finance providers or acceleration services as commonly delivered are not sufficient to close the investment gap for women-led businesses in emerging markets, resulting in a need for innovative solutions to this challenge. Evidence also shows that women-led small growth businesses suffer from a lack of network connections that can open new possibilities in terms of business growth support, while also showing that support programming that focuses on leadership and confidence building can increase critical networks for small growing businesses.  

The Covid-19 crisis has also exposed inequalities like never before. Economies and communities have taken a hit the likes of which have not been seen for decades. On employment, as of May 2020, women make up 39 percent of global employment but accounted for 54 percent of overall job losses. Another impact is an increase in unpaid childcare and household responsibilities for women as schools and nurseries have and remain closed. Women business owners not only have been forced to rapidly respond to unprecedented health and economic catastrophe to ensure the survival of their businesses but in many cases have to do so while shouldering a disproportionate share of household and child labor. While all of these issues presented significant challenges for many women entrepreneurs, their risks were compounded by the historic lack of equal access to skills training, which both restrained growth or optimization of business operations for many women entrepreneurs, and hampered many from meeting the criteria for government business support programs and grants. This perpetuation of long-term gaps in access to critical financial and business support has thus resulted not only in women entrepreneurs being clustered in immediate-risk (and often lower profit) sectors, but also prevents them from accessing business sustaining support. While the challenges that women entrepreneurs face are manifold, there exists an opportunity to support not only the survival of existing women-owned businesses but to catalyze GDP growth through providing access to tailored support.  

A PACE study indicated that small growth businesses supported by intermediaries including incubators, accelerators, and leadership programs, increase revenues by 68% and jobs by 77% in a one-year period. This level of growth exceeds benchmarks for high-growth firms set by OECD and Bureau of Labor Statistics. Evaluation evidence also shows that business incubator and accelerator programs can help stimulate growth intentions among women entrepreneurs, and help more women entrepreneurs achieve their business’ growth potential. Dedicated programs can have a greater impact than general programs since there is greater take-up among women, more tailored support is provided, and more suitable networking opportunities are offered.  

 

Challenge #3: How to ensure inclusive access to technology for all?   

Over the last several years, quite a noticeable population has benefited from new technology and services. Not everyone stands to benefit from this new development. On the consumer side, there is a lack of digital technology adoption among the people on the bottom of the pyramid and small businesses. This is due to low digital literacy, and unfamiliarity with various digital tools. Because technology is under-utilized, the productivity and competitiveness of Small Business and people at the bottom of the pyramid are limited in the fast-growing digital era.   

Keeping this in mind, if we let market mechanism to work by itself without any affirmative action to promote digital technology adoption among BOP and small businesses, there is risk that technology may increase economic gap and inequality, since medium and large enterprises are increasingly pro-active optimizing the digital technology to improve their productivity.   

 

Challenge #4: How to ensure a sustainable supply of human capital in the fast-changing digital economy?   

Meanwhile, on the supply side, there is also a lack of human capital in developing said technology itself. In ASEAN, there are small pools of tech talents, which inhibit many potential tech startups from launching and growing their tech services.The under-supplies of tech talents results in fiercer competition for human resources and higher cost of launching a technology service. Going forward, if we want to survive in a world where technology is the core standard in conducting a business, we will have to find a way to get more people into technology, particularly inclusive technology (in the sense that it is secure, effective, but also easy to use for people at BOP and small businesses, and other people with specialized need).   

Therefore, specific education/training programs to elevate the skills of IT professionals or many short term-modular-based training programs to provide more digital talent in the developing world would be highly relevant. 

 

Challenge #5: How to ensure that socially responsible businesses can access adequate resources to become financially sustainable companies?   

Socially responsible businesses (SRB) must take matters into their own hands by breaking a vicious cycle that leaves them dependent on donations and charity. Breaking the cycle is imperative to their survival and involves gaining access to proper tools and resources which weren’t already available beforehand. These resources include access to capital, management, mentorship, networks, and corporate partners. Only then will social enterprises truly build consistent revenues, scale up their businesses, and sustain their own operations without needing a feeding hand.  

Additionally, as the concept of SRB remains relatively new to the region, there is a lack of legal instruments and scholars that clearly define what SRBs actually are; thus leading to a misallocation of resources. Consequently, SRBs don’t get enough recognition and resources from the community, businesses, and government to be sustainable.  

 

Challenge #6:  How to address the lack of access to early stage funding, so that investment does not come too late for startups in Southeast Asia?    

There is clear disparity in funding of startups in South East Asia although it may appear that the region has active angel investor circles, and VCs e.g. a study done in Malaysia in 2019 identifies that there are 110 VCs operating in the country (USD 1.75B in total available funds) but only 0.89% of the VC capital went into early stage investments. Angel investors, when they are active and visible, tend to only make profitable investments that are aligned to VC preferred startup types e.g. the next Grab, Gojek. Beyond angel investors and VCs, the region also does not have strong innovation driven corporate culture that would invest in new ideas i.e. large corporations funding startups. If there is any, it is usually designed for incremental innovations and at growth stage. In short, we invest late.  

In the absence of supportive private-led initiatives, government fund managers end up shouldering all the responsibilities of investing in high-risk early stage startups, and particularly those that i) spin-off from university and research labs and ii) social- impact driven.  

A large number of startups, usually, by their very DNA will never end up becoming a billion-dollar unicorn-startup. We think that’s alright. Innovation, perhaps should not be defined by the same metrics that large profitable VCs use. A fresh way of defining and investing in startups that positively impact the world will need to be devised, and championed by stakeholders in the SEA region.  

 

Challenge #7: How to address the lack of good start-up advisors and enablers in Southeast Asia who can help build companies that have potential to expand outside of the region?  

The region’s startup ecosystem is perhaps 25-years old – at most. We lack, relative to the U.S., the sizeable amount of entrepreneurs, founders, investors and ecosystem enablers who have found multiple profit-making exits / failures, and the collective experience they would bring to help build future startups. These ‘enablers’, are also not spread equally throughout SEA – maybe more noticeable in more developed startup ecosystems e.g. Singapore than anywhere else. The opportunity for people to participate in helping early stage startups across the region / cross-border advisory- investment is further limited when each country operates within its own. Entrepreneurs here are often advised to grow locally from their own country, a concept perhaps also adopted from the U.S. with a 320M+ population – we would argue that early adopters for smaller countries e.g. a Brunei-based medtech startup may be in Vietnam, and customer discovery exercises should be extended rapidly beyond one’s own country (especially when we are all on average 3-4 flight hours away).  

A regional effort has not been well championed up to now for early stage startups in SEA as it may challenge resources allocated for country-wide programs, as most governments, are motivated to compete and build the region’s best startup ecosystems from their own. We would like to help them think that we are better, together.