Because Asia went mobile-first, mobile became the platform that underpinned innovations and new business models. These consumer preferences have created a generation of digital native, born-in-the-cloud businesses.
We had a chat with Michael Smith Jr., who recently joined Microsoft as the GM for Startups and digital native businesses in Asia Pacific. He brings extensive experience working with Startups across the region on their business strategies and technical architecture. Michael led a US$20M seed fund, the CTO of HOOQ, managed messaging products in ASEAN for Yahoo Emerging Markets and one of the first Sales Engineers at WebLogic which was acquired by BEA and later by Oracle.
1. Congratulations on your new role. Tell us three things about you.
I’ve lived in Asia since 1999 and have called Hong Kong, China, Thailand and Singapore home.
I think the opportunity to build things is a lot of fun.
I’m most proud of my investment in Homage – a Singaporean female founder that is building an amazing business, which is having real human impact. That’s pretty rare in the startup scene.
2. Why startups and digital natives?
If I were to draw a Venn diagram of the things I’ve been involved in, it’s either been venture capital, working with startups, or big tech companies that are servicing startups. Startups exist at the center, and I’ve been around them just doing different things for decades now.
I’m thrilled to have been one of the first to work with some very successful startups. Very early in my career, I was involved in what I call an “early enterprise” startup called WebLogic, which was bought by BEA Systems. It was a big acquisition in our space, and it was later bought over by Oracle. I’m also most excited about being on the team that started a seed fund in Singapore called SeedPlus, which has made investments in some amazing startups across the region.
3. How are digital native businesses different from other businesses?
I think there are a couple of reasons why startups are different. They have a very quick gestation period as compared to a normal SMB (small-to-medium business) or enterprise business. Startups tend to go from ground zero to building something very quickly.
Since I come from the startup space, I’m equipped to talk to them about what they’re going through – whether it’s tech, business, funding or employment issues.
4. Which one has it tougher, startups or enterprise businesses?
Established companies tend to have older tech and have a hard time staying current. Anybody who’s been in this region and has used banking apps probably gets what I mean. If you’ve used an app from a fresh-faced fintech startup over the last two or three years, you’ve probably seen noticeable differences between that and your banking app. Is that because they have a legacy tech system, or because they think differently? I think legacy companies are less likely to want to blow something up and completely start over.
On the other hand, startups have a clean slate and are starting fresh from day one. This is the foundational principle that enables them to do some things differently. What they might lack is the entrenched market share, capital or old-world relationships that allow them to be successful.
5. Why do you think Microsoft is the natural partner for start-ups and digital native businesses?
All of us have grown up with Microsoft technology pretty much our entire lives and people are still using an enormous amount of Microsoft productivity software. Microsoft under CEO Satya Nadella is no longer a Windows company but a technology company. We have acquired amazing assets like GitHub and LinkedIn. If you pair these platforms with our productivity software and capabilities on Azure, you realize everything a startup might need is there for you.
Using Office, Teams, and Azure, coupled with Microsoft’s enterprise or market capabilities in specific sectors such as fintech, B2B, or gaming has the potential to create a remarkable offering. Topped with the Microsoft for Startups program reboot – Microsoft now has a very compelling offer for startups.
Then there is the ecosystem beyond all the tech offerings where working with Microsoft a startup can expand to other markets, industries, or segments.
Beyond our cloud services, Microsoft can offer startups unique go-to-market capabilities and all the tools required to reach their consumer or business customers. This allows us to bring our expertise and our product offerings to specific startup segments like fintech, B2B, gaming, augmented reality and health where Microsoft has plenty of experience. In these specific areas, we can help startups apart from just the usage of the technology stack.
6. How are digital native businesses in Asia Pacific different from others?
APAC is a market with tons of opportunity, in terms of the geographical size of the region, and the people. If you ask an outsider how many islands there are in Indonesia, some people will struggle – some say single digits, others triple. When you tell them it’s approximately 17,000 islands, they are shocked. They have no idea!
The opportunities in Asia Pacific are huge – split across cultural, language, and geographical differences, which makes it unique from other parts of the world.
In some of these countries, if you look at the B2B or the logistics market, large players have penetrated many of the first or second-tier cities, but the third and fourth-tier cities have yet to be conquered. Many countries still have a tremendous amount of growth in the second or third-tier cities when it comes to core services. Even if you think some markets have already been completely saturated, they really haven’t. So incredible opportunities are still available for startups and market disruptors.
7. Super apps like Grab have taken their customers’ whole lifestyles online. Bukalapak has transformed e-commerce in Indonesia. What other trends can we look forward to?
It may come as a surprise, but fintech in the region still has a lot of room left for innovation. We’re just scratching the surface of how far we can take it. The continued proliferation of bandwidth and finance will create new opportunities such as enhanced commerce that will need growth in logistics as well. Social selling and live video are starting to come together to create new business opportunities, further pushing the logistics sector.
Then there’s sustainability. The acute awareness of climate change has now hit everywhere. There are also a few local fund accelerators that are climate tech-focused. Climate change is starting to hit home with both capital and technology coming together.
And finally, healthcare. COVID-19 and the medical arena for testing and logistics have also really started to come around. There are some homegrown innovations, such as the saliva-based COVID tests that should be able to replace the terrible swabbing regime we have all endured. The COVID situation has brought the importance of health to the forefront.
8. We know that Asian businesses now patent more innovations than the U.S. and Europe combined. What makes Asia the innovation hub?
Startups are flourishing everywhere, but this region is so big that it’s a pure numbers game. Given Asia’s capital and finance capabilities, its connectivity to the world and the fact that regional problems require solutions, there are market opportunities that have allowed Asia to finally flourish.
In addition to the focus on STEM learning in schools here, it is also becoming more accepted to be a startup entrepreneur. Combine this with capital, the education base and multilingual abilities – it is clear why this is such a big growth market for startups. It’s all finally coming together. Now, we’re starting to see the fruits of that.
9. Are there any countries that we should be watching?
I’m a big fan of Singapore. Singapore has done well in creating an epicenter of innovation – with its safety around capital, its friendliness to the fund industry and measures to enable technological innovation. I hope Singapore can recover from the effects of the pandemic and continue its momentum.
We are also very fortunate the government constantly fosters innovation and is continually making sure that Singapore is a home for capital and tech innovation. Hopefully, more ASEAN governments strengthen the linkage between universities and tech which is crucial to any startup ecosystem.
Singapore has done a good job of bringing the higher education system together with capital and tech, which has helped to create more startups plus more students graduating who go straight into founding their own company. We need more of this!
I’ve also been really impressed with Bangladesh. They have their own local incubators and accelerators, and their startups are already attracting the best of the capital in the region. What’s great is many of the large Bangladeshi startups are incorporated in Singapore or were even incubated in local Singaporean accelerators. In terms of startups, I think Bangladesh is really punching above its weight and it’s quite fascinating to watch.
10. What are you looking forward to?
I’m excited by this opportunity and looking forward to building the APAC Digital Natives team and our presence in the segment. I’m obsessed with startups, software products and the continued expansion of the startup ecosystem in Southeast Asia. Microsoft is an amazing brand known for gaming, productivity and enterprise software and I’m excited to bring that to the startup community with everyone’s help.