A confluence of trends appears poised to make Southeast Asia a new major destination for legal startups. Among those trends is a spike in funding for startups in the region, the continuing challenge to the traditional law firm business model in Asia, and a growing number of legal startups locating in South East Asia. The rapid increase in internet connection regionally, a growing infrastructure of support for startups regionally including incubators, accelerators. Other similar support, and finally, an abundance of fast-growing Southeast Asia regional economies.
1. Startup funding sources are increasingly targeting South East Asia
An article in TechCrunch this month outlines the increasing maturity of Southeast Asia’s startup ecosystem: “[A] new fund has arrived to offer yet more financing options for emerging tech companies. Venture Capital is a big-hitting $150 million fund announced this week that is focused on the region, where mobile internet adoption is rising rapidly across a cumulative population of over 600 million.”
But traditional funding is not the only method startups can utilize to raise capital. Malaysia, for example, is the first jurisdiction in the ASEAN region to have a legal framework for crowdfunding.
2. Challenge to traditional law firm business model
In recent months, as John Knox, Head of Asia for NewLaw firm AdventBalance outlined, “a growing number of traditional law firms including Eversheds (Agile) and Allen & Overy (Peerpoint) are establishing [NewLaw-style] operating units in Asia.” Additionally, Corrs Chambers Westgarth and Rajah & Tann are among others who’ve launched similar initiatives in Asia. Knox sees these new entrants “as re-affirming what we already know – the traditional law firm model is under serious threat and success comes from putting client’s needs first.”
NewLaw firm AdventBalance, along with regional rival Axiom Law, uses a private equity funding model and place seconded lawyers in-house, while keeping overheads low. Similar in nature to legal startups, they together encompass a groups of private equity-backed challengers to the traditional law firm business model in Asia.
3. More legal startups have come to South East Asia
Benjamin Cher outlined recently in Digital News Asia how: “Legal services still remain relatively untouched by the startup boom in Asia. He cited the complex nature of law and a highly-regulated legal industry as part of the challenge to entry for startups. However, he noted that: “There have been a few legal services startups, helping companies draft the legal documents from templates like Singapore’s LawCanvas to legal directories like Malaysia’s Answers-in-Law.” He also cited Legalese.io and Dragon Law as a recent entrants to the Singapore market but noted: “generally the space in Asia is quite bare.”
4. A rapid increase in South East Asia internet connectivity
Internet connectivity is crucial to the rise of startups, with legal services startups no exception. Notably, the Asia-Pacific region is responsible for 61% of new internet users in the world — according to a report published by Jim Dougherty, social media analyst and commentator at Leaders West. According to the report: “Of the new connections between now and 2017, an estimated 61% will be from Asia-Pacific. This growth will be driven mostly by the “big three” emerging markets: [India, China and Indonesia]. Between these countries they’ll have an estimated 3 billion [internet] connections in 2017.” What also characterizes this new growth is that usage will be often on a mobile device and be worn on the body.
5. Incubators, Accelerators and other forms of support is on the increase
Cher detailed in Digital News Asia how Singapore’s Joyful Frog Digital Incubator has helped legal services sector startups locally. While Malaysian startup backer Malaysian Global Innovation and Creativity Centre — founded in 2014 — is similarly helping Malaysian startups. And Legal Hackers, a network of organizations globally, with a number of chapters in Asia, provides a venue conducive to the support of local legal startups via their efforts to “spot issues and opportunities where technology can improve and inform the practice of law and where law, legal practice, and policy can adapt to rapidly changing technology.”
6. Fast-growing South East Asia regional economies
As Inbound Logistics details: “With an average annual economic growth rate of more than five percent, the countries that comprise this dynamic region represent a thriving trade and economic hub, despite infrastructure and regulatory challenges. Southeast Asia’s 11 countries have a combined gross domestic product (GDP) of $1.9 trillion; a population of almost 600 million people. The average per-capita income is nearly equal to China’s. According to Southeast Asia: Crouching Tiger or Hidden Dragon?, an article published by the International Economic Bulletin.”
Taken together, these 6 trends are likely to see a marked increase in the number and diversity of legal services sector startups coming to South East Asia in the future – poised to help businesses and individuals adapt to what is likely to be more varied legal needs attendant to a growing and complex regional economy. It will certainly be fascinating to watch how these trends, working together, will contribute to the growth of the region’s legal startup ecosystem.