Emerging markets are altering the currents of the global economy, generating new opportunities for startups, investors, and companies alike. Rapid urbanization, an accelerated technological wave, and a propelling middle class are converting these markets into the innovation-and-growth epicenter. In this blog, we shall discuss why emerging markets matter, what trends drive their growth, and how startups could harness these opportunities.
What are Emerging Markets Anyway?
Emerging markets refer to nations with a social or commercial activity undergoing rapid growth and industrialization. Some of these countries usually feature lower-income economies but experience significant economic growth. For the purposes of our discussion here, we would mention:
BRICS Nations: Brazil-Russia-India-China-South Africa
MINT Countries: Mexico-Indonesia-Nigeria-Turkey
Other Key Players: Vietnam, Philippines, Bangladesh, Kenya.
Did you know that M-Pesa in Kenya does an annual transaction of over $50 billion? This exceeds the GDP of some slightly bigger small African countries!
Fun Fact: With over 70% of adults and many more adopting it, Kenya has all the right bragging rights as a world leader in fintech innovation.
It is important to note these markets are characterized by:
- High GDP growth rates.
- Middle-class consumerism is growing.
- Foreign direct investment (FDI) is increasing.
- Rapid dissemination of technology.
Why Emerging Markets Are Important for Startups and Investors
Emerging markets have long ceased to be the playground of risky investors and are fast becoming essential to global economic growth. Here are the compelling reasons behind it:
- Untouched Consumer Base
Emerging markets have over 85% of the world population.
There is an expected growth of 1.4 billion people into the middle class in these regions by 2030, generating a huge demand for goods and services.
- Digital Transformation
Mobile Internet penetration has become highly explosive, with the lead being taken by places like India and Nigeria.
Startups in e-commerce, fintech, and edtech are thriving as more and more people get access to smartphones and the Internet.
- Cost Advantages
Startups looking for efficient scaling appreciate lower labor and operational costs within emerging markets.
Tax incentives: to foreigners to attract investments.
- Innovation Hubs
The modes of innovation allow these companies to resolve very local challenges, for example, mobile payments in Africa, while the technology could be scalable to other regions for global opportunity.
Key Trends Driving Growth in Emerging Markets
- Rise of the Digital Economy
Boom in E-commerce: Retailing-from the likes of Jumia in Africa, Mercado Libre in Latin America and Flipkart in India-is being transformed.
Fintech Revolution: Financial inclusion is being achieved through mobile money such as M-Pesa in Kenya and digital wallet services in India powered by Paytm.
Edtech Boom: Companies like Byju’s in India and uLesson in Nigeria are getting millions of students into very accessible learning.
- Urbanization and Infrastructure Development
Emerging cities shall be unprecedentedly fast in terms of growth, creating the need for housing, transportation, and utilities.
Proptech, smart cities, and logistics ettils: Start-ups are capitalizing on this trend.
Clean, renewable energy investments are now needed in emerging markets for fighting climate change and dependence on fossil fuels.
Increasing adoption of new ideas into solar electric cars and startups in waste management.
Healthcare innovation
Affordable healthcare will be much desired because of rising income and improved healthcare systems.
These telemedicine, health tech, and biotech solutions are gaining momentum to satisfy this demand.
Top emerging markets for 2024
India
Why This Matters: India is currently the fastest major economy in the world and the home of a booming technology-driven industry fueled with a large population of youths who are tech-savvy.
Focus areas will be fintech, edtech, agritech, and renewable energy.
Zomato, Ola, Razorpay, and other Indian start-ups.
India houses more than 100 unicorns (startups worth over $1 billion), becoming the third-largest hub for unicorns after the US and China.
Fun Fact: Bangalore has more tech startups than most of the European countries put together, which is crazy!
Here is the world bank report of top startup in india
Nigeria
Why this matters: Among other things, Nigeria is the largest economy in Africa, most innovative country, and hotbed in the fields of fintech and agritech.
This mainly includes mobile payments, e-commerce, and logistics.
Sample names of self-made stars include Flutterwave, Andela, and Kobo360.
Africa has the youngest global population with a median age of just 19.7 years: A demographic driving an avalanche of innovation and consumer growth.
Fun Fact: In 2030, Africa’s workforce will be larger than China’s, creating enormous opportunities for startups.
Vietnam
Why Remark It: Vietnam prepares itself not only to become a manufacturing powerhouse but also a hotbed for tech startups.
Sectors: Manufacturing, e-commerce, gaming.
Some startup success stories include VNG Corporation, Tiki, and MoMo.
Vietnam is the second-largest smartphone exporter in the world after China, with heavy reliance from corporations like Samsung and Apple for manufacturing.
Fun Fact: With an 8% GDP growth rate in 2022, Vietnam was among the fastest-growing economies in the world.
Brazil
Why it matters: Brazil has the largest economy in Latin America and has an active startup ecosystem.
Fintech, proptech, healthtech, are crucial.
Nubank, QuintoAndar, and Gympass are some success stories.
Challenges of Doing Business in Emerging Markets
There are many opportunities, but start-ups are often faced with many challenges.
Brazil is the largest market of e-commerce in Latin America with over 70% of its inhabitants buying online.
Fun Fact: During Black Friday, per capita expenses by Brazilians surpassed those by Americans!
- Regulatory Hurdles
They slow down business processes that cover complicated regulations and bureaucratic red tape.
Start-ups need to take a local look at laws and tax policies.
- Infrastructure Gaps
Opportunities speak of infrastructure issues, especially in electricity and well-established transportation networks.
Yet start-ups have to often establish some of their infrastructure or even tie up with local providers.
- Cultural Differences
An understanding of local norms, language, and behavior of consumers is essential.
Hire local talents and conduct market research for start-ups.
- Currency Volatility
Profits and pricing effects are not exempt from fluctuating exchange rates.
Therefore, the starting-up should hedge risk in currencies and prepare for an unstable economy.
How Start-ups Succeed in the Emerging Markets
- Technology-based
Reach out to customers through digital ways, improve internal operations, and engage in effective scaling.
Emerging markets are mostly mobile; hence it must be mobile-first.
- Building Stronger Local Partnerships
Successfully navigate the regulatory and cultural maze with local businesses, governments, and NGOs.
Start-ups benefit from credibility and access into networks through partnerships.
- Affordability should be a priority
Affordable goods and services are what the price-shy consumers in growing economies expect.
Startups must tailor their business into low-cost-per-unit, mass volume sales.
- Investment in Talent
Hungry local recruits would educate the trusted local market.
Train and reskill to ensure that expertise can be retained well.
- Local Difference
Products and services should be localized to serve the specific needs of every market.
Mobile money has been used for servicing unbanked clients by some fintech startups in Africa.
The Future of Emerging Markets
For the years to come, emerging markets are destined to have bigger footprints on the stage of the global economy. Here are some of the speculations:
Increased FDI: Foreign investors will continue to pour money into emerging markets, driven by high returns and untapped potential.
Tech-Driven Growth: Advances in AI, blockchain, and IoT will fuel innovation and productivity.
Sustainability Focus: Green energy and sustainable practices will become a priority for governments and businesses.
Global Influence: Emerging markets will shape global trends in technology, culture, and business.
Conclusion: Why Startups Should Bet on Emerging Markets:
Emerging markets are the places to bet on as far as the future of business is concerned. The biggest consumer bases: quick digital adoption: innovative startups: these regions are heaven on earth for growth and potential profit. The challenges ahead are there, but they mean nothing compared to the immense opportunity that exists to startups willing to adjust and innovate.
Foremost, these should be understood and take cognizance of the intricacies of every market as well as heavily depend on technology as startups to unlock the full potential of the emerging new markets and possibly create the last exciting global changes. Now is the time to act-don’t be left behind in the next big opportunity!
Digital Economy in Indonesia
The Indonesian digital economy is predicted to reach $130 billion by 2025, with strong support from e-commerce and fintech.
Fun Fact: Gojek, Indonesia’s super app, began as a ride-hailing service before expanding into food delivery and financial services.
The Cultural Industry in Nigeria
Nigeria’s film industry, Nollywood, produces over 2,500 films per year, making it one of the largest by volume in the world.
Fun Fact: The company generates more than $7 billion for Nigeria and employs more than a million people.
Chinese Technology Giants
Tech giants in China, including Alibaba and Tencent, are not only dominating the home market but also taking their chances to go global.
Fun Fact: Alibaba’s Singles’ Day (November 11) is the world’s biggest shopping event, grossing over $100 billion in sales in 2023.
Mexico Startups
Mexico City is now the home for Latin American startups, with over 600 tech startups calling the city home.
Fun Fact: In 2020, Kavak became Latin America’s first unicorn upon its valuation.
Garment of Bangladesh
Bangladesh is the world’s second-largest exporter of ready-made garments, coming in after China.
Fun Fact: The garment industry accommodates more than 4 million people, with the majority being women.
what is emerging market debt?
Emerging Market Debt refers to all those debts represented as bond or loan instruments issued by any government’s corporation or even institutions for an upcoming emerging market. Most of the debts are lumped as public or private, especially for infrastructures and emerging economies or corporate expansion. EMD usually pays higher yields than the developed markets; however, many risks, such as volatility associated with currency, political instability, and economic uncertainty, characterize it. Even then, such EMD are used by investors for portfolio diversification and also some potential high returns from them.
