Ericsson, which provides technology and services to telecom operators around the globe, estimates we’ve hit another milestone in the Internet becoming increasingly mobile. The company claims, based on estimates based on industry information, that the 5 billionth mobile subscription was accounted for on Thursday, July 8.

The 5 billion mark was hit largely thanks to a surge in mobile subscriptions in emerging markets like China and India, the company says. In the year 2000, about 720 million people had mobile subscriptions, less than the amount of users China alone has today, still according to Ericsson.

Mobile broadband subscriptions are growing at similar pace and are expected to amount to more than 3.4 billion by 2015 (from 360 million in 2009).

Furthermore, Ericsson estimates, 2 million mobile subscriptions are added on a daily basis, and the number of 3G subscriptions has now exceeded 500 million worldwide. The company also posits we’ll be at no less than 50 billion connected devices by the year 2020.

(Photo via Ericsson)

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I’ve written several posts about the innovation, entrepreneurship and promising Web audience I’ve found over several weeks of reporting in Indonesia. As such, friends in the venture capital business are peppering my inbox asking round-about-questions that all go back to the same central query: Should we be investing in Indonesia?

The seatback pocket on my flight from Jakarta to Surabaya seemed to think so. A pamphlet blared “INVEST IN REMARKABLE INDONESIA,” and included some testimonials from companies like Coca-Cola and Unilever, and some charts showing Indonesia’s economic stability. This was the second time I’d heard the words “Remarkable Indonesia” in as many days. Dino Patti Djalal, the spokesperson for Indonesia’s President Susilo Bambang Yudhoyono and soon to be Ambassador to the US said they’d trademarked it as the country’s new marketing tagline. It called to mind the “Incredible India” push of a few years ago which even included purchasing ads during the Oscars.

Compared to “Incredible India,” “Remarkable Indonesia” seems to express muted praise for the country—especially considering the infrastructure in Jakarta was far better than the infrastructure I found in most major Indian cities, the food cooked with some 30,000 locally grown spices was amazing, the cultural heritage and diversity was just as rich, and Bali has some of the most beautiful beaches anywhere in the world. Only remarkable?

The biggest reason for Valley-types to think about investing in Remarkable Indonesia wasn’t in that pamphlet. It’s the fact that for all the promise and nascent bubbling growth in technology and mobile, almost no one is there. Indonesia has 240 million people and a Web audience around 30 million to 40 million people, not including the surging mobile Web. It’s curious how little venture capital is going after that, given that in the first quarter nearly $1 billion in US startup funding flowed to India, China and Israel, with each country reporting surges in capital from between 20% to more than 100% over the last year.

This post is one that many people in South Africa, India and China have begged me not to write, because they are having a field day expanding mobile and Web services in Indonesia. In this age of global venture capital and emerging markets hype, how many markets this big is the US mostly ignoring? In this age of globalization and outsourcing, how many markets this big have so few multinational jobs driving up employment and developer costs?

But all of this opportunity doesn’t necessarily mean Indonesia is a market where US venture capitalists can do well. Recently Indonesian tech blogger Rama Mamuaya was cold-called by a Valley venture firm and asked if he had a million dollars to invest in one Indonesian Web startup, which one he should pick. He thought about it and answered: None. It’s not because they aren’t promising, but because the costs of building a company are still so low in Indonesia—as opposed to markets like China and India where a flood of multinational jobs have pushed up salaries and rents—that any company would have a hard time putting that much money to good use.

There are concerns about politics, stability, the banking system and, of course, how to get liquidity as there are with most emerging markets. There’s especially a visceral fear in Indonesia—a country that was brought to its knees by the late 1990s Asian financial crisis, and one that most Americans know very little about. These are not waters to be navigated from thousands of miles away.

I think what Indonesia could use is something in between the current state of no high-growth capital and the money that goes to countries like India and China: A Y-Combinator-style incubator that could help Indonesian entrepreneurs make sense of the pitfalls of modern startup life, including things like recruiting and managing talent, how to deal with Silicon Valley giants, how to make money online and when and when not to raise outside funding. The funding amounts and exits would be small, but a Yossi-Vardi-style angel could clean up where many classic VCs might crush startups under the weight of millions. Someone to coax these entrepreneurs as they develop organically, but not bind them to a Western-way of building companies. Someone local–or at least transplanted fully– who understands when all those Valley rules need to be modified or broken.

In the Valley, the ecosystem for starting companies grew organically over several decades, a luxury that China and India didn’t have. Those countries have entrepreneurs, they have tons of venture capital and big market opportunities—but when they got flooded with American cash in the last decade, the ecosystem’s natural development accelerated, and the step of developing local angels and mentors was largely skipped. That’s the single biggest complaint I hear from entrepreneurs in these countries. Indonesia has a rare opportunity to develop a huge startup ecosystem in the right order.

The question is who will fill this void, because someone will. Will it be an American who moves and becomes embedded in the market? Or will it be a branch of a firm that’s sprung up in recent years in China or India, places that understand emerging market economics and risk better than we do? It’s not going to be easy, but Indonesia is too big and too untapped—too “remarkable”–to stay undiscovered forever.

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After exploring the mobile and Internet landscapes in Shanghai and Beijing, the GeeksOnAPlane (GOAP) group (30+ techies mostly from the Silicon Valley) continued their Asian field trip to Korea today. In Beijing, the GOAP attended two of China’s largest tech conferences: CHINICT, “the largest conference on China tech innovation” (which was livestreamed on TechCrunch), and the “Global Mobile Internet Conference” (GMIC), both of which are held in the city every year.

The GOAP got in touch with and gained unfiltered insight from dozens and dozens of local entrepreneurs, VCs and industry observers during the conferences and the events that took place around them. What follows are just a few learnings and impressions the GOAP group picked up during their China web crash course in Beijing (the size of the tech landscape is summarized in my previous post).

Innovation & Adoption of Business Models: The Chinese way

Before CHINICT and GMIC took place, Benjamin Joffe from Asia-based digital strategy consultancy +8* | Plus Eight Star delivered a primer during the Startup2Startup Beijing event on how innovation in China works, and how local companies adjust proven business models from abroad to meet the peculiarities of the Chinese market.

There’s a ton of valuable information on these and other topics in Joffe’s presentation (embedded below):

A lot has been written about how quickly China’s web entrepreneurs rip off successful concepts from the US and elsewhere, with one local VC half-jokingly at some point telling the GOAP group: “Every site that gets on TechCrunch is sure to have at least one Chinese clone a week later!”.

But there are some startups that don’t just churn out 1:1 copies. Instead, a few clever entrepreneurs find twists to make concepts working abroad more China-friendly or mash up existing, successful ones to create original offerings. One case in point is a startup called Lashou whose eponymous service marries Groupon with Foursquare-like mobile mechanics. I had the chance to talk to Lashou CEO Bo Wu during the Startup2Startup Beijing event, and according to Wu, user numbers are currently exploding.

This presentation provides more insight on how Lashou works:

China’s mobile web: The three finalists of the GMIC startup competition

CHINICT and GMIC were held at the same time in Beijing (Thursday and Friday), forcing the GOAP to choose between the two conferences and me to decide about which event I should report back (I attended both). I have a personal penchant for covering yet unknown startups (and CHINICT was livestreamed on TechCrunch), so I decided to cover the launch pad that took place at the GMIC.

Find short profiles of the three finalists below. The selection highlights three mega trends that can currently be observed in China’s mobile scene: the fragmentation in hardware and software, the rise of mobile gaming, and the low number of people who are ready to make payments over the cell phone.

Multi-platform solution by Crossmo
Crossmo is a “cross-mobile” solution that has already been licensed by a number of top tech companies, including Motorola, Orange, Baidu and a number of Chinese operators. Orange, for example, runs its Chinese App Store based on Crossmo, basically as a white-labeled, generic “iTunes” for non-Apple platforms.

For end users, Crossmo intends to solve the fragmentation problem in the mobile space by offering an online data management and synchronization tool for cell phones that’s completely hardware agnostic. Just connect your phone to your PC, and the service backs up, synchronizes and pushes all mobile data (music files, ringtones, wallpapers, and other content) into your own personal online “Crossmo Space”.

Cross platform engine by Softgames
Alexander Krug, CEO of Berlin-based Softgames, said that when it comes to offering mobile content across different platforms, his company has an edge over established gaming giants such as Zynga or Playfish. The Softgames game engine apparently makes it possible to “rapidly” design a social mobile game and then distribute it across a total of six platforms (i.e. iPhone, Android, or Java). SoftGames also pitched CrimeCity at the GMIC, a browser-based mobile RPG that’s available on “all devices and platforms”. Like many foreign mobile content providers, Softgames is currently looking for distribution partners in China and other Asian markets.

2C2P Mobile by 2C2P
Market research firm Gartner expects the number of mobile payment users worldwide to ballon to 190 million in 2012, up from the 70 million counted last year. And since 85% of those 190 million people will be based in Asia/Pacific, Singapore-based e-commerce payment solutions provider 2C2P is looking at a huge future market for itself. The core offering in the mobile area is 2C2P Mobile, a solution for cell phones that uses QR codes, Bluetooth, BUMP and other technologies to transfer money between different credit/debit cards without friction. The company was selected as the winner of the GMIC startup competition.

Find a larger cross section of local mobile startups in my previous article on the 3G Industry Summit in China from last year.

Many thanks to the CHINICT and GMIC organizers for the special treatment the GOAP group received.

Challenges for China’s web and mobile companies

China’s high-speed Internet industry is already huge, still offers plenty of room for even more growth, produces one startup after the other, is eager to globalize quickly, and has – unlike its counterparts in many other Asian countries – an iron grip on the domestic market.

But Silicon Valley and the planet’s other technology hotbeds still have a bit of time to breathe before the dragon takes over, as even in China’s web market all’s not well. The GOAP heard local mobile and web entrepreneurs and VCs deploring the

• lack of valid industry data across a number of tech sectors
• strict legal and political frameworks (one industry veteran told me he checks if his popular micro-blogging service is still online every morning, as Twitter is blocked by the government)
• low online spend (just one telling example: the ARPU in China’s social gaming sector is said to be 5-20 times lower than in the US and other regions)
• insufficient online payment systems (still low circulation of credit cards hampers growth in e-commerce and other areas)
• overheated VC market
• trouble for young startups to find seed capital and angel investors
• lack of competent staff (especially engineers)
• propensity of highly skilled team members to quickly quit even successful startups to join others or set up their own
• lack of innovative power in the industry (Korea invented the virtual goods-based business model, Japan invented the mobile web, and China?)
• rampant copycat culture (which is not really a China-only phenomenon)
• fierce domestic competitive environment in the mobile and web fields
• and other factors (for example, copyright problems or the fact that no foreign entrepreneur- with one exception – has realized a sizable exit in China so far).

After gaining a 10,000 foot overview of China’s tech scene, it’s now time to explore what’s currently hot in Korea, the next stop of the GOAP Asia tour. The GOAP will be attending a Korean startup pitch event and the Startup Weekend Seoul (the country’s first ever), before moving on to echelon 2010 in Singapore.

For information in real-time, follow the adventures of the GOAP via the #goap hash tag (the official Twitter account is here). GOAP pictures are being uploaded regularly over on Flickr.

Photo credit: Craig Fisk

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Adam Hocherman, 34, is an entrepreneur and founder of the consumer electronics company American Innovative in Boston, MA. Adam founded the company in 2003 with the help of the US Government’s SBA loan program and is currently the 100% owner. He holds a BS in Mechanical Engineering and an MBA, both from Cornell University. Adam’s writings can be found on his blog at DesignTheatre.net and through his Twitter feed. He welcomes your comments. Read more about sourcing in China here.

Part III of the Going It Alone series will answer the question: What is a factory and how can I tell one from another?  I will answer the question from a consumer electronics perspective and I will assume an audience that has little or no prior knowledge of manufacturing.  The purpose of this article will be to try to introduce the burgeoning entrepreneur to the basic components of electronics manufacturing in China.

I will do this in the context of manufacturing the simple electronic product shown below – a digital kitchen timer that we call the Klip!
Read more…

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