Silicon Valley has long been heralded as the world’s centre for technological innovation. It can boast of being the birthplace of many of the world’s most recognisable companies. But we are standing on the precipice of change.
To be clear, this is not because of president Donald Trump’s tariffs. It is a long-term trend and the result of increasing opportunities in emerging markets (EMs).
The case for investing in EMs is well established: rapid growth, favourable demographics, improving infrastructure and a deepening pool of truly innovative companies.
The dominance of Western companies, mostly American tech giants, has created a bit of a blind spot for investors but there is no shortage of internet-enabled companies coming through in emerging markets.
Some exciting businesses are being built in Asia, Latin America, Africa and the Middle East. There is, not unfairly, a concern about risk and a potential lack of transparency, but this is where enhanced due diligence and close contact with companies help us to spot overlooked opportunities.
We primarily look for companies that can capture secular growth tailwinds and benefit from domestic structural growth.
Home market advantage
As domestic markets go, few offer the same demographic advantages as India – it has the largest population in the world, a young workforce and a burgeoning middle class. Household incomes are set to rise over the coming years, resulting in higher discretionary spending.
One of the companies we expect to continue benefiting from this tailwind is Ixigo. Founded in 2007, it markets itself as ‘empowering Indian travellers to plan, book and manage their trips across rail, air, buses and hotels’, while deploying artificial intelligence (AI) to ‘help travellers make smarter decisions’.
Having started life as a price comparison site for plane tickets, Ixigo has grown its reach across multiple modes of transportation and accommodation, diversifying into complementary sectors, creating a more complete offering.
By harnessing AI, the company is enhancing its efficiency while also providing a more bespoke and seamless service for customers.
Ixigo is not lacking in ambition, with 480 million people active on the platform last year. Its target is 1 billion users.
The opportunity set within India is vast, and efforts by the government to improve the national infrastructure mean more, and better, routes opening up across the country.
The company’s multi-year structural opportunity and strong leadership team, alongside its economic moat, were the primary reasons why we first invested in Ixigo in October 2024.
International breadth plus domestic depth
Whereas Ixigo’s mission statement is to ‘empower Indian travellers’, other emerging market innovators have taken a more international approach.
One such example is Singapore-headquartered technology company, Sea. Founded in 2007, it operates across southeast Asia (and beyond) via three primary business lines: digital entertainment service Garena, digital financial services provider SeaMoney, and e-commerce site Shopee.
The gaming business has historically been the engine driving its growth. As well as developing its own games, Sea has an agreement to distribute mobile games created by Chinese tech giant Tencent, which is the single largest shareholder in Sea. Since it was established in 2009, Garena has built a footprint across more than 130 markets.
In 2014, the company launched SeaMoney, a digital platform that offers a variety of financial services products, including banking, credit and insurance. A year later, Shopee was launched, which provides consumers with ‘an easy, secure, fast and enjoyable online shopping experience’.
Sea is a company with depth as well as breadth. It is harnessing multiple tailwinds across a huge number of markets.
With Garena, the distribution agreement with Tencent, as well as its own development pipeline, has been bolstered by the worldwide interest and growth in esports. Add to this SeaMoney, which is offering a vital service to markets where an estimated 70% of people are underbanked or entirely unbanked.
And then there is Shopee, which has gained significant traction across southeast Asia, most notably in Indonesia, the fourth most populated country in the world, and has become one of the biggest e-commerce companies in Brazil.
Unleashing innovation
The success of both Ixigo and Sea, in common with many internet-enabled companies, is a direct result of the growth of mobile technology. Whereas a lack of physical infrastructure was once a hindrance, the boom in wireless technology has helped innovators overcome these hurdles.
From a single device, hundreds of millions of people can book travel, bank, shop and access endless forms of entertainment. Importantly, they can do this via local companies that have designed products and services tailored to their wants and needs.
We believe that diversification and growth are the key attributes needed to successfully navigate the investment landscape. The two domestically focused companies above really encapsulate long-term structural growth trends such as digitalisation and demographics.
Recent shifts across emerging markets have unlocked even greater investment opportunities, allowing investors to diversify their portfolios more effectively in an increasingly volatile world.
Mike Sell is head of global emerging market equities at Alquity. The views expressed above should not be taken as investment advice.