The good, the bad, and the hallucinations: What SEA startups

think of AI

The honeymoon may be over, but the marriage between startups and generative
AI (genAI) isn’t headed for divorce court yet. The road ahead, however, may get
rocky.

Across the board, startups in Southeast Asia quickly fell in love with genAI
products in 2022. Founders and engineers we spoke to said they use it to manage
schedules and emails, generate content, and analyze data.

Despite the outpouring of love for AI possibilities, few founders seem interested
in taking the next step: integrating genAI into their core business.

“I think individuals are embracing AI quite well because if you see something
that can quickly make you more productive or outsource your work a little bit –
especially if you’re pretty overloaded – hey, why not?” says Daan Van Rossum,
the CEO of FlexOS, an AI-focused website based in Vietnam that provides news
and offers advice to businesses. “But at a company enterprise level, it’s still
very early days for real wide adoption.”

The issue is also evident in the US. The Economist reported last month that
despite the hype around genAI across the country, business spending on
“information-processing equipment and software” was down 0.4% in 2023.
Capital expenditure (capex) in general is also falling at a rate of 4% each year.
In short, companies aren’t increasing their budgets to acquire the new tech.
That’s telling, considering the boom years that surrounded the rise in personal
computers between 1992 and 1999, when companies on average increased
capex by an average of 3%.

A poll conducted by Tech in Asia – which saw the participation of 25 startup

founders in Southeast Asia – found that many companies here also hesitate on
investing in AI. While some are just being cautious, others are still trying it out.

Most are unsure about increasing their spending on AI without a clearer path
to seeing a return on their investment.

Over 52% of startups in the poll spent below US$1,000 on genAI tools last year.
About 20% of these founders say they are happy using the free versions of
popular apps like ChatGPT.
Further, most of the founders and engineers Tech in Asia spoke to had not
successfully integrated AI into their product offerings to customers yet,
although not for a lack of trying.

AI is good for a “ton of things”

Those that have added AI to their workflow say they use it to cut costs, hone
their business strategies, and use it for general administrative purposes like
creating marketing or sales content, summarizing reports, and managing
emails.

Alex Svanevik, the CEO of crypto analytics platform Nansen.ai, says his
company uses the tech for “a ton of things.”
“Collectively, one of our goals this quarter is to spend 5,000 hours working with
AI – this works out to around 10% of our time,” he tells Tech in Asia. He says
the company’s goal is to use AI in two ways: to enhance its products and to
drive productivity in the organization.

Nansen currently uses it for strategy development, executive coaching, legal

support, coding, as well as summarizing documents and meetings.

He called ChatGPT – if given enough business context and the correct prompts
– “a very valuable sparring partner and advisor.”

But some companies, even those who say they now use AI in their current
business, don’t plan on investing in it.

Michael D’Ambrosio, the co-founder and director of Orchid Sports and

Entertainment, a sports agency that focuses on investment and sponsorship
deals, tells Tech in Asia that it uses AI for briefs on sponsors that are looking to
partner with the firm.

“You can do a Google search for that, but it’s not great,” he says. “AI helps us
filter our opportunities and has proven useful and successful so far. But we
don’t spend money on that.”

D’Ambrosio says the business’ current strategy of using AI, which he calls a
“basic, simple use case,” doesn’t justify an increase in spending.
He says the company uses the free version of ChatGPT, as well as Bing and
Bard. Though he admits that the company has spent money on Midjourney.

Yann Schuermans, co-founder and CEO of Jakarta-based B2B ecommerce

logistics firm Baskit, tells Tech in Asia that his company has been working on
using AI and machine learning to “incrementally” digitalize warehouses to
create a more interconnected supply chain.

Schuermans says the company captures supply chain data from warehouses
and uses it to optimize routes.

“On the logistics side, there’s a ton that we can do,” he adds.
Struggling to change mindsets

But not all of Schuermans’ clients are interested.

He encourages clients to work with AI, telling them that the data it provides
could help them grow and drive revenue. But ongoing issues at these
companies, such as the lack of payment systems, preference for cash, or old
software that can’t be accessed remotely, are often an impediment.

He adds that a lot of Indonesia’s legacy infrastructure is run by “folks that have
been doing business in that way for a very long period of time, and there’s no
one that’s going to change that.”

But Schuermans isn’t giving up on the new tech. He says that once the
infrastructure is established, he will be able to cut costs by eliminating portions
of his data admin team.

Efficiency vs. hallucinations

Ankur Jalan, the head of engineering at GajiGesa, an Indonesian earned-wage

access startup, says he’s had some hits and misses using genAI.

The company instituted a chatbot, which has automated about 80% of

customer interactions. The company also uses it for data analytics, which he
says has made operations much more efficient.
It has also helped his team code faster. They were working on a fund
disbursement tool and built it within a day by just feeding details to the genAI
system, he says.

“We had to tweak it a bit, make sure that it is working as per our standards, but
more than 80% of the job was done,” he adds. “If engineers worked on it, it
would be a four-day project.”

But when the firm attempted to build an AI model that could recommend to
clients how to manage their spending and build savings, it began to have
problems with hallucinations – a term used when AI makes up answers.

Despite this, Ankur says he is still enthusiastic about genAI and is looking to
develop an AI tool to help people with their finances.

He says it wasn’t an easy journey to convince the company’s board that

investing in AI was the right decision, especially after the infrastructure costs
shot up. But the business has now allocated around 5% of its budget for AI
development.

This sentiment could be seen in our poll numbers too. Despite the hesitancy
shown by some, about 65% of the startups from Southeast Asia say they would
like to increase their spend on genAI tools this year.

Job losses: The part you knew was coming

But while all the founders that Tech in Asia spoke to saw advantages to AI,
many were concerned about the long-term impact of the new technology and
about its effect on employment. Job losses are coming, they warned.

Van Rossum of Vietnam AI firm FlexOS says there will be a clash between
employees and employers, what he calls “The Big Renegotiation.”
 Image credit: Timmy Loen

“Like, where does the productivity gain go? Does it go to the employee? Does it
go to the employer?”

Indeed, about 60% of the founders in the poll say they would or are thinking
about reducing their employment costs due to the use of generative AI.

While the issue has already made headlines thanks to strikes in Hollywood,
with actors and writers facing off against movie and TV producers, Van Rossum
warns that it could hit in any industry.

Professionals, such as lawyers or engineers, will become better at their jobs

with AI, but it is going to cut out “tons and tons of manual work” that would
have employed supporting staff.

“But what’s the alternative, right?” he says, “Are you going to be the only
company not embracing AI? You’re going to have people that are 40% less
effective than at your competitor.”