BY ANIRVAN GHOSH
Southeast Asia is a slightly different market for venture capital funding, because there isn’t much deal activity compared with China and India. That has started to change, with more investors heading to high-growth countries like Vietnam, lured by its young demographic and untapped markets. The sentiment has gradually become more optimistic. From being laggards in Asia, as China and India mopped up most of the PE-VC funding, Southeast Asian nations are reaching a tipping point. According to a recent report by Google and Temasek, the region’s 260 million internet users — with an additional 3.8 million coming online every month — is spurring its internet economy.
That economy will expand sixfold to $200 billion in the next decade, the report said. E-commerce might rise as much as sixteeen fold to $88 billion by 2025, driven by internet users who will number close to 500 million in the next four years. Indonesia, which is trying to put its growth on a higher footing, is projected to bring more people online than any other country in the world.
With increasing Venture Capital Activity in ASEAN, is the region on course to become an innovation hot spot? At the DEALSTREETASIA PE-VC Summit on September 30, a power-packed panel, will explore this topic. The Summit will see an unprecedented global meeting place for top investors to discover companies in the continent’s fastest growing economies.
The Venture Capital in ASEAN Panel at the Summit features:
Dr. Jeffrey Chi, Vice Chairman and Managing Director, Vickers Venture Partners: Jeffrey joined Vickers in 2005, and is a member of the Investment Committee. He is based in Shanghai and Singapore. Prior to joining Vickers, Jeffrey was a corporate finance specialist and an executive director at Pegasus Capital from and senior consultant with the Monitor Group. His operational background includes working on the management team of an engineering and construction group where he oversaw operations in Singapore, Malaysia, Taiwan and Indonesia.
Thomas Tsao, Founding Partner, Managing Partner, Gobi Partners: Thomas is the Managing Partner and co-founder of Gobi Partners, a venture capital firm headquartered in Shanghai and with offices in China, Hong Kong, Singapore and Kuala Lumpur. Established in 2002, Gobi is a leading investor in digital media, information technology and telecom companies in China and the ASEAN region. To date, Gobi has funded more than 100 companies and is currently investing its sixth fund. Prior to Gobi, Thomas was a founder of the Beijing Technology Development Fund, where he facilitated investments into CommerceOne, MyRice and SiRF. In 2001, Thomas led the merger of Hong Kong-based Asia2B and Singapore-based SESAMi.
Chin Chao, Chief Executive Officer, Singapore and South East Asia, Innoven Capital: Chin brings with him more than 15 years of experience in the venture capital and venture debt industries, including entrepreneurship, company building and business operations and strategy. Chin was most recently the co-managing director at Sirius SME, a venture capital firm he co-founded in the middle of 2008. Prior to Sirius SME, Chin was a Managing Director of Venture TDF Singapore and Venture TDF China. He is the author of three publications on technology and business law.
Eugene Wong, Founder and Managing Director, Sirius Venture Capital: Eugene is currently the Chairman of Crimson Logic Pte Ltd, a global e-Govt Solutions firm.Sirius Venture Capital Pte Ltd is a Venture Capital and Investment Holding firm, focused on small and medium sized companies in Singapore. The Sirius Group has invested in a number of Singapore-based as well as overseas enterprises.
Paul Santos, Managing Partner, Wavemaker Partners: Paul’s firm is one of the most active venture capital firms currently in Southeast Asia. He has co-founded six companies across different industries, exiting three times. Paul has invested in more than 50 startups including Luxola (acquired by LVMH), Gushcloud (acquired by YelloMobile) and Pie (acquired by Google). Paul leads the Asia office of Wavemaker Partners, an early stage VC firm, and co-launched the firm’s Labs Fund.
Winston Damarillo, Chief Strategy Officer, PLDT, and Co-Managing Director, PLDT Capital: Winston joined Philippine telecom giant PLDT in May 2015, and was later appointed co-managing director of the company’s investment arm, PLDT Capital, which formally launched in September last year, with $50 million fund. Prior to that, Winston spent more than 20 years n the Silicon Valley as a tech entrepreneur and VC professional.
This flagship conference in Singapore – brought to you in collaboration with Mint Asia– will bring together the biggest LPs, GPs and chief executives of private equity and venture capital-backed companies for exciting networking opportunities, Q&As and keynotes.
These developments come at a time when ASEAN countries — Malaysia, Singapore, the Philippines, Thailand and Vietnam — together have attracted less than one-fifth of the VC funding that Indian startups received in 2014, showing that despite its potential, investors have been wary of putting their money in the region.
Governments in the region have worked to remove obstacles in the path of investments. According to World Bank rankings, SEA countries ranked better than Indian and China on the ‘ease of doing business’ scale. Connectivity speeds in the region are double that of average internet speeds in India, and a higher percentage of people have access to broadband, with 190 million people spending more than three hours a day using mobile data.
According to research by deal intelligence company Mattermark, the number of VC deals and total capital deployed, two main measures to check for funding activity, were both higher than Q1 ’15. That means the pullback in funding seen in Q4 ’15 has recovered. Only Q3 ’15 had higher deals and funding.
For instance, Singapore-based Golden Gate Ventures, which focusses on companies building out consumer internet products and services for Southeast Asia, has participated in sixteen funding rounds between April 2015 until June this year, according to researcher Tracxn.
According to an earlier DEALSTREETASIA report, such rounds were worth about $38 million, mostly in seed and Series A rounds, in startups like Indonesian med-tech startup Alodokter, payments gateway Xfers, digital commerce facilitator Ayannah Information Solutions, fintech startup Lenddo, utilities mobile app ServisHero and Perx, an app to measure customer engagement.
California, US-based Wavemaker Partners comes a close second, with 15 deals in the same time period. It has invested in companies such as Singapore-based communication app developer Wavecell, business analytics tool maker Einsights, 3D pen maker CreoPop, Arcstone and Kaligo.
Shanghai-based Gobi Partners‘ participation in $15 million round in Indonesia e-commerce startup Orami and $8 million in restaurant listing site Qraved were among the highest among Southeast Asian investors.
Gobi’s SuperSeed Fund, managed out of its Kuala Lumpur office, will focus on Asean-based internet and mobile technology startups in major verticals, including but not limited to, advertising, big data, cloud computing, connected devices, content and digital media, e-commerce, fintech, internet of things (IoT), Muslim innovation and online tourism. Gobi expects to invest in 25 to 35 startups over the next three years, with an average deal size estimated around MYR2 million ($500,000).
“Generally China deal sizes are getting bigger, even for bite size Series A deals. In SEA, it is usually $1 million to $3 million but in China, it can be $5 million and up. The market there is more mature, you can scale quickly because you don’t have logistics issues, online payments are all resolved. SEA is further behind in terms of infrastructure, and the countries have different levels of maturity,” said Gobi’s Singapore-based partner Ku Kay-Mok, in an earlier chat with DEALSTREETASIA.
The best way to look at SEA, he said, is to look at the various markets in terms of groups. Ku said that Malaysia and Indonesia are culturally pretty similar. However, Indonesia has a pretty large domestic market and most of the startups are domestic-play because their market is big enough. In that sense, Singapore and Malaysia are pretty similar with small domestic markets.
Malaysian startups have more advantage to dominate regionally, taking a leaf from the playbooks of Grab and iProperty, while Singapore’s edge is growing global tech players. “Many Malaysians can speak English, Chinese dialects and Bahasa Malaysia, which makes them adaptable within the region. We’re seeing a lot of good quality deals from Malaysia. Other markets coming out online is Thailand; as the second largest economy in SEA, it is much easier to scale than Indonesia,” Ku said, noting that Thailand is beginning to bubble with deals.
With governments in Singapore, Indonesia and Malaysia putting in place policies and incentives to grow respective startup ecosystems, the environment for funding might actually improve as the year progresses and the measures take effect.
“This part of the world has always been a follower of Silicon Valley. So if I give you an analogy – if you say R&D, we are kind of a ‘D’ rather than the ‘R’. We are a small ‘r’ and a big ‘D’. Silicon Valley is big on R&D. So a lot of the ideas here have been followed and copied from business models in the US. But recently in China there have been some major innovations – WeChat is more complete than WhatsApp or even Facebook Messenger,” said Finian Tan, chairman of Singapore-headquartered Vickers Venture Partners, in an interview with this website. “WeChat is a combination of what everyone does on Twitter, Facebook and WhatsApp, and it’s unbelievable. And Go-Jek is another idea from Uber, but modified for this region.”
In Singapore’s case, the impetus provided by the government has created an opportunity. “The grants and the semi equity grants by the government are all important. So it may be very easy to start here. The ecosystem is not quite complete. There is a big gap at the seed, pre-seed and Series A and there’s where we’re in, and that’s why the deal flow is so rich. So it’s great that there is a lot of money earlier than us – it starts the deal flow so we have a lot of fish to see. It’s a very nice sweet spot to be in,” Tan said.