Investors See Bright Future for Southeast Asia Startups

0

Venture capitalists and investors attending the Converge technology conference in Hong Kong last week expressed optimism about the future of startups in Southeast Asia, despite significant challenges.

“Between Southeast Asia and India there are about two billion people,” said Facebook Inc.co-founder Eduardo Saverin, speaking on a panel about investment opportunities in the region. “It’s arguably the fastest-growing internet market in the world.”

In the first quarter of this year, funding to companies in Singaporethe region’s startup hub—rose sharply to $199 million from $53.1 million a year earlier, according to Hong Kong-based AVCJ Research.

In Indonesia, the region’s largest country by population, investments more than doubled to $18.9 million in the first quarter from $8 million a year earlier. Funding was also up in Malaysia, Vietnam and Thailand, though it fell in the Philippines.

To be sure, investments have been rising from a lower base compared with China and India, where funders have long been looking to capitalize on booming technology scenes. Investments in Chinese startups sank 28% to $1.8 billion in the first quarter compared with a year earlier and fell 17% to $736 million in India, AVCJ said. Funding in Southeast Asia is also far behind the U.S.

ZhenFund’s Anna Fang and Garena’s Nick Nash said at the Converge conference in Hong Kong that education reforms and ability to fail are key to the Asian tech scene. Photo: Getty

Still, “the deal pace has accelerated a great deal,” said Vinnie Lauria, a founder of Singapore-based venture-capital firm Golden Gate Ventures, which was born in 2011 and invests throughout the region.

U.S. investors eyeing Asia once thought only of China or India, but are now increasingly turning to Southeast Asia, Mr. Lauria said. That is mostly due to its collective population of about 600 million people, many of whom are under the age of 40 and entering the internet economy for the first time via low-cost smartphones.

A report last week from Google Inc. and Singapore state-investment firm Temasek Holdings said Southeast Asia is adding internet users at a faster rate than anywhere else in the world, with about 124,000 new people coming online every day.

The region, the report said, currently has 260 million people online and that tally will nearly double to about 480 million by 2020 as web access becomes more common. The combined value of the region’s e-commerce and online media industry should rise to about $200 billion by 2025 from about $30 billion at present, the report said.

Southeast Asian startups face a number of challenges, however. A survey released in April by consulting firm Bain & Co. noted that the region’s e-commerce firms, which have attracted much of the venture capital, have to grapple with disparate languages, regulations and consumer preferences that often vary by country.

Southeast Asia also lacks reliable regionwide infrastructure for logistics and payment, factors that contributed to the explosion of online retailing in China in years past, the report said.

Another challenge, according to Stefan Jung,managing partner at Jakarta-based venture-capital firm Venturra Capital, is talent. “By far the biggest limiting factor is the quantity of top entrepreneurs,” he said.

While hot spots like Silicon Valley are teeming with tech industry veterans who can provide mentoring and money, “there are few entrepreneurs and investors who have the insights on nuances of each of the countries in the region,” Mr. Jung said.

Still, many recent investors haven’t been deterred by such obstacles.

In April, China’s Alibaba Group Holding Ltd. said it was paying about $1 billion for a controlling stake in Singapore e-commerce startup Lazada Group, which operates throughout Southeast Asia.

And last month, a venture-capital firm launched by Mr. Saverin and a partner said it raised more than $143.6 million in the first close for its first fund. The firm, B Capital Group, has already invested an undisclosed amount in Singapore-based e-commerce logistics startup Ninja Van.

Singapore’s Garena Interactive Holding Ltd., a startup focused on online entertainment and e-commerce in Southeast Asia, said in March it raised $170 million in fresh capital in a fundraising round led by Malaysian wealth fund Khazanah Nasional Bhd., valuing the firm at about $3.75 billion, according to a person familiar with the situation.

Last year, Singapore’s GrabTaxi Holdings Pte. Ltd., Uber Technologies Inc.’s main rival in Southeast Asia, said it raised more than $350 million in a funding round led by U.S. hedge fund Coatue Management LLC.

Meanwhile Sequoia Capital, a prominent Silicon Valley venture-capital firm known for its early bets on Apple Inc., Google Inc. and Cisco Systems Inc., has also been putting funds on the line in Southeast Asia.

Last year it invested an undisclosed amount in Jakarta-based motorbike transportation service GoJek. It also invested in Indonesian online marketplace Tokopedia and Singapore-based peer-to-peer shopping startup Carousell.

Such new rounds of fundraising are “getting lots of international attention,” Mr. Lauria said, prompting new investors in turn to examine opportunities in Southeast Asia. “These are big check sizes at very large rounds,” he said.

See original article at http://www.wsj.com/articles/southeast-asia-startup-scene-is-sunny-investors-say-1464951113

Share.

About Author

Founded by two travel and technology professionals with years of experience in Asia, Representasia specialises in sales & marketing representation throughout Southeast Asia for travel/hospitality technology providers and travel-related startups, as well as providing marketing consultancy services for hotels and travel businesses in the region.

Join the Conversation!