Southeast Asia has seen tremendous growth in their startup scene throughout the past few years. As a young region with a market that promises huge growth potential (many thanks to the increasing internet population), it is no wonder that VCs have expressed interest to invest in more startups in Southeast Asia.
Below are a couple of points highlighting the current VC landscape in the region – but that’s just skimming the surface. For more in-depth coverage and insights, you ought to catch the panel titled “Raise, Check, Fold: How Southeast Asia’s VC landscape is evolving” at Tech in Asia Singapore 2017’s Main Stage.
But first, let’s take a look at what Southeast Asia’s VC landscape is shaping up to be in 2017.
The funding environment has been steadily maturing
VCs have been moving beyond seed funding, with the investor market seeing an increase in breadth and depth, as well as the number of investors. There seems to be a rise in funds that are focusing not just on early-stage investments, but also later-stage investments.
According to The Straits Times, local VC firms have managed to raise more funds in 2016 as compared to earlier years. For instance, Jungle Ventures recently raised a second fund of USD100 million, a whole ten times more than its first one raised in 2012.
VCs extending their focus to late-stage investments are great news for startups that have already shown potential and has traction in the market. These new funds can help startups improve and possibly push their products into other markets.
The startup scene has growth potential despite having a rocky start to 2017
Although the first quarter of 2017 was not rosy for Southeast Asian startups, with the number of seed to series C deals hitting a four-year low, Southeast Asia still has the potential for growth.
Vinnie Lauria, founding partner of GGV, reasoned that investment remains prevalent in Southeast Asia due to the growth profile of companies here being different from other markets, such as China and the United States.
ingapore, in particular, has the advantage of political stability, which lures maturing regional companies to move here, thus contributing to the growth of the country’s VC funds for the next few years. This brings us to our next point.
Global VC investors are focusing on Singapore
Apart from political stability and infrastructure, other factors that have attracted global VCs include the country’s strategic location as a gateway to Southeast Asia, government support for the industry, and its growing startup activity.
There have also been efforts by the government to grow the funding landscape in the region. Deputy Prime Minister Tharman Shanmugaratnam has said that the regulatory regime for VC managers will be reviewed.
VCs have become more cautious
Despite SEA’s potential for growth, investors are also becoming more cautious about what they invest in. Due to the low interest rates and average returns on most asset classes, investors are prioritizing business models that are profitable and sustainable.
As explained by Anchanto’s COO Mr Heininger, “Startups today need to realistically show the path towards profitability. The business model and unit economics are increasingly the focus of investors.” Thus, when pitching to an investor, startups should fine tune the specifics according to the focus of investors, and show how they can build a sustainable business.
Want more in-depth insights on SEA’s evolving VC landscape?
Then join Hian Goh (Partner, NSI Ventures), Kee Lock Chua (President/CEO, Vertex Ventures) and Pieter Kemps (Principal, Sequoia Capital) at Tech in Asia Singapore 2017 this May 17, as they break down key insights and learnings at their Main Stage session titled “Raise, Check, Fold: How Southeast Asia’s VC landscape is evolving”.
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