Fintech based Unicorns made a major push in the 2018/2019 market to upgrade the economic state of Southeast Asia through mobile app-based business, and now Venture Capitalists (VC) have set their sights to swarm the market with fundraising investment. DealStreetAsia data shows that VC fundraising is stated to raise $4.2 billion USD in 2019, with a major push from Chinese VC groups at $3.4 billion USD towards overall growth. With more than 35 VC companies set to strike, the state of Southeast Asia economy is worthy of world attention as the next up-and-coming global economy.
Contenders from 2018
An impressive influx of VC investment of $48 billion USD hit the market in 2018. Some of the most notable, 500 Durian ($50,000 – $300,000 USD), Golden Gate Ventures ($100 million USD), Gree Ventures ($500,000 – $3 million USD), Jungle Ventures ($150 million USD), Vertex Ventures HC ($201 million USD), Openspace Ventures ($135 million USD), Qualgro Venture ($100 million USD), will see a major rise in commitments in 2019. According to data from Refinitiv, Chinese firms poured an additional $148 million USD into investments through companies such as Sequoia Capital and Monk’s Hill Ventures.
Why the influx?
According to Mark Suckling from Cento Ventures “The sheer scale of Venture Capital activity is the most notable shift–from less than $500 million USD in 2013 to over $11 billion USD in 2018. The last five years have been a period during which the Southeast Asia tech sector has emerged as an attractive destination for global venture capital.”
e-Conomy SEA 2018 report by Google and Temeasek:
While the internet economy is growing in all six Southeast Asian countries covered in our research, the stage of development relative to the size of each country’s economy differs. It is most developed in Vietnam, where the gross merchandise volume (GMV) of the internet economy is 4% of the country’s gross domestic product (GDP), and it has the most room to grow in the Philippines, where it reaches 1.6% of GDP. Singapore, where the internet economy is 3.2% of its GDP, ranks second in Southeast Asia, although it still lags behind markets like the U.S. or China. The Indonesian “digital archipelago” is firing on all cylinders. Supported by the largest internet user base in the region (150 million users in 2018), Indonesia has the largest ($27 billion in 2018) and fastest growing (49% CAGR 2015-2018) internet economy in the region. With huge headroom across all sectors, it is poised to grow to $100 billion by 2025, accounting for $4 of every $10 spent in the region.
“China’s mobile internet growth is slowing down–it has reached maturity,” said Ms Helen Wong, a partner at Qiming Ventures. “A lot of Chinese firms that we are close to, such as the Alibabas and Tencents of the world, are also looking at the region [Southeast Asia] as the next market.”
The first half of 2019
Local Southeast Asia investors include: B Capital Group’s with $406.1 million USD in commitments; Vickers Venture Partners, which is chasing a target of $500 million USD; Vertex Ventures who has raised $230 million USD; Jungle Ventures, having secured commitments of $175 million USD; STRIVE, formerly known as GREE Ventures, is raising a $130 million USD; and Alpha JWC who has invested $100 million USD in funds.
China has wasted no time in stepping up with Qiming Ventures and GGV Capital, which has managed to raise a combined total of $10.2 billion USD this year. GGV’s China-based managing partners, Jenny Lee and Jixun Foo, plan to allocate a portion of their $1.8 billion USD profit margin towards Southeast Asia investment by the end of the year. Warburg Pincus has announced a potential $4.25 billion USD investment as well.
According to the e-Conomy SEA 2018 report, “Southeast Asia’s internet economy reached $72 billion USD in 2018 and is on track to exceed $240 billion USD by 2025, $40 billion USD higher than previously expected.” Projections now estimate that the e-Commerce sector will exceed $100 billion USD by 2025, with the addition of online media to reach almost $32 billion USD, online advertising to reach $20 billion USD, mobile gaming to reach $10 billion USD, and subscription music and video on demand to rise up to $1.5 billion USD by 2025.
Interestingly, it appears that “$16 billion USD–or two-thirds–of that capital [investment] has gone to just nine companies: Bukalapak, Go-Jek, Grab, Lazada, Razer, Sea, Traveloka, Tokopedia, and VNG.” It’s an important observation to make as there is plenty of evidence that select Southeast Asian unicorns are driving exits of regional startups in an attempt for a sort of Oligopoly. Looking into the future, the e-Conomy SEA 2018 report estimates the Southeast Asia Internet economy to reach $240 billion USD by 2025, showing an 8% increase from the 2.5% growth in 2018.
With so many big players jumping into Southeast Asia’s market, especially in the tech sector, it’s obvious why the pundits are projecting such large increases in ASEAN’s e-conomy for the near future. From the outside, it seems like a veritable playground, rich with opportunities, so don’t be surprised to see the region continue to flourish with continued investment opportunities. The only question is: Are you ready to play?