During these turbulent times for startups around the world, finding funding and support from Venture Capitalists (VCs) is more vital than ever if projects are going to get off the ground or evolve and develop further. Prior to the pandemic, Southeast Asia was a hotbed of activity for investors as they recognised the potential of the area.
The trifecta of a large, young, tech-savvy population offered startups the human resources necessary to thrive. Add to this mix the governments in the region helping create innovation ecosystems that support tech development, easy access to raw materials and countries with highly educated workforces; it’s easy to fathom how the area has become startup heaven. The economies of scale in ASEAN make it a very attractive place to develop a company, and VC funds were making hay while the sun shone as they hoped to find another unicorn.
Of course, COVID-19 has slowed this growth to a snail’s pace, but during the first three months of 2020, it was business as usual with $1.3 billion USD finding its way to startups in Southeast Asia in this time. With the impact of COVID-19 causing uncertainty, we take a look at the Southeast Asia VC funds dispersed during the first quarter of 2020.
Investing in 2020
The champagne from New Year’s Eve had barely stopped flowing when things swung into action again in Southeast Asia. In 2019, particularly the latter part, the number of significant investments had dropped, and there was more of a focus on smaller sums of funding filtering out to more startups. This trend continued in January with investments coming in smaller amounts but to a higher number of companies.
Singapore and Indonesia led the way when it came to Southeast Asia VC funds investing in startups in 2020, with Singapore taking in $865 million USD and Indonesia laying claim to $161 million USD worth of investment. One such example was from Singaporean VC firm Accelerating Asia. The company invested around $2.2 million USD in January but spread it out around ten startups throughout the region.
One of the benefactors of this funding round was Myanmar-based waste management and data analytics firm, RecyGlo. The award-winning Yangon-based startup is working on raising $900,000 USD to aid their expansion into other Southeast Asian countries with Accelerating Asia being amongst the first to support this drive. Vietnam, Thailand, Malaysia and Cambodia failed to close any noteworthy VC deals at the start of the new year.
With the growth of edtech in the region, it’s unsurprising that Accelerating Asia also funded Singaporean firm Joni.AI, a platform designed to help students learn at their own pace. With the Coronavirus seeing a spike in home education, firms such as Joni.AI are ready to capitalise and make the most out of their funding.
Sectors such as fintech saw a significant upswing in VC interest in recent times and this continued into 2020. Globally, in one week of February this year, fintech companies were funded to the tune of $1 billion USD. Two of Southeast Asia’s startups claimed a significant chunk of this money with Grab leading the way with $856 million USD.
Indonesian firm Mbiz followed their neighbouring startup by adding $20 million USD to their coffers through Series B Funding in the same week. This injection of funding into two of the region’s big players highlights the continued confidence in this sector in Southeast Asia.
While investments may have been down on Q4 of 2019, there were still significant levels of funding with another Indonesian firm, GoJek bringing in $1.3 billion USD in the first quarter of this year.
The impact of COVID-19
As the pandemic all but brings a halt to the industry in the region, it has also stalled many VCs’ investment plans. With some startups struggling and going out of business, private equity firms and angel investors are taking a more cautious approach to funding.
While there is likely to be some movement in the markets again soon, many VCs will be turning their focus to the sectors that thrived during the worst of the pandemic. Those developing technology in the fields of health, education, eCommerce and finance are the leading contenders for cash injections over the coming months. Projects and startups focussing on making life easier for their communities as they emerge from lockdowns will also attract the attention of those wishing to invest.
So, while the first quarter of 2020 was reasonably successful due to many funding rounds having completed in January and February, the impact of COVID-19 was noticeable by March. Hopefully, those VCs that reined in their spending while riding out the pandemic will start to loosen the purse strings once more and help put Southeast Asia back on track as one of the most reliable startup ecosystems in the world.