Thanks to the global pandemic, many western countries have seen an economic downturn in 2020. This is not the case, however, with tech startups in Southeast Asia who have continued to see venture capital investments grow during the global health crisis. The rise of Southeast Asia tech startups and the continued increase in economic activity has helped to stimulate more interest in the region.
Bouncing back in 2020
While the US and Europe struggle to get back on their feet due to second waves, Thailand, Malaysia, Singapore, and Vietnam are all putting the crisis behind them and entering the recovery stage. Southeast Asia has a history of bouncing back quicker than other regions in the face of global disasters: their quick recovery after the dot com crash, the Global Financial and the Eurozone crisis spring to mind. This positive track record is a good indicator to potential investors that Southeast Asia will do it again this time and see an increase in GDP growth ahead of other regions. Such an optimistic economic outlook provides excellent encouragement for tech startups looking to expand.
We explore the future of tech startups in 2021 and beyond
Southeast Asia is still an early-stage market for venture capital investments. Compared to larger, more established markets like China or India, the proportion of venture capital is much smaller, but tech startups in Southeast Asia are on the rise. Over the last ten years, the region has seen venture capital investments worth around $52 billion USD with the value in 2020 likely to be $13 billion USD. In the last five years alone, more than 2,000 startups have been funded by venture capital in Southeast Asia. Despite the global pandemic, VC activity has not slowed down with at least 248 deals expected to be closed across the region in 2020.
500 Startups increases investments
One global VC firm, 500 Startups, has actively invested in Southeast Asia. In 2013, the company launched 500 Durians, a fund specifically dedicated to startups in the region. The firm has also established country-specific funds like 500 Vietnam, 500 TukTuks (Thailand), and most recently Angkor 500 (Cambodia). It has backed over 200 companies in the region, including unicorns like Singapore based ride-hailing service Grab and Indonesian eCommerce platform Bukalapak.
In an interview with KrAsia, the CEO of 500 Startups, Christine Tsai, talked about Southeast Asia’s promising future: “It became fairly clear during the first months of the pandemic that some sectors were going to be impacted and some were going to benefit by experiencing accelerated growth. We will continue to invest in the sectors you mentioned [logistics, eCommerce, edtech, and healthtech] —productivity and software-as-a-service (SaaS) tools, where we’ve already had success in companies like Talkdesk and GitLab; in health tech, where we have investments in companies such as Carbon Health and Siren Care; and in edtech, where we were early investors in ApplyBoard and Udemy.”
She continued, “Despite the pandemic, the Southeast Asian startup ecosystem has proven its resilience. The recent fundraising success of unicorns such as Grab, Carousell, and Bukalapak should send a signal to investors worldwide that the region’s startup ecosystem has come a long way in a short period of time. We have seen more and more investors around the world actively seeking to increase their exposure to Southeast Asia, and that trend will only accelerate.”
Singapore startup ecosystem is poised to bounce back post-pandemic
The most valuable company in Southeast Asia
Singapore based Sea Ltd. is the most valuable company in the ASEAN region and is an almost unique example of a success story in the pandemic. It is a leading provider in digital entertainment (Garena), eCommerce (Shopee), and fintech services (SeaMoney) in the area. With lockdowns implemented all over Southeast Asia at the start of 2020, all three of these sectors saw massive growth. Sea has surged to a market valuation of $100 billion USD with its shares rising more than 400% this year alone. The company said in a statement that it intends to spend the proceeds from the new offering on business expansion, including potential strategic investments and acquisitions.
According to iPrice, Shopee became Southeast Asia’s leading eCommerce provider at the end of 2019. The usage of the platform has only increased with the higher demand for online shopping and food delivery during the pandemic. Gaming has also become more popular during the lockdown, and in 2019, Garena launched Free Fire which became the most downloaded mobile game globally and the highest-grossing in Southeast Asia. Sea is just one example of the potential growth in Southeast Asia’s tech startup sector.
Though global events predicted otherwise, 2020 has been a good year for tech startups in Southeast Asia. The region has seen continued economic growth and VC investment due to its fast recovery time. The region is a burgeoning market that has seen increased interest from investors during 2020. Looking ahead, the future indeed seems bright for Southeast Asia’s tech startups.