As Southeast Asia’s digital economy has continued to show resilience amid the pandemic, the region’s internet economy is predicted to cross $360 billion in value by 2025 and could very well surpass $1 trillion by 2030. This bodes well for the region, as we look to understand how it will grow.
That’s why a lot of investors are betting big on the region and looking to identify and support the growth through their funds. One such player is Accelerating Asia, an international early-stage Venture Capital Fund headquartered in Singapore, which is aiming to raise $50 million for its second fund.
With the changing economy and consumer behaviour, we wanted to understand more and get insight into the region’s growth, so we spoke to Craig Dixon, Co-Founder and General Partner of the fund.
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Craig Dixon was previously the Entrepreneur in Residence (EiR) and Programme Director for Accelerating Asia. Previously, Craig was the EiR and Program Manager for the muru-D Singapore startup accelerator.
Craig arrived in Singapore in 2013 after his startup, Zumata received funding from Wavemaker Partners, the National Research Foundation and 500 Durians. As an investor, Craig has been involved in over 50 investment rounds in startups as either a founder, institutional investor or Angel investor. He has a passion for building a more efficient startup ecosystem in Southeast Asia, focusing on standardization of investment terms and fairness between startup founders and investors.
Could you share a bit more about the goals for your second fund? Which industries and categories are you looking to invest in?
Fund II aims to expand on and double down on the Fund I strategies now that we are established and our investment thesis shows early signs of validation. We will continue to plug the market gap for an early stage VC accelerator that focuses on lowering the investment risk for our fund through our flagship accelerator program. This is where we work closely with startups on revenue growth, user acquisition/retention and fundraising.
We invest in pre-Series A startups from the world’s fastest growing digital economies in Southeast and South Asia and beyond – including Indonesia, Vietnam, Philippines, Bangladesh and more at the pre-Series A level. For us we define pre-Series A as startups that have a product being used by customers, early signs of traction and most have raised their first angel funding or family and friends round. We are often the first institutional investor. These companies are usually 12-18 months away from closing Series A.
With the fresh funds, we plan to invest in ~30 startups per year and we will be well positioned to take bigger stages in high-potential startups up front and through follow-on funding.
What is impact investing and could you give us some examples of this in Southeast Asia?
My Co-Founder Amra has been focused on impacting investing since before we started in 2019, so it was the natural progression that when we built our investment thesis at Accelerating Asia that impact was part of it from the get go.
The Global Impact Investing Network (GIIN) defines impact investing as “Investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.” At Accelerating Asia, we target investments that are delivering commercially viable, profitable solutions to the development problems facing the region’s economies because it is possible to have purpose with profit.
In the markets we operate in we’ve invested in startups across verticals including fintech, agritech, eCommerce and transport – all which have a positive impact in the communities they operate in and are addressing the United Nations Sustainable Development Goals. This includes startups like KaryaKarsa, an Indonesian platform that enables creators to distribute, monetise their work and generate diverse income streams. Then there’s a range of impact startups in the smart city and energy space such as EnergyLite which enables companies to install zero-cost and zero-hassle solar energy for their operations.
Gender Lens Investing is one component of impact investing and it’s not just about female founders but also startups that address gender issues. We were an early investor into BeamAndGo – a payment and digital marketplace that empowers Overseas Filipino Workers (OFWs), mainly women by giving them control over how their remittances are spent by their families back home. We’ve also invested in a range of female founders like TransTRACK.ID who closed investment from Cocoon Capital and the Indonesia Women’s Empowerment Fund. Actually, our portfolio includes 40% female co-founded companies, around 4X the average or VCs globally.
Which markets and industries in Southeast Asia are the most exciting for you right now?
As a vertical agnostic fund, we don’t have a specific industry focus – and we’ve invested in over 20 industries to date. We continue to be excited by the prospects across SaaS and developer tools as well as startups that are digitising existing industries such as agriculture, financial services, education and eCommerce.
In terms of markets, we’ve seen an increase in the quality and stage of startups coming out of the Philippines and Vietnam as indicated in our recent investments into social commerce platform ChatGenie, agritech startup Mayani and insurtech platform Vifo. The latest Google Temasek Report released in November places Vietnam and the Philippines as the region’s fastest growing economies. The Philippines has had the highest proportion of new users during the pandemic and with only 68% of internet users consuming online services, the lowest digital penetration in SEA, there is still room for significant growth as we’ve seen in places like Indonesia in the past decade. The Filipino digital economy is growing at a rate of 24% compounded annually and it is estimated to double in worth by 2025 to be $40B. Vietnam is on a similar trajectory with the digital economy growing at 29% compounded annually, it is expected to almost triple from $21B in 2021 to $57B in 2025. This presents a considerable opportunity for early stage VC funds and angel investors to capitalise on the growth. Indonesia will continue to grow as well as we start to see the ecosystem mature and there will continue to be opportunities to invest at the early and late stage.
What are some of the trends that are emerging in the region that have got you excited?
The number of unicorns is expected to rise dramatically in the region by 2025 and we believe that now is the time to invest in early-stage startups to capitalize on outsized returns in Southeast and South Asia. In terms of our portfolio, we are seeing a lot of interest from large institutional investors looking for deal flow for startups at our stage which have lower investment risk.
What we’ve seen in the market and startups coming up through our deal flow pipeline is the continuation of digitisation of traditional industries including SaaS platforms, data solutions, health care, logistics, agricultural supply chains and finance. It’s those industries that continue to excite us as we see the significant market potential across Southeast Asia.
This trend is likely to continue in 2022 and we’ve seen investors be bullish at the early and late stages in fintechs that enable buy now pay later, digital credit scoring platforms like our portfolio startup Dana Money and one click payment platforms. In Southeast Asia there’s also an increasing number of mental health and wellness startups coming through the pipeline at the early stage and in 2022, expect we will see more of that vertical.
You also can’t talk about the outlook without mentioning crypto. In 2021 we saw a number of homegrown platforms like Philippines unicorn Axie Infinity that closed investment from Andreessen Horowitz (a16z) and Indonesia’s Pintu which closed Series A. It will be interesting to see what develops in the space in 2022 as Singapore starts to establish itself as a hub for crypto and blockchain innovation.
What’s next for Accelerating Asia?
It’s an exciting time to be an early-stage investor in Southeast Asia. At Accelerating Asia we’re focused on partnering and connecting with investors for Fund II and later stage institutional investors for startups in our portfolio. We can’t give away too much but a number of our startups will be raising Series A in 2022, and we are currently working alongside them on fundraising strategy.
We will continue to invest in pre-Series A startups and are currently in the selection phase for our next cohort, due to start in March 2022 we’re excited so far by the quality of startups that is getting higher and higher each cohort. And in 2022, we’re looking to make more investments into more markets.
In 2022, we’re aiming to expand our programs to enable more female angel investors to get involved in the startup ecosystem through and are also working on a deal flow platform that will enable investors and startups to connect to each other – reach out if you’re interested in learning more. And we have a number of new initiatives in the works including partnerships in the works with angel networks and development organisations in the works.