The venture capital (VC) industry is rapidly changing. The days of only backing the next big thing in developed countries are over. Impact investing and projects that bring more equitable results for minorities are becoming more popular. Many are looking to invest in innovative startups in emerging markets like technology and digital projects that align with the UN’s sustainable development goals (SDGs) or environmental, social, and governance (ESG) targets.
As a result of these new goals, more eco-conscious or ethical VCs are making significant investments in Southeast Asia. The region is a magnet for investors due to its growth potential, talent availability, high population, low labour costs, and proximity to China and India. Foreign direct investment (FDI) has been steadily increasing since 2010 and it continues to grow. Despite the global COVID crisis slowing investment in 2020, FDI in the region fell by 25% from 2019’s level, reaching USD $137 billion.
The VC trends Southeast Asia are experiencing are changing rapidly. A lot of money is being pumped in, but it’s no longer simply about investing in startups. The region has much more competition, making it a hotbed for investment.
A closer look at the PE trends in Southeast Asia
We take a closer look at the emerging VC trends in the region, what some of the more prominent players have been investing their money in, and how they plan to tap into the potential of this emerging market.
Antler, a Singapore-based VC firm, is famed for its early-stage investments in startups. Since its inception in 2017, the company has invested over USD $25 million in 127 Southeast Asian startups. With its mission to enable innovative developers through funding and support, Antler recently committed to investing a further USD $100 million over the next three years.
The firm has also funded many projects in other countries, and 50% of the companies Antler has helped have female CEOs, while 35% have at least one female co-founder. This determination to be equitable in its investments correlates with its aim of creating a better world through responsible funding.
With over Euro €32 billion in Assets under Management (AuM) and 530 projects in its portfolio, French VC firm Eurazeo is a significant player in the European investment scene. In order to establish its commitment to corporate responsibility, it created its 0+ ESG programme in 2020. It seeks to be carbon neutral by 2040 and to encourage sustainable initiatives across the world, including reaching UN SDGs.
As part of its drive to invest in startups that improve the quality of life, Eurazeo is funding a Southeast Asian insurtech fund worth USD $215 million. The fund has already invested in Indonesian firm Qoala, leading its Series B funding round, bringing USD $65 million to the retail insurer.
Another financial group making moves into the ASEAN market is the Japanese company SBI Holdings, a subsidiary of Softbank. In late 2021, SBI and Malaysian firm VentureTECH set up a VC fund for local projects. Recently, it teamed up with South Korea’s Kyobo Securities and Singapore’s Nanyang Technological University to create a similar fund. The investment dubbed a digital innovation fund, is worth USD $75 million and will support tech companies at pre-series A and Series A rounds.
The recent creation of these VC funds demonstrates SBI Holdings’s faith in Southeast Asia as a technology hub and its eagerness to support innovation and development in the region.
As Vietnam’s digital ecosystem flourishes, VC firms from both home and abroad are increasing their project funding. Ho Chi Minh City-based Mekong Capital is one such company investing in its country’s development as a centre for innovation. Through its Mekong Enterprise Fund IV (MEF IV), worth USD $246 million, it has already helped seven startups, including a recent investment in Entobel, a biotech company, in the sum of USD $25 million.
The MEF IV focuses on growth equity investments for consumer-driven sectors wishing to digitalise, innovate and expand. The fund typically invests between $10 to $35 million USD in a startup and has earmarked 12 as the number of projects in this fourth iteration of the fund over the next ten years.
With businesses and investments ramping up again post-COVID, the emerging VC trends indicate businesses focusing even more on sustainable development goals. Innovative technology startups that address social, environmental, or governance issues appear to be in high demand. The VC trends Southeast Asia is witnessing are pointing toward assisting companies bolstering the economy in ethical or worthwhile ways.
This shift to more meaningful investments, rather than just pumping money into companies to make a quick buck, will likely bring about great dividends for the region. Funding projects that enhance people’s lives will help in the development of sustainable communities where innovation thrives and in the creation of a more socially conscious economy in Southeast Asia.