Editor’s take: The week that was — Jan 16-21

Editor’s take: The week that was — Jan 16-21

We knew it was coming, but that does not make it any easier for the ecosystem.

It was evident after the third quarter of last year that startup fundraising across Asia in 2022 will fall significantly short of the previous year’s levels.

The SE Asia Deal Review: Q4 2022 report, released this week by DealStreetAsia – DATA VANTAGE, confirmed that total private funding in the region’s startups dropped 32% to $15.8 billion last year from 2021’s record high of $23.18 billion.

More ominously, the fourth quarter of 2022 recorded the lowest quarterly deal value in two years ($2.88 billion), suggesting we are not out of the woods yet.

“The year 2023 is likely to present more challenges… dealmaking may not come to a standstill this year but it will be an investor’s market and we can expect to see capital providers ask for higher downside protection — besides a clear path to profitability — before signing term sheets,” the report added.

The fall in fundraising value in 2022 came despite a 9.6% year-on-year increase in the number of deals, suggesting investors are flocking to smaller-sized deals in the earlier stages at the expense of late-stage deals.

An Asia Partners report released this week confirmed these findings. “While the Series A/B ecosystem has strengthened, there is an acute Series C/D gap in the market for $20-100 million cheques,” it said.

We also reported this week, based on Magnitt’s Emerging Venture Markets report, that startup fundraising fell by 5% YoY in Pakistan to $315 million.

In neighbouring India, startups looking to raise capital for the first time are facing a tough time as investors turn cautious. In 2022, there were only 646 startups raising capital for the first time, down from 906 the previous year.

Now, let’s dive into other news that made the headlines this week:

Deep dives and exclusives

This week, we dwelt on the unicorn landscape of China, which houses the largest number of startups valued at $1 billion or more after the US.

Sectors such as e-commerce, the internet economy, and consumer electronics are no longer incubating the next batch of unicorns in the country. Replacing them are up-and-coming industries such as semiconductor developers, new energy, military manufacturing, and industry 4.0.

In another analytical piece, we wrote about the space industry in India. At a time when overall funding in Indian startups slowed down, startups in the space sector bucked the trend in 2022. According to Tracxn, the total funding in Indian spacetech startups increased to $112.2 million in 2022 from $91.5 million in 2021.

Pakistan’s edtech sector faces a conundrum: the demand for private, after-school services remains high in the country, yet consumers will not pay for digital services. We wrote a deep dive into how startups in the country are navigating this situation.

Many late-stage startups in Indonesia, such as GoTo, Privy, and J&T Express, are venturing overseas for growth and global validation. These companies are looking first at markets with characteristics similar to their base.

India’s kiranatech startups that had raised funds from Lightspeed, Tiger Global, Matrix Partners, and Sequoia amid the pandemic are seeing their demand wane, forcing them to shut divisions or even lay off employees. Struggling to survive, these startups are pivoting to other avenues, such as lending.

Our reporters got wind that China’s Luckin Coffee is planning an entry into Southeast Asia two years after it was investigated for accounting fraud.

This week we dwelt on the fundraising prospects of Indonesia’s agritech sector, given the growth potential for tech-led disintermediation in the country’s agriculture and fisheries industries.

Jakarta-based quick delivery commerce startup Astro is bucking the difficulties faced by its peers and is now setting its sights on making money, CEO and co-founder Vincent Tjendra told DealStreetAsia.

LP-GP news

For our weekly LP View column this week, we covered the Hong Kong Asia Private Equity Forum. Given the lacklustre global IPO market of 2022, LPs are more likely to look for alternative exit options like continuation funds and secondaries this year, opined industry players.

“Exit channels have diversified; we are no longer IPO-dependent,” said Doug Coulter, partner at LGT Capital Partners, during a panel discussion at the forum. “We’re all waiting for the IPO markets to come back to get more distributions,” added Catherine Shih, partner at Quilvest Capital Partners, at the same panel.

Venture capital firm B Capital Group closed its third and latest series of global growth funds at $2.1 billion. “This was definitely a more challenging fundraising environment. I think the reason we were successful was because of our focus on being operationally engaged value-add investors,” co-founder and managing partner Raj Ganguly told DealStreetAsia in an interview.

Singapore-based PE firms Capital Square Partners (CSP) and Basil Technology Partners (BTP) have closed a $700 million fund. CSP Fund II raised capital from HarbourVest Partners, TPG NewQuest, Committed Advisors, and other institutional investors.

Singapore-based global investment company Lighthouse Canton completed the first close of its newly-launched venture debt fund at $20 million, according to a release.

Secondary private equity firm TR Capital secured the first close for its fifth fund at $350 million, raising capital from financial institutions in Asia, Europe, and North America.

The Asian Development Bank (ADB) has invested $25 million in Quadria Capital’s third fund, confirming a report published by DealStreetAsia in December 2022.

Blackstone raised a record $25 billion for two funds that dabble in secondaries and co-investments.

Fundraising news

Walmart-backed fintech unicorn PhonePe said it has raised $350 million in a fresh funding round led by private equity firm General Atlantic, valuing the company at $12 billion.

Norfund’s Norwegian Climate Investment Fund said it is investing about $60 million in SAEL, an Indian solar and agricultural waste-to-energy company.

Singapore-based cybersecurity firm Blackpanda secured $15 million in its Series A round led by Primavera Venture Partners and Gaw Capital Partners.

And finally…

It’s been only twenty days into 2023, and at least 20 Indian startups have handed pink slips to employees in a grim start to the new year, which was expected to bring some respite from the tech winter.

Among them are Temasek-backed ShareChat, Sequoia- and Tiger Global-backed GoMechanic, which also admitted to making “grave errors in financial reporting”, and Swiggy, which is trying to put a lid on rising costs amid a drop in food delivery growth rates.

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