How publicly-listed tech giants will upend SE Asia’s startup ecosystem

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The coming-out party has begun for Southeast Asia’s technology startups. And the growing pool of listed companies may in turn append Southeast Asia’s startup scene in more ways than one.

Ride-hailing giant Grab’s blockbuster SPAC merger announcement earlier this month, at a $4 billion valuation, is expected to be only one among many.

Others, from Indonesian homegrown unicorns Gojek and Tokopedia, to Singapore-based tech jewel Trax, a retail analytics firm, are in various stages of preparations for their public listings. Observers attribute the momentum to two factors.

First is the listing of gaming and e-commerce company Sea Limited — the first Southeast Asian technology firm to go public on a major US exchange in 2017. Since then, its shares on NYSE have surged by more than 1,400%, turning it into a regional e-commerce behemoth and boosting investors’ confidence in companies from the region.

Second, the growth in venture capital firms and investments. In Singapore, there are at least 150 venture capital firms today, of which 45 were admitted in 2015. The total number of PE-VC deals in Singapore, Malaysia, and Indonesia has gone up from 160 deals worth $6.1 billion in 2016 to 249 deals worth $8.7 billion in 2020, according to a report by management consultancy Duff & Phelps.

“We have more companies going public. I think it will create a signalling effect, and more capital will be taking Southeast Asia more seriously,” said Jianggan Li, Momentum Works’ founder and chief executive, on the sudden rise of regional startups.

Expect more M&As, local talent

The rise of publicly-listed technology companies will help increase the liquidity in the market, and also bring much-needed talent to Southeast Asia.

With access to huge amounts of capital from the exchanges, the technology giants could become engines revving up mergers & acquisitions in the region, said Dmitry Levit, the founder of venture capital firm Cento Ventures, pointing to Sea Limited’s war chest after it listed.

Since it listed, Sea has acquired Hong Kong-licensed investment management firm Composite Capital Management to establish its investment arm, Canadian game developer Phoenix Labs, Indonesia’s lender Bank Kesejahteraan Ekonomi (Bank BKE), and Vietnam’s Foody Corporation, the parent company of food delivery player Now.

In an ultra-low interest rate environment, more global capital will look for investment opportunities here and this will create new tech millionaires who will use their new wealth to launch new companies or become venture capitalists themselves, said Hau Koh Foo, director of the Singapore Management University’s Institute of Innovation and Entrepreneurship.

“We can expect a ‘Grab mafia’ [to emerge],” he said, referring to the possibility of people associated with the company jumpstarting many startups in Singapore and the region.

The rising prominence of tech companies could also push retail investors to take more risks, for higher returns. “Singapore investors are also not used to valuations for emerging technology stocks, so a more vibrant ecosystem should address that differential,” said managing partner at TSMP Law Corporation Stefanie Yuen Thio.

With a more positive view of Southeast Asia, it will be easier for companies to attract talent to Southeast Asia — not just Singapore, but emerging cities like Jakarta, Bangkok, and Manila — especially in a world where tech talent is in shortage.

Dan Cullen, the partner-in-charge of headhunter Heidrick & Struggles’ Singapore office and a member of its global technology and services practice, said that four to five years ago, the region used to bring in executives from more mature startup ecosystems like Silicon Valley to fill C-suite positions because people here were not yet ready to take up leadership roles.

“As the ecosystem develops, more locals will be at the helm. Governments will also invest more into training and upskilling individuals to enter the technology sector as employment opportunities balloon,” he said.

Dealmaking in Southeast Asia’s startup ecosystem continued its ascent last year, despite the unprecedented economic fallout from the COVID-19 pandemic.

According to DealStreetAsia data, privately-held companies in the region announced 622 deals in 2020, a 26% increase year-on-year. Despite the pandemic-marred year, total funds raised dipped only 2% year-on-year to $8.6 billion. 

Singapore topped the deals list with 280 deals and a total value of $3.7 billion, while Indonesia came in second with 134 deals worth $3.4 billion. The two markets accounted for more than 80% of funds raised in 2020.

Based on Cento Ventures’ data, the number of independent companies valued at $100 million or more in Southeast Asia grew from 43 in 2018, to 64 in 2019, and 82 in 2020. Some of the new names added to the list last year include Singapore’s Stashaway, theAsianparent, and Indonesia’s Waresix and Mekari.

Top beneficiaries: Singapore and Indonesia

Known for its political stability, intellectual property laws, and open business policies, Singapore has been a magnet for investors and startups.

The country is seen as a testbed for new technologies, and a gateway to the rest of Southeast Asia, a PricewaterhouseCoopers report on Singapore’s startup funding trends and outlook outlined.

“The government has helped link us up with the right people and provided resources that have helped us to seize opportunities both in Singapore and across the region. Financial support in Singapore is also readily available,” said Chang Wen Lai, the co-founder of logistics provider Ninja Van. The Singapore-based startup has raised nearly $400 million since it was established in 2014.

Joel Bar-El, co-founder and executive chairman of retail analytics firm Trax, said that Singapore has provided the company unrestricted access to foreign talent, access to government grants, and R&D. “Singapore also has a very generous tax regime. All of these factors helped us set up our company here,” he said. Trax has raised more than $1 billion to date with a reported valuation of over $2 billion.

Both Trax and Ninja Van are part of Singapore’s eight unicorns — Sea, Razer, Lazada, Bigo, Patsnap, and Grab being the others — according to the country’s government agency Enterprise Singapore. To be sure, most of these companies operate regionally, while Lazada and Bigo were both acquired by China’s Alibaba and NASDAQ-listed Joyy respectively.

Singapore’s status as a financial hub has also created a burgeoning fintech industry, with more than 1,000 fintech firms employing over 10,000 in the country, a report published by Oliver Wyman in December stated.

Indonesia, meanwhile, has the largest consumer market for companies to tap as the region’s largest country, giving rise to at least six unicorns, all consumer-focused: JD.id, Tokopedia, OVO, Gojek, Bukalapak, and Traveloka.

Last year’s e-Conomy report released by Google, Temasek, and Bain & Company puts Indonesia’s internet economy at $44 billion, an 11% increase from 2019.

Fintech will continue to dominate Singapore’s ecosystem, analysts said.

But other up-and-coming sectors could include healthtech and edtech, given the country’s focus on healthcare amid an ageing population, and an education system touted as world-class, said Hau.

Indonesia’s large unbanked population — about a third of its 270 million people — also makes it ripe for fintech disruption, Hau said, highlighting how the super apps have been acquiring local banks ahead of their digital banking ambitions.

Another sector to look out for is agritech, as they try to digitalise an industry that has traditionally been a huge contributor to the economy.

The “publicly-listed” tag of some of the new unicorns should, therefore, be a big confidence boost for the overall ecosystem.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.