<article><p>Higher penetration of e-commerce and financial technology in India and the Southeast Asian region has heightened investor interest in technology startups in those countries.</p></article>

<p>Higher penetration of e-commerce and financial technology in India and the Southeast Asian region has heightened investor interest in technology startups in those countries.</p>
<p>According to a report by Kroll and Mergermarket titled &#8216;Staying ahead of change: Investing in disruptive tech in India and Southeast Asia&#8217;, private equity and venture capital investors nearly tripled their investments in tech deals to $18 billion in 2017 as compared to $6.5 billion in 2016. In the first quarter of 2018, 170 tech transactions worth $2.6 billion were recorded, as per the report.</p>
<p>&#8220;As investors look to enter the game early, VC funding has focused on startups. As more and more local companies in the region demonstrate the sustained performance and market reach required to secure larger mid- or growth-stage funding, PE investments in the tech sector may also begin to look up in 2018 and beyond,&#8221; the report said.</p>
<p>&#8220;In the next 12-24 months, both regions may see steadier international interest and buyouts as more investable targets start to reach the size and growth stage that render them ripe for the picking,&#8221; it added.</p>
<p>While India, given its the size of the market, took the lion&#8217;s share of the investments, it was followed by Singapore, which has seen a steady rise in tech investments. Since 2015, Singapore has been the second largest market, after India in the region, accounting for 33 per cent of deal value and 10 per cent of volume, said the report. With 7 per cent share each of the deal value and volume. Indonesia was also on investors’ radar.</p>
<p>Total deal value for the 218 transactions recorded in the Singapore between 2015 and Q1 2018 stood at $11.5 billion.</p>
<p>While domestic funds have been more prominent players in the Indian and Southeast Asian region, foreign investors have also in the last few years increased their interest and presence in this space. They, however, still are comfortable with investing along with local investors.</p>
<p>The report revealed that since 2015, Indian investors were involved in 40 per cent of investment instances with those from Southeast Asia in 20 per cent. On the other hand, US investors took part in 25 per cent of investment instances, followed by Japanese and European funds that accounted for 5 per cent and 4 per cent of the total activity respectively.</p>
<p>There has also been a growing interest from strategic corporate buyers that are looking to stay ahead of competition by investing in technology and innovation. While larger corporates have set up their their own VC arms such as Softbank, Google, Alibaba and Cisco, some others are opting to partner with  financial investors to share risk exposures and gain access to wider capital pools.</p>
<p>“As traditional banks continue to face pressure from nonperforming loans in India, and increasingly in Southeast Asia, technology companies seeking capital have been turning to private investors,&#8221; explains Reshmi Khurana, Kroll’s Managing Director and Head of South Asia.</p>
<p>&#8220;Meanwhile, governments in these geographies have been providing fertile ground for digitization and tech investment through policy initiatives, by incubating tech funds with traditional banks or by initiating e-governance projects to digitize government services, attracting investment in ancillary industries like enterprise solutions,&#8221; she added.</p>
<h3>SECTORS</h3>
<p><strong>E-Commerce</strong></p>
<p>With a large addressable population, and greater adoption of smartphones India and Southeast Asia coupled with digitisation of payment systems, e-commerce has accounted for 16 per cent of PE and VC tech investment volume and 25 per cent of value in India and Southeast Asia since 2015. In 2017, there were 88 transactions worth $3.7 billion.</p>
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<p>Southeast Asia is pegged as the fastest-growing internet population of approximately 260 million according to a research by Temasek and Google—with projections to reach 480 million by 2020.</p>
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<p>Indian e-commerce firms received a majority 72 per cent of the investments in the sector in the regions led by Flipkart raising $2.5 billion from Softbank in 2017. Indonesia came in second with with 12 per cent of PE and VC e-commerce investment volume and 3 per cent of value since 2015 with a notable $27 million funding by Indonesia- based e-commerce startup Sale Stock.</p>
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<p>Singapore contributed to 5 per cent of volume and 2 per cent of value, with online fashion marketplace Zilingo raising US$17m from Sequoia Capital India and Burda Principal Investments.</p>
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<p>Malaysia and Vietnam, with their thriving consumer markets also offer the promise of higher risk-adjusted returns.</p>
<p><strong>Fintech</strong></p>
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<p>In the area of fintech in Southeast Asia and India, 82 per cent of PE and VC transaction value and 58 per cent of transaction volume since 2015 were channelled into India, followed by Singapore with 8 per cent of value and 17 per cent of volume. Total deal value for the 201 fintech transactions recorded between 2015 and Q1 2018 stood at US$1.1 billion, according to the report.</p>
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<p>The vast unbanked population along with its positioning as a strong regional technology hub, has made India an attractive destination for investors keen on fintech. However, the report points out that to succeed in the longer run, the country needs to catch up in regulatory support. In 2017, Indian digital lending platform Capital Float raised $45 million in its Series C funding round.</p>
<p>On the other hand, the Monetary Authority of Singapore has set up a $21 million grant to drive fintech development, especially in AI and data analytics. Last year, Singapore-based online personal finance comparison portal Moneysmart raised $10 million.</p>
<p>Also, in 2017, Indonesia-based online consumer lending service UangTeman raised $12 million in a Series A funding round.</p>
<p>&#8220;A fundamental investment consideration is whether a fintech company can withstand the test of emerging and evolving guidelines and restrictions aimed at regulating this sector, as lawmakers attempt to reconcile growth imperatives with the need for guidelines and laws necessary to protect this sector,&#8221; the report said.</p>
<p><strong>Also Read:</strong></p>
<p><span style="color: #ff0000;"><strong><a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/asia-north-america-vc-q1-95681/" target="_blank" rel="noopener">Asia overtakes North America as most active region for VC deals in Q1</a></strong></span></p>
<p><span style="color: #ff0000;"><strong><a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/asias-largest-vc-deal-ever-helps-global-funding-to-break-records-in-2017-89733/" target="_blank" rel="noopener">Asia’s largest VC deal ever pushes global funding to break records in 2017</a></strong></span></p>
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Higher penetration of e-commerce and financial technology in India and the Southeast Asian region has also heightened investor interest in technology startups in those countries.

PE-VC tech investments in India & SE Asia treble to $18b in 2017 in one year

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PE-VC tech investments in India & SE Asia treble to $18b in 2017 in one year

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