After grabbing record technology funding in 2018, Southeast Asia looks set to sustain the growth momentum in 2019 as Grab, Go-Jek, Tokopedia and Traveloka continue to attract capital, according to a report by venture capital firm Cento Ventures.
According to the report, internet technology related investments in Southeast Asia almost doubled to $11 billion in 2018 from $5.8 billion in 2017. Five companies accounted for 70 per cent of that total — Grab ($3 billion), Lazada ($2 billion), Go-Jek ($1.5 billion), Tokopedia ($1.1 billion) and Sea Group (a $575-million convertible note offering).
Besides the unicorns, the report notes that there is a growing number of late-stage companies in the region that are raising larger rounds and inching towards a billion-dollar valuation. Some of the notable deals in 2018 involved PropertyGuru ($180-million capital raise in 2018), Ninja Van ($85 million), Carousell ($85 million) and Carro ($60 million).
Source: Cento Ventures
Series B funding gradually growing
Cento also compared the rate of follow-on fundraising for Southeast Asian startups that raised seed funding between 2013 and 2015 with startups from the US and Europe. Series A funding for this region’s startups grew broadly in line with international peers. When it comes to Series B funding, the 2013 cohort had a notable increase in funding rate, while the 2014-2015 cohort registered a more gradual rise.
“We believe the follow-on funding rates will continue to increase through time. However, it is still too early to tell how Southeast Asia’s later stage funding environment compares to those of a more mature ecosystem,” the VC noted in its report.
Indonesia and Singapore dominate
Indonesia accounts for more than 70 per cent of the capital invested in Southeast Asia, thanks to the massive rounds raised by its unicorns. However, bear in mind that Cento does not count the likes of Grab, Sea and Lazada as Singapore startups due to their multi-country presence. Count them in and the data would tell a different story.
Among other countries in Southeast Asia, Vietnam stood out by reporting the highest ever investments in 2018, at a time when Malaysia, Philippines, and Thailand witnessed a decline from 2017 levels.
“For the year ahead, we think Southeast Asia will continue to gain the attention of institutional investors looking for growth markets outside of China and India,” said Cento.
“Alternative assets such as venture and subsets of private equity in Southeast Asia will be the beneficiaries. We also expect to see a trend towards the emergence of value-chain specific funds and fund managers,” it added.
With IPOs still few and far between in the region, exits through acquisitions remain the mainstay for liquidity in the ecosystem. According to the Cento report, exits in the $50-100 million range are increasing in frequency, with higher-end valuations being in the $150-300 million range.
A majority of the acquisitions have been made by cash-rich unicorns like Grab, Go-Jek and Traveloka as they look to expand into newer verticals. Grab and Go-Jek have been focusing on fintech acquisitions, while Traveloka was in the news in 2018 for acquiring regional travel companies.
Singapore-based acquirers contributed the largest number of deals, while Chinese companies were the largest spenders.
“We think high-quality startups exist beyond a few heavily-invested parts of the region and there has been some improvement in bridging the funding gaps that remain. Every year that brings more successful exit stories will help inspire more founders to start companies and attract more investors to the ASEAN region,” said Cento.