Venture capital (VC) funds with a mandate to invest in Southeast Asia saw a slowdown in momentum in the first nine months of this year due to the dislocation caused by the COVID-19 pandemic, finds our latest report.
According to SE Asia’s VC Funds: Q3 2020 Review, only nine Southeast Asia-based VC funds held a final close from January through September this year, versus 19 and 14, respectively, in the same period in 2019 and 2018.
While local VCs pushed back on their fundraising milestones or slashed targets, foreign VCs—those not headquartered in the region but with Southeast Asia among their target markets—closed six funds in the first nine months of 2020. This compares with one fund each in the same period of 2019 and 2018.
Number of final closes in 9M19 vs 9M20
Among Southeast Asia-based VCs, Eduardo Saverin’s B Capital Group, which focuses on investment in growth-stage startups, was the largest fundraiser so far in 2020 with its $820 million second fund. Indeed, early and growth-stage funds generated most of the fundraising value in the first nine months. Only one seed fund secured a final close, pushing the median fundraising value in the region higher relative to last year.
Beyond closed funds, there are 61 VC funds currently in the market to raise capital for Southeast Asia, of which 49 are from VCs that are headquartered in the region, mostly in Singapore. Singaporean VCs launched 12 new funds this year with a total target of $1 billion. Two have secured interim closes worth $250 million in total.
Overall, the fundraising performance of Singaporean VCs slowed down this year. As of September, 14 funds had secured new capital worth $1.3 billion, down from 18 funds and $1.8 billion in the same period last year.
The total value of final closes by Indonesian VCs nearly doubled this year on account of a single fund, MDI Ventures’s $500 million tech fund. Meanwhile, eleven Indonesian VCs are currently in the market to raise funds.
For VCs based in the rest of Southeast Asia, 2020 has been exceptionally hard. Only one VC firm managed to reach a final close as of September versus seven in the first nine months of last year.
With the pandemic rearing its head again in Europe and a spike in cases in the US, investor sentiment is likely to be tepid in the near term.
“In the coming years, political uncertainty, intensified by the COVID-19 pandemic, will have an impact on investment strategies and asset allocation of VC and PE funds,” noted Openspace Ventures co-founder and partner Hian Goh.
“A research study by Coller Capital, showed, however, that investors expect Southeast Asia to see relative political stability vis-à-vis other emerging nations and jurisdictions in the near term.”
As limited partners continue to be cautious and selective, many fund managers, especially the relatively newer ones in Southeast Asia, will have a harder time raising new capital.
“With travel restrictions likely to continue into 2021, some (newer and smaller) funds may have challenges raising a subsequent fund, given they could have deployed a fair bit of their dry powder and their investments are yet to bear fruit/ traction. Hopefully, this will help drive some discipline in valuation,” said Vertex Ventures partner Carmen Yuen.