South Asian venture capital fundraising touches decade-high record at $15b

Mexican pesos and U.S. dollar banknotes are seen in this picture illustration, November 3, 2016. REUTERS/Edgard Garrido

South Asia-based venture capital funds raised a whopping $15 billion in the past decade, marking the highest amount raised by any emerging region from 2008 till date, said a recent Preqin report.

The fundraising activity in the region was buoyed by Singapore that accounted for 54 per cent of the funds closed and 58 per cent ($8.6 billion) of aggregate venture capital raised in South Asia since 2008.

Overall, managers based in emerging markets closed almost 600 venture capital funds securing $47 billion since 2008, according to Preqin’s Private Equity and Venture Capital Spotlight May 2018 report.

Fund managers based in MENA and Latin America raised similar amounts of venture capital money since 2008 at $12 billion and $13 billion respectively. Besides, Israel and Brazil lead their respective regions, accounting for 45 per cent and 47 per cent of funds closed and 49 per cent and 59 per cent of aggregate capital raised respectively.

Felice Egidio, head of venture capital products at Preqin said, “Although fund managers based in emerging economies remain a relatively small group in the global venture capital fundraising market, we are seeing certain regions gathering force to become more significant markets. Singapore has driven South Asia into becoming the largest emerging market for venture capital fundraising, while Latin America-based funds are the most numerous group of emerging markets vehicles. As economies in these regions develop, it makes sense that most vehicles would be early-stage: these funds will be best-placed to take advantage of the opportunities available in these markets.”

Funds Present in Market

At the start of Q2 2018, 190 venture capital funds based in emerging regions were in market, with the largest proportion (30 per cent) being raised by managers located in Latin America, followed by firms based in Sub-Saharan Africa (26 per cent), South Asia (25 per cent) and MENA (19 per cent) .

The largest fund in South Asia is Singapore-based Sino-Singapore (Chongqing) Connectivity Private Equity, managed by UOB Venture Management, which is targeting CNY 100,000 million ($15.6 billion).

Early-Stage Funds Lead Fundraising

Early-stage strategies dominated the fundraising landscape over the past 15 months in Latin America, South Asia and MENA.

From 2017 to 2018 YTD, early stage funds accounted for the largest proportion of aggregate capital raised in emerging economies – 54 per cent in South Asia, 63 per cent in Latin America, and 67 per cent in MENA.  However, growth funds accounted for 50 per cent of aggregate capital raised in Sub-Saharan Africa, while early stage vehicles made up just 25 per cent.

In contrast, late-stage funds did not raise any capital across Latin America, South Asia and Sub-Saharan Africa, accounting for only 13 per cent of aggregate capital raised in MENA since the beginning of 2017, the report said.

Of the large venture capital funds closed in each of the four sub-regions in 2017, three were early-stage vehicles, while the largest fund closed in Sub-Saharan Africa was a growth vehicle. United Arab Emirates-based Mubadala Ventures Fund I was the only top fund that was not focused on domestic investments but was focused on the US instead.

Within emerging regions, individual larger economies accounted for significant proportions of the capital raised over the past decade. In Sub-Saharan Africa, Mauritius-based funds represented 44 per cent of venture capital raised since 2008. In MENA, Israel accounted for 49 per cent, and in South Asia and Latin America Singapore- and Brazil-based vehicles each represented 59 per cent of capital respectively.

“The majority of fundraising activity in emerging markets remains focused on a small number of larger economies within these regions. Singapore and Brazil account for more than half of capital raised in South Asia and Latin America respectively, while Israel and Mauritius represent significant proportions of fundraising in MENA and Sub-Saharan Africa. These markets are growing as places for venture capital fund managers to be based, but if emerging markets more widely are to feel the benefits of venture capital investment, fund managers in these countries must look beyond their own borders,” Egidio said.

Deals & Exits

Since the start of 2017, emerging markets saw 1,168 venture capital deals valued at an aggregate $13 billion. South Asia accounted for the largest proportion of both the total number of deals (43 per cent) and aggregate deal value (61 per cent), led by the $2 billion Series G financing of Singapore-based Grab Holdings in July 2017.

On the exits front, the MENA region lead with the most exits (36) and highest aggregate exit value ($1.9 billion). The majority (94 per cent) of exits in the MENA region were based in Israel, led by the $580 million trade sale of FZ-LLC.