SE Asia saw record number of tech investments in H1, says Cento report

Photo by Pierpaolo Lanfrancotti on Unsplash

The number of technology investments in Southeast Asia hit a record high in the first six months of the year but the amount invested, at close to $6 billion, was lower than the same period last year, according to a report released by Singapore-based venture capital firm Cento Ventures.

The first half of the year saw at least 332 tech investments, up from 183 deals in the second half of 2018 and 177 in the first half of that year. Due to a surge in early-stage deals, which tend to be smaller in size, the total deal value reached $5.99 billion, lower than the $8.31 billion registered during the same period last year.

About 50 per cent of the total capital invested in this year’s first half came from “mega deals”, lower than 70 per cent in the same period last year, Cento said in its Southeast Asia Tech Investment – H1 2019 report.

“Small deals (less than $500K) experienced a spike in the first half of 2019, after remaining fairly flat between 2016 – 2018. We note that the increase in the early stage activities is partly driven by deals invested by a number of new accelerators/incubators such as Antler, SKALA, and Accelerating Asia,” the VC firm said.

Graphics from Cento Ventures

Indonesia and Singapore continued to capture the majority of investment activity in Southeast Asia but Vietnam’s late-stage companies such as Tiki, VNPay, and Vntrip helped it snap up a larger share of capital invested.

Singapore remains one of the major destinations of tech investments during the said period as later-stage firms such as QExpress, Carousell, and Taiger continue to raise larger rounds, according to the report.

The report excludes Sea Group, Grab, Lazada and other companies that have a truly regional footprint.

“Investment into Vietnam is increasing, making up 17 per cent of the capital invested in 2019 H1, a significant [increase] from 2018 where it only made 5 per cent of total capital invested. Investments into Malaysia, Thailand, and the Philippines appear to be consistent to previous years,” the report added.

In terms of sectors that attracted the most investments during the first six months of the year, online retail, along with multi-vertical companies, remains heavily funded. Other categories such as financial services, travel, logistics, and healthcare are also attracting increased investor attention.

Rise in Series B funding

Startups in Southeast Asia have been able to attract Series A funding at a broadly similar rate as those in the US and Europe. Series B remains a challenge but the report noted that the Series B follow-on funding rate in the region continues to improve.

Of the total number of deals that Centro recorded in the first half, 176 were pre-Series A, while 86 were Series A. There were 25 Series B and C+ investments each during the period. In comparison, there were a total of 39 Series B deals in the whole of 2018.

Graphics from Cento Ventures

The average deal size for Series B funding in the region also increased to $12 million in the first half, from $11.4 million for the entire 2018 and $10.7 million in 2017. For the purpose of the report, Cento defines Series B as those involving $3 million to $10 million with the investment purpose of building scale, either domestically or regionally.

“Although we believe the follow on funding rates will continue to increase through time, it is still too early to tell how Southeast Asia’s later stage funding environment compares to those of a more mature ecosystem,” the report said.

Exit conundrum remains

Landmark exits, however, were scarce in the January-June period. While the number of liquidity events in the first half was relatively high, the total proceeds remain low due to the absence of a landmark exit during the year.

The largest liquidity event in the first half was GOJEK’s $72-million acquisition of Coins.ph in the Philippines, Cento said.