Editor’s take: The week that was — June 13-18

We were once again reminded this week just how fragile an asset class cryptocurrencies can be as trouble brewed at the US crypto lender Celsius Network, which had a domino effect on the value of all major digital tokens.

Following Celsius Network’s announcement that it is freezing withdrawals and transfers due to “extreme conditions,” the combined market capitalisation of all crypto assets fell below $1 trillion on Monday — the first time after January 2001. Bitcoin, which has already shed half its value in 2022, touched an 18-month low of $23,300 and No.2 token ether dropped as much as 18%.

More sombre news arrived in the form of US inflation data for March, which showed the largest price increase since 1981, prompting the Federal Reserve to hike interest rates by 75 basis points — the biggest in 28 years — mid-week.

The broad macroeconomic uncertainty does not bode well for crypto tokens. “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter,” said Brian Armstrong, the CEO of crypto exchange Coinbase, which slashed 1,100 jobs or 18% of its workforce this week.

Crypto platform Gemini, founded by the Winklevoss twins, Coins.com, and Blockfi also announced layoffs.

In a move similar to Celsius Network, Hong Kong’s Babel Finance temporarily suspended withdrawals and redemption of crypto assets, as it scrambled to pay its clients after the recent slump.

Meanwhile, Singapore crypto hedge fund Three Arrows Capital is exploring options, including the sale of assets and a bailout by another firm, according to reports.

One exception, though, is crypto bourse Binance, which has opened 2,000 positions for hiring, CEO Changpeng Zhao said on Wednesday.

The developments at Celsius Network will almost certainly lead to increased US regulatory pressure on the sector.

Southeast Asia, though, appears to be more resilient.

In Indonesia, the growing interest in crypto is likely to continue given the country’s young and tech-savvy population. Crypto investors in the country outnumbered capital market investors in 2020, we reported in a deep dive on the sector. The growth has been catalysed by the birth of a slew of venture-backed crypto trading platforms — Tokocrypto, Indodax, and Pintu, among others — in the last few years.

Moreover, the Philippines and Vietnam will start feasibility studies this month on issuing central bank digital currencies (CBDCs).

While the crypto sector in Southeast Asia seems unscathed, trouble is brewing elsewhere. Crashing tech stocks and rising inflation are choking even the most-prepared startups.

Sea Ltd-owned Shopee, for instance, is said to be executing layoffs across multiple markets, including Thailand, Vietnam, Mexico, Chile and Argentina.

Shopee will also shut its Spanish operations, which were launched in Q4 last year. It had launched in France in October last year but pulled out after five months. Its European presence is now limited to Poland.

Besides Shopee, several venture-backed startups in the region — Lummo, LinkAja, JD.ID, Pahamify and Zenius, to name a few — have laid off hundreds of employees to cut their operating burn.

Another startup reviewing its operations is Grab. The super app is set to discontinue its quick commerce service in Bandung, West Java starting July. Grab had only recently introduced the 30-minute grocery delivery service called GrabMart Kilat in Indonesia in February.

Meanwhile, Grab Singapore bought and relaunched food reviews and restaurant reservations site HungryGoWhere.

Moving on to other top headlines.

Deep dives and scoops

Chinese tech giant Tencent Holdings bought a stake worth nearly $250 million in Flipkart from its co-founder Binny Bansal, showed regulatory filings.

Tencent continues to seal deals in India despite the government tweaking its FDI policy, in April 2020, primarily aimed at stonewalling Chinese investors. Tencent pumped in a total of $500 million in India in 2021, DealStreetAsia reported.

Another analytical piece we published this week was on India’s edtech sector, which grew leaps and bounds during the pandemic but now faces demand slowdown and waning investor interest. Edtech startups, unicorn BYJU’s included, have begun to experiment with an omnichannel presence.

Another detailed report was on the Vietnamese government’s move to promote blockchain in the country by setting up a forum called the Vietnam Blockchain Association that looks to build a legal framework for the industry.

We also reported on Indonesia’s investigation into the legality and ethics of Telkomsel’s investment in GoTo, and concerns that the move may be politically-motivated given that SOE Minister Erick Thohir is a potential presidential candidate.

We also brought exclusive news on HarbourVest Partners raising more than $870 million for its latest Asia-focused fund of funds (FoF) and its sidecar vehicles and Biocon Biologics looking to raise funding from Baring Private Equity (PE) Asia.

Reports

The Women in Southeast Asia’s VC Ecosystem 2022 report, available to our DATA VANTAGE subscribers, revealed that about 77% of Southeast Asia-based venture investors don’t have a single woman in an investment decision-making role. “Most firms do a decent job attracting diverse talent pools at the junior level but not as well higher up the ranks,” said Pinn Lawjindakul, partner at Lightspeed Venture Partners.

Another DATA VANTAGE report this week was on Indonesia’s telecom tower operators. The report looks at the incumbents and new rivals, their business models and track record, and what potentially lies ahead for the sector as demand grows for data services.

Interviews

Manish Taneja, the co-founder of India’s unicorn No. 102 Purplle, spoke to us this week about his company’s forthcoming plans. The online beauty products retailer, Taneja said, is around four years from making a public market debut and will do so only when it is profitable. “When you take money from small retailers, you better respect them. If they start losing money on you, you lose your reputation.”

Singapore-based Delight Capital’s Maisy Ng said the firm has launched a $50-million fund targeting early- and late-stage tech in Southeast Asia.

Swiss private markets firm Partners Group, meanwhile, expects more investment opportunities to emerge from the correction in tech valuations. “There is a whole generation of globally competitive SaaS businesses that have been created in the last ten years, and many of them will become multi-billion-dollar companies,” said Cyrus Driver, the firm’s managing director, private equity Asia.

US venture capital investor White Star Capital is launching multi-stage and digital asset funds to diversify its venture offerings, its general partner, Joe Quinn Wei said in an interview. White Star is actively raising money across several funds, including a $100-million second digital asset fund focusing on NFTs and blockchain.

The Zilingo saga

Singapore-based fashion B2B marketplace Zilingo, which has been embroiled in a tussle between lead investor Sequoia Capital and former CEO Ankiti Bose, is set to discuss its exit options on Monday, DealStreetAsia learnt.

The proposals range from a management buyout to complete liquidation, with different parties displaying signs of favouring different outcomes. Zilingo’s co-founder Dhruv Kapoor, for instance, is understood to have presented a plan to revive the company via an additional capital injection of under $10 million by existing investors.

The episode has cast a spotlight on Sequoia Capital India and Southeast Asia, which is Zilingo’s largest shareholder. Sequoia, a major venture capital player in India, is still grappling with complaints from startups about damaged trust and a defamation lawsuit by a former general counsel.

Separately, Sequoia Capital announced that it has raised $850 million for its first fund dedicated to the Southeast Asia region. Sequoia SEA Fund I is one of the three funds that Sequoia Capital successfully closed at an aggregate of $2.85 billion. The two other vehicles are SC India Venture VIII and SC India Growth IV. This is the first time that Sequoia has separately allocated for India and Southeast Asia.

The firm had earlier postponed the closing date of the three funds pending an investigation into a portfolio company.

And finally…

If, like me, you are among the many for whom coffee is an indispensable part of the daily routine, you would have missed frequenting the local café during the pandemic.

But habits, as they say, die hard and with COVID-induced restrictions being lifted, coffee enthusiasts are once again frequenting their old hangouts. And investors are taking note.

Flash Coffee, a grab-and-go coffee chain backed by Rocket Internet, closed a $32.8 million Series B1 funding round this week from White Star Capital and others.

In another such deal, Indonesian made-to-order drink brand Haus! raised a Series B1 funding round from Atlas Global Ventures and others. Kopi Kenangan, and Hangry, too, had raised funds recently.

Now that you’ve made it to the end of this newsletter, go grab a cuppa and enjoy the rest of the weekend!

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