Over a dozen VC transactions, PE exits mark Myanmar dealscape in 2017

Photo: Juliet Shwe Gaung. Flag of the Union of Myanmar.

Myanmar’s fledgeling startup ecosystem got a boost in 2017 with over a dozen venture capital deals recorded in the frontier market, according to data compiled by DEALSTREETASIA. The country’s startups attracted interest from both local and overseas investors who placed their bets on both tech and non-tech business models.

What has led to the growing interest from the investor community is the potential of telecom connectivity-based verticals such as consumer internet, a civilian government in place and the vast untapped opportunities across every sector, both new economy and traditional.

Some of the startups that received funding in Myanmar include online property platform ShweProperty.com, jobs portal JobNet.com.mm, cloud computing firm Code2LAB, local app creator Myanmar Online Creations, search firm Bindez, freelancing platform Chate Sat, animated comic app White Merak, and mobile learning platform DedaaBox.

“It has been a very busy year for VC in Asia, and Myanmar has received a lot of capital, thanks to the arrival of young talent looking to solve problems in addition to excellent demographics and smartphone penetration. I think it is important for these startups to focus on good capital allocation and core business growth and not lose focus of all the opportunities that are available in Myanmar,” said Nicholas Thibeault, vice president, business development at financial advisory firm Thura Swiss Ltd.

DEALSTREETASIA picked some significant developments in 2017 that will outline trends in 2018 in the areas of investments, private equity activity, startup consolidation and Yangon bourse traction.

Early-stage action

A handful of venture capital firms have been early movers into the market including Myanmar-focused BOD Tech, Singapore’s Vulpes Investment Management, Phandeeyar, Theta Capital and Japan-based Globalway Ventures.

The other trend that is boosting the startup environment in the country is the growing number of accelerators and startup competitions that are helping startups move to the next level. For instance, Phandeeyar has taken in a second cohort for its accelerator programme while  Switzerland-based Seedstars, which has already held two pitching competitions, is backing tech startups who are expanding operations in Myanmar.

Companies like New Westminster Co Ltd organised University Hackathon Challenge in 10 universities while Impact Hub Yangon participated in the accelerator. The Myanmar Young Entrepreneurs Association and Tiger Mekong also held some pitching events for both tech and non-tech entrepreneurs. Last year also saw impact-focused Rockstart Impact launch its first accelerator programme in Myanmar for both tech and non-tech companies.

Global startups drive into Myanmar

In a sign of growing maturity of the market, US-based ride-hailing major Uber and Singapore’s Grab announced their forays into Myanmar in early 2017. The entry of these two players was expected but not this soon, according to local industry observers. Prior to the entry of the major players, Myanmar already had two home-grown app-based taxi brands, Hello Cabs, which entered the market in 2015, and Oway Ride, operational since 2016.

Five months after entering Myanmar, Grab announced that it would commit $100 million over the next three years to deepen its presence in the country. The firm said it was looking to launch its payment arm, GrabPay, in Myanmar.

Exits in PE & VC landscape

Despite the long-term investment horizon for a market like Myanmar, the country saw a couple of significant exits in 2017.

“PE has only really been deploying capital for a few years, and the timeline of these first investments will likely be longer. Many investments will be maturing in the next few years, plus the arrival of new investors and corporations into Myanmar will provide a better climate for secondary buyouts and cross-border M&A,” said Thibeault.

In October 2017, U.S. private equity firm TPG exited spirit maker Myanmar Distillery Company by selling its entire 50 per cent stake in a deal estimated to be worth close to $500 million. Its stake was bought by Thai Beverage owned by billionaire Charoen Sirivadhanabhakdi. TPG had invested between $100 million and $200 million in the company over the last two years.

Last month, SGX-listed investment holding company SHC Capital Asia Ltd bought tourism firm MM Myanmar Pte Ltd from Yoma Strategic Holdings, First Myanmar Investment Company and Exemplary Ventures Ltd for about $51 million.

M&A pursuits in startup space

There were sporadic M&A deals in the startup space, largely in the fintech and consumer internet spaces. Myanmar mobile payment firm MyPay Ltd bought Singapore’s social and mobile payment platform fastacash while another mobile payments provider, ONGO, backed by Ronoc Asia, saw a 22 per cent stake being acquired by the National Bank of Canada.

Myanmar game developer My Play Co Ltd was also acquired by ASX-listed iSentric Limited for about $4.5 million in a deal that will help My Play expand into additional markets and establish pan-Asian social gaming products.

Leading domestic travel portal FlyMya made two acquisitions in the year. In April, it acquired SWITCH.CM, a London-based travel reservation developer, for $600,000. In December, FlyMya acquired Go-Myanmar.com, a travel information website for a six-digit US dollar sum.

Opportunities in PE space

US private equity major TPG is known to be looking at the opportunities in the infrastructure space for a possible investment in the ticket size of between $100 million to $200 million.

Another Myanmar-focused PE firm Delta Capital is targeting to close its second vehicle, Myanmar Opportunities Fund II, at $100 million. By mid of 2017, it had managed to raise $50 million.

Daiwa PI Partners, the investment arm of Daiwa Securities Group, is looking to invest about $50 million over the next two years in Myanmar. It invested $6.26 million into internet service provider startup, Frontiir, in its maiden deal. It is targeting to close its second deal soon and is looking at spaces including communications, finance, online business and consumer.

Another player in Myanmar’s PE space is Singapore-based Credera Group which is currently raising a $100 million fund. By March 2017, it had secured a $50 million soft commitment for its fund. Meanwhile, Myanmar-focused Golden Rock Capital is also reportedly raising a $100 million fund.

“I think PE investment will continue to flow into the sectors that are necessary goods and core requirements of the emerging middle class. The F&B sector has a plethora of opportunities and I would expect to see more investment in the manufacturing and distribution capabilities of such consumer goods. Investors will continue to chase e-commerce opportunities and industries linked to this growth such as logistics,” said Thibeault.

YSX traction

2017 saw First Private Bank Ltd become the fourth company to list and trade on the YSX. Another company, TMH Telecom Public Co Ltd (TMH), has been approved to list on the bourse.

First Myanmar Investment Co Ltd was the first company to be listed on the exchange in March 2016, followed by Myanmar Thilawa SEZ Holdings Public Ltd, Myanmar Citizens Bank Ltd and First Private Bank.

The bourse will soon welcome at least two other companies, Great Hor Kham and Myanmar Agribusiness Public Corporation. Last year, an official from YSX estimated that it could see at least 10 companies joining the exchange but failed to realise the targets. YSX has been criticised for poor trading activity and also its restrictive policies that bar foreigners from participating in trading and listing.

Updated Companies Law

One of the significant legislative changes in Myanmar in 2017 was the updated Companies Law that now defines a foreign company as one with a stake of more than 35 per cent held by a foreign corporation or individual or both. The updated law is expected to come into force only after August 2018.

Previously, only 1 per cent of a foreign shareholding classified a firm as an overseas entity. The changes will unlock previously restricted sectors to foreigners and will allow foreign investors to invest in sectors such as banking and insurance.

Thibeault said the updates will have a huge impact on the investment climate in the country. “I would expect to see more investment from corporations looking to dip their toe in the market, acquiring minority positions in Myanmar companies. They can ensure the investment has a strategic fit and offers the opportunity they anticipated, at which point they will look to acquire a more meaningful stake,” he said.

Also Read:

Deal-making opportunities galore as Myanmar targets $11b FDI by 2030

Myanmar-focused PE firm Credera looks to set up greenfield ventures in finance, healthcare and education

Daiwa PI Partners seeks to invest up to $50m in Myanmar within two years

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.