This week, we asked Southeast Asia’s most prolific investor, East Ventures co-founder and managing partner Willson Cuaca, to share his insights on the pandemic’s impact on the startup ecosystem in the region.
“It’s not a game-changer like previous crises. We call this a game reset,” Cuaca said, during a DealStreetAsia webinar on Thursday. “It’s like playing Super Mario Bros, and then someone accidentally hit the reset button. Everybody had to start all over again.”
It is no surprise then that the COVID-19 pandemic has turned the last few months into the busiest period of his career. If you missed the session, check out the highlights in this story. We will be sharing the entire transcript and the video with our readers this week.
The pandemic has severely impacted startups everywhere and the big guns are no exception. According to this Nikkei Asian Review story, the virus crisis has revealed the Achilles’ heel of Southeast Asia’s unicorn startups. Many of them have been forced to put profitability on the back burner and solely focus on surviving the winter.
Among the worst affected by the uncertainty of the COVID-19 pandemic is Indonesia’s travel booking unicorn Traveloka, which saw a near-total collapse of revenues in the last few months. The company, which had to lay off hundreds of employees, seems to have put the worst behind it as it announced a $250 million funding round led by an unnamed investor this week.
Our Indonesia reporter Ardi Wirdana, in his story, says the unidentified lead investor is Qatar Investment Authority (QIA), the $320 billion sovereign wealth fund of the Gulf country, while Singapore wealth fund GIC Pte and existing investors pumped in a little over $100 million in the round.
In another fallout from the pandemic, GIC reported its worst rate of return since the financial crisis in 2009 and warned that the global pandemic could further affect its performance. Earlier, Singapore’s state investment company Temasek Holdings had reported that its preliminary net portfolio value (NPV) slipped 2.2 per cent year-on-year to around S$306 billion, or $214 billion, by the end of March.
The economic tsunami also left Indonesian e-commerce startup Sorabel high and dry. The company (formerly known as Sale Stock) shut down operations recently. Our reporter Kristie talked to Jeffrey Yuwono and Kevin Widlansky, its former CEO and CFO respectively, to understand what went wrong at the firm. Sorabel had raised $27 million in funding from investors that included Gobi Partners, Golden Equator, Openspace Ventures, InnoVen Capital and Alpha JWC, and yet, could not be saved in the end.
Moving to India, where the pandemic is showing no signs of easing, food-tech unicorn Swiggy is laying off another 350 employees. This is the second wave of layoffs at the company, which had let go about 1100 employees in May.
Seeing a COVID-19 bounce?
The pandemic has given a huge boost to some of the e-commerce majors in the region. Indonesia’s Bukalapak, which had seen sales on its platform soar as people stayed home and made more online purchases, is in talks with a number of investors to raise at least $100 million in fresh funding. Its existing investors GIC and Shinhan are expected to top up.
We had earlier reported that Tokopedia had secured around $500 million from Temasek Holdings as part of its latest funding round, and is in talks with other investors, including US-based strategic, to raise $500 million to $1 billion more. Tokopedia is expected to announce the funding round this month.
We conducted our first investor sentiment survey in July to understand how leading private equity and venture capital firms view valuations, fundraising and market attractiveness, among other factors, in Southeast Asia and the larger Asia region in 2020 and 2021.
Some takeaways: Close to two-thirds of investors said they have allocated additional capital to their existing portfolio, and PE firms appear to have a higher appetite for new investments compared to VCs both this year and in 2021.
The full survey is available to our Research and Analytics subscribers, who will receive at least three insightful reports every month. Check out the subscription plans or sample a monthly trial.
My colleague Leslie Shaffer’s story explored how Southeast Asia’s startups and investors are repurposing a variety of technologies to fight the COVID-19 outbreak.
On the fundraising trail
Singapore-domiciled private equity firm Emerging Markets Investment Advisers (EMIA) plans to raise up to $120 million for its third fund, reported our Vietnam correspondent Ngoc. EMIA’s core markets include the frontier regions of Laos, Cambodia and Myanmar. The firm had raised $64.5 million and $19.65 million for its earlier vehicles.
Special situations-focused alternative investment manager Ares SSG (formerly known as SSG Capital) is understood to be raising $1.5 billion for its latest secured lending fund. It had closed its first such fund at $325 million in 2015 and its successor Fund II at $815 million in 2017.
One of the largest public pension funds in the US has committed up to $200 million to the second China-focused fund launched by DCP Capital. The PE firm’s debut USD and RMB funds had raised about $2.5 billion in total in April last year.
Hong Kong-listed marketing solution provider Activation Group has teamed up with state-owned investment platform Shanghai Innovital to set up a $143-million industry fund to invest in sectors including fashion, sports, entertainment, digital and creative marketing.
Cathay Life Insurance, a Taiwan-based life insurance subsidiary of conglomerate Cathay Financial Holdings, is set to invest $60 million in TPG Growth V LP, which is targeting to collect $4 billion.
Beijing-based healthcare investment firm Sherpa Healthcare Partners has reached the final close of its maiden USD fund that will make equity investments in early and growth-stage investments in the fields of biomedicines, medical diagnostic devices, and healthcare services.
China deals & IPOs
On the listings front, Chinese companies continue to witness robust activity.
Hangzhou Tigermed Consulting plans to raise up to $1.38 billion in a Hong Kong listing in what could be the largest healthcare transaction in Asia this year.
Aircraft device manufacturer Hefei Jianghang Aircraft Equipment is targeting to raise $148 million via a listing on the STAR Market of the Shanghai Stock Exchange
CanSino Biologics Inc, which is developing a COVID-19 vaccine candidate, plans to raise a total of $743 million via a STAR Market IPO.
The rising US-China tensions are set to force many Chinese companies to explore the option to delist from American stock exchanges. Chinese online travel giant Ctrip is in talks with potential investors about funding its Nasdaq delisting, while US-listed web search firm Sogou Inc has received a preliminary take-private offer from Tencent Holdings that values the firm at $3.5 billion.
Meanwhile, Meituan Dianping-backed electric vehicle maker Li Auto Inc’s stock jumped over 50 per cent following its debut on Nasdaq on Thursday after raising $1.1 billion in its IPO.
Among significant deals in Greater China, PE firm Permira bought a 60 per cent stake in the children-focused business of language tutor EF Education First, valuing it at around $1.5 billion; hotpot ingredient supplier Guoquan Shihui pocketed $60 million in Series C funding; and Tencent reached a deal to pick up a 5 per cent stake in Shanghai-listed office automation solutions provider Weaver Network for over $110 million.
India: Jio updates and more
India has seen several billionaire founders turn angel investors and launch venture capital arms. The latest to do so is hospitality startup OYO’s founder Ritesh Agarwal, who has floated a VC firm named Aroa Ventures that will invest between $1 million and $10 million in early-stage companies.
After raising over $20 billion in just four months for its unit Jio Platforms, Indian conglomerate Reliance Industries shows no sign of slowing down. Sovereign fund Qatar Investment Authority (QIA) is reportedly close to investing around $1.5 billion in the infrastructure investment trust (InvIT) that holds Reliance’s fibre-optic assets.
In other news, SoftBank-backed online grocery startup Grofers said it is planning a listing by the end of next year. The company has advanced its IPO plans in the wake of increased sales amidst the COVID-19 pandemic.
Blue Ashva Capital, which recently made the first close of its maiden SME and startup-focused fund at $60 million, is looking to clock investments primarily in traditional sectors that have a focus on sustainability, its founder Satya Bansal said in an interview.
Our best reads from the week
I want to leave you with some of our best reads from this week.
This story from Ardi explores the similarities between mom-and-pop stores in India, or kirana stores as they are called locally, and the warungs in Indonesia. Investors have been bullish on the opportunity to digitalise micro-merchants in India and they are now flocking to back startups working closely with warungs in the archipelago.
Sticking with Indonesia, we also had this story on ride-hailing giant Gojek’s super app ambitions as it has filed several fresh trademark applications for potential new offerings that include a public transit mapping service. In June, we had reported that the firm had filed for trademarks for a slew of new business services, including live video conferencing, financial management, corporate services and electronics repair.
China’s venture capital investments in Southeast Asia dived 83 per cent in the first six months of this year, according to this story available only to our Research & Analytics subscribers, on the back of challenges in cross-border dealmaking and lack of mega-rounds in the second quarter.