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State of tech venture investments in Southeast Asia - Q1 2017

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Using insights from Tech in Asia's database, this report delves into how tech venture investment is doing in Southeast Asia, and where it might go to next.

Published in: Technology

State of tech venture investments in Southeast Asia - Q1 2017

  1. 1. Q1 2017 State of tech venture investments in Southeast Asia /beta
  2. 2. About this report Tech in Asia tracks tech venture funding across Asia. Our data, comprising over 37,000 companies, goes back to 2012. This quarterly report looks at the most recent developments in Southeast Asia’s tech scene in terms of funding activity - and how it fits into the bigger picture. In this report, Southeast Asia encompasses the following countries: Singapore, Indonesia, Malaysia, Thailand, Vietnam, and Philippines. Page 2 of 14
  3. 3. Key takeaways Southeast Asia’s bleak streak continues in the first quarter of 2017. The number of investment deals as well as the total amount put into startups continues to decline. It’s a trend that started in 2016 as tech company valuations in Silicon Valley and India deflated, causing investors to scale back their optimism. While 2017 is off to a rough start, it could still rebound as investors and governments continue to put money into startups and startup-related initiatives. While fintech may carry the hype, we may see new investment themes emerge once venture capitalists identify the next gold mine after ecommerce. Page 3 of 14
  4. 4. Total deal volume from seed to series C ● Number of deals hits a 4-year low and is back at 2014 levels. ● However, compared to 2014, the mean deal value is still much stronger. Page 4 of 14
  5. 5. No. of early stage deals ● Number of seed stage deals in Q1 has more than halved from its 2015 peak. ● Series A funding saw two weak quarters, bringing it back to 2014 levels. Page 5 of 14
  6. 6. No. of late stage deals ● Exits peaked in 2015. ● No clear pattern for series B funding and above. Page 6 of 14
  7. 7. Page 7 of 31 “2016 was a reality check year for everyone, but the strongest 10 to 15 percent of deals will still be funded. Overall, it was a slow year for most sectors so revenues are hit with same or more marketing spend. Because of that and the correction in India, Japan, and Korea, investors are more cautious, hence lengthening fund raising cycles. It kinda brought the ecosystem through a quick gut check and regrouping.” Jeffrey Paine Managing partner Venture capitalists speak: reality check “The downward funding trend in Southeast Asia in general may be caused by the market valuation adjustment from Silicon Valley that we all saw at the beginning of 2016. At the same time, this circumstance marked the start of a more rational market that motivated investors to be more selective with their funding decisions.” Sebastian Togelang Founding partner
  8. 8. Median seed stage funding amounts ● Median seed stage funding rounds have increased in value consistently. ● Remains to be seen of larger seed rounds lead to more success for startups. Page 8 of 14 Year/quarter Median (US$) 2017/1 578,000 2016/4 888,000 2016/3 300,000 2016/2 498,000 2016/1 415,000 2015/4 710,000 2015/3 366,000 2015/2 119,500 2015/1 385,000
  9. 9. No. of seed to series C deals by country ● Singapore is experiencing a decline in number of funding deals. ● Indonesia seems stable. Page 9 of 14
  10. 10. No. of seed to series C deals by country ● Malaysia’s number of deals seems to have stabilized after peaking in 2015. ● No clear pattern observed in Vietnam. Page 10 of 14
  11. 11. No. of seed to series C deals by country ● Rate of investments appear unchanged for Thailand and the Philippines. Page 11 of 14
  12. 12. No. of seed to series C deals by country ● Singapore, Indonesia, and Malaysia form the most active funding markets, in that order. ● Q1 saw the least contributions from countries other than Singapore and Indonesia. Page 12 of 14
  13. 13. Total value (US$m) of seed to series C deals by country ● Singapore saw a consistent decline in total deal value in 2016. ● Indonesia remains consistent. Page 13 of 14
  14. 14. Total value (US$m) of seed to series C deals by country ● Malaysia is seeing a sharp spike. However it’s largely due to one startup (Netflix competitor iFlix). ● The drastic changes from quarter to quarter are caused by startups not disclosing how much they’ve raised, resulting in incomplete data. Page 14 of 14
  15. 15. Total value (US$m) of seed to series C deals by country ● Thailand saw a strong 2016. ● The drastic changes from quarter to quarter are due to startups not disclosing how much they’ve raised, resulting in incomplete data. Page 15 of 14
  16. 16. Total value (US$m) of seed to series C deals by country ● Since 2016, Singapore has no longer been dominating funding rounds in terms of deal value. Page 16 of 14
  17. 17. Page 17 of 31 The downward trend is to be expected in the next quarter as the investment scene is looking for the next flavour of the season. Fintech (payments), marketplaces, SaaS, Uber-like startups are all seeing possible consolidation in Asia. VCs at Series A and beyond also have too many such portfolio companies and see no need to invest further in the same verticals. It is not a matter of lack of funds from VCs. There are is still a lot of funds available and even more expected with the opening of new funds across Southeast Asia. In Singapore, the new Monetary Authority of Singapore regulations which reduces the requirement to be a VC will likely see more funds flowing in. The consolidation of the new SG Startup funding grants scheme by SPRING Singapore will likely push out another few seed and Series A investments. VCs speak: prospects for 2017 Once there is clarity in the investment scene (as to which verticals are hot), you will find that the funding dealflow will pick up across seed and series A stages in the later part of the year to early 2018. Investment will not likely be affected by external economic factors as Southeast Asia is still a very nascent and large opportunity. A clue on possible sectors that’ll become hot is to understand what Southeast Asia and Asia in general are in dire need of disrupting. Media, agricultural, infrastructural, energy, and smart cities are likely the next themes. Christopher Quek Managing partner
  18. 18. Page 18 of 31 B2B startups will stay strong, fintech is just breaking out, and consumer-facing companies will start to return. Traditional businesses are still a strong foundation for regional growth. They are now starting to understand what technology can do for them. Learning and experimenting, as well as business spend in IT will continue to grow well in the next 5 to 10 years. Looking at the last five years, 70 percent of the top Southeast Asian startups are still in B2C. With the growth of the region, increased mobile data usage, entertainment on mobile will return with a force, whether it’s music, videos, games or apps. Jeffrey Paine VCs speak: prospects for 2017 Fintech is still getting the most investments as it grows quite significantly. Other sector that might have a good interest including healthtech, edutech, or more traditional sector that’s moving online. Big data, IoT and other emerging technologies are also candidates for seed investment. I believe companies with a strong revenue and cashflow model will generate more interest from investors as they will offer a better liquidity than startups that focus on building a pure assets or technologies. Andi Boediman Managing partner
  19. 19. Methodology The Tech in Asia database comprises more than 37,000 tech ventures, with a focus on Southeast Asia, India, and China. It grows daily. We scan international and local news, database entries, startup and VC firms’ websites for updates. The report only includes funding deals from seed to series C as late stage rounds are usually in the hundreds of millions of dollars. If included in the charts, they prevent viewers from observing the health of the startup ecosystem. Also, most startup funding rounds occur below the series D stage. Funding round stages are labelled based on what the startup or press coverage discloses. Rounds that don’t disclose the stage are classified “seed” if below US$1m, and “undisclosed” if above US$1m. ● Page 4: Total deal value only includes funding rounds with disclosed deal values and disclosed funding stages. ● Pages 6, 9 to 16: Excludes rounds which did not explicitly state which round it belongs to. Includes crowdfunding and grants. ● Page 7: Other rounds do not have sufficient sample sizes to draw good median values. Page 19 of 14
  20. 20. Page 20 of 14 Limitations This report represents Tech in Asia’s best efforts at collecting and presenting data on the tech ecosystem. However, there are limitations that we hope to address in future reports. For example, some startups choose not disclose their fundraising activity, which means they do not factor into this report. Startups often do not reveal the amount of funds raised nor the stage of a particular funding round. Because of these reasons, our data for each market varies in completeness. Nonetheless, we believe this report contains enough data to act as a guide.
  21. 21. Let’s work together If you find the data in this report incomplete in some way, and if you possess information that could help make our future efforts more complete, we’d love to work with you. If you own a startup or have invested in a startup, search for it on our website. If there’s missing funding data, contact the research team at data@techinasia.com to let her know what information is missing. You can create a company profile here if your company’s missing from Tech in Asia. We’d also love to explore a partnership if your organization publishes its own white papers or research reports, or if you’re looking to license our data Contact us to start a conversation. For media inquiries, reach out to editors@techinasia.com. Page 21 of 14
  22. 22. About Tech in Asia Page 22 of 14 Tech in Asia is a media, events, and jobs platform on a mission to build and serve Asia’s tech and startup community. Tech in Asia counts East Ventures, Fenox Ventures, Marvelstone, Softbank, Walden International, Y Combinator, and Facebook co-founder Eduardo Saverin amongst its list of investors.

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