state of tech venture investments in southeast asia - q1 2017

Q1 2017 State of tech venture

investments in Southeast Asia

/beta

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.

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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.

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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.

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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.

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No. of late stage deals

● Exits peaked in 2015.

● No clear pattern for series B

funding and above.

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“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 PaineManaging 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 TogelangFounding partner

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.

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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

No. of seed to series C deals by country

● Singapore is experiencing a

decline in number of funding

deals.

● Indonesia seems stable.

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● Malaysia’s number of deals

seems to have stabilized after

peaking in 2015.

● No clear pattern observed in

Vietnam.

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● Rate of investments appear

unchanged for Thailand and the

Philippines.

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● 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.

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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.

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● 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.

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● 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.

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● Since 2016, Singapore has no

longer been dominating funding

rounds in terms of deal value.

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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 QuekManaging partner

http://www.channelnewsasia.com/news/singapore/s-20m-to-be-set-aside-for-first-time-entrepreneurs/3615874.html

http://www.channelnewsasia.com/news/singapore/s-20m-to-be-set-aside-for-first-time-entrepreneurs/3615874.html

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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 BoedimanManaging partner

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.

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LimitationsThis 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.

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 [email protected] 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 [email protected].

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About Tech in Asia

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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.

state of tech venture investments in southeast asia - q1 2017

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