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VCs give us their predictions for startups and tech in Southeast Asia in 2019 – TechCrunch

VCs give us their predictions for startups and tech in Southeast Asia in 2019 – TechCrunch

The brand new yr is properly underway and, earlier than January is out, we polled VCs in Southeast Asia to get their ideas on what to anticipate in 2019.

The variety of VCs in the area has elevated massively in current years, in no small half on account of forecasts of progress in the tech area as web entry continues to shoot up amongst Southeast Asia’s cumulative inhabitants of greater than 600 million shoppers.

There are different elements, together with financial progress and rising center courses, however with greater than Three.eight million individuals turning into first-time web customers every month — because of smartphones — Southeast Asia’s ‘digital economy’ is tipped to greater than triple to succeed in $240 billion by 2025. That leaves loads of alternative for tech and on-line companies and, by extension, enterprise capitalists.

With a VC corpus that now numbers dozens of funding companies, TechCrunch requested the individuals who write the checks what’s on the horizon for 2019.

The one rule was not more than three predictions — under, in no specific order, is what they informed us.

Alberty Shyy, Burda

Funds will proceed to take a position aggressively in Southeast Asia in the primary half of this yr however capital will tighten up by This fall as funds and corporations put together for a potential recession. I feel we’ll see loads of corporations opportunistically exit to fundraise in Q1/Q2 to reap the benefits of a bull market.

We’ll see two to 3 newly-minted unicorns from the area this yr, after a relative lull final yr.

It will (lastly) be the yr that we begin to see some consolidation in the e-commerce scene

Dmitry Levit, Centro

A good portion of capital returned by upcoming U.S. IPOs to institutional buyers can be directed to progress markets outdoors of China, with India and Southeast Asia being the likeliest beneficiaries. Various belongings similar to enterprise and subsets of personal fairness in rising markets will enter their golden age.

The withdrawal of Chinese language strategic gamers held again by weakened home financial system, prudent M&A by native strategics and ongoing warning amongst Japanese, Korean and international corporates, mixed with ongoing valuations exuberance by late-stage buyers allocating funds to Southeast Asia, will proceed holding again giant liquidity occasions. Save maybe for a roll-up of an area champion or two into a worldwide IPO. Fundraising will get extra troublesome for a few of Southeast Asia’s bigger unprofitable market leaders. Lack of marquee liquidity occasions and curtailed entry to late-stage capital for some will lead to some seen failures (our cash is on the subsidy-heavy wallets!) and a short lived burst of short-term skepticism round Southeast Asia as an funding vacation spot in the direction of the top of 2019.

The development in the direction of the emergence of value-chain particular funds and fund managers will proceed, as digitalization is reaching ever additional into quite a few business sectors and as Southeast Asia hosts an growing portion of worldwide provide chains. We foresee at the very least dozen new enterprise companies and automobiles rising in 2019 with clear sector-led funding thesis across the place of Southeast Asian economies in the worldwide worth chains of trend business, agriculture and meals; labour, healthcare providers; manufacturing, development tech and so on, with funding groups which have the required experience to unravel this growing complexity.

Willson Cuaca, East Ventures

Jakarta turns into Southeast Asia’s startup capital surpassing Singapore in phrases of the variety of offers and funding quantity.

As Indonesia’s startup scene heats up, regional seed and collection A funds transfer away from Indonesia and goal Vietnam, Malaysia, Thailand and the Philippines (in market precedence order).

Southeast will get two new unicorns.

Rachel Lau, RHL Ventures

North Asian corporations will present well-needed liquidity as they withdraw capital from developed American and European markets because of the Federal Reserve’s actions. The FED raised rates of interest and decreased the dimensions of its stability sheet (by not changing the bonds that have been maturing at a price of $50 billion a month). This has been seen in the current fundraising train by Southeast Asian unicorns. Seize has just lately seen a powerful listing of North Asian buyers comparable to Mirae, Toyota and Yamaha . A current stat said that 85 % of the funding of Southeast Asia startups have gone to billion greenback unicorn corresponding to Seize and Gojek, bypassing the early stage startups which might be extra in want for funding, this development is predicted to proceed. Subsequently, we’ll see early-stage corporations and enterprise capitalists turning into extra targeted on producing money move from working operations as an alternative as fundraising actions grow to be harder.

A progress in urbanization in Southeast will create new job alternatives in small/medium companies, as evident in China. At present, solely 12 % of Asia’s city inhabitants stay in megacities, whereas 4 % stay in cities of fewer than 300,000 inhabitants. New corporations will see the blurred strains between brick and mortar companies vs pure on-line companies. Prior to now yr or so, we’ve got seen extra and extra offline companies logging on and extra on-line companies going offline.

Fertility charges in the Philippines, Laos, Cambodia, Indonesia and Vietnam exceed 2.1 births per lady — the extent that sustains a inhabitants — however charges under 1.5 in Singapore and Thailand imply their populations will decline with out immigration. As we see extra startup actions coming to Southeast Asian nations, we anticipate to see extra certified overseas expertise shifting to the area vs staying in low progress American and European nations.

Kay-Mok Ku, Gobi Ventures

First Chinese language “Seaward” Unicorn in Southeast Asia. In recent times, a rising variety of Chinese language startups are concentrating on abroad markets from the get go (referred to as Chuhai 出海 or “Seaward”). These Chinese language entrepreneurs sometimes deliver with them greatest practices in shopper advertising and product improvement honed by a hyper-competitive residence market, supported by robust, devoted technical workforce based mostly out of China and more and more capitalized by Chinese language VCs which have raised billion-dollar funds.

Consolidation amongst ASEAN Unicorns. Whereas ASEAN now boasts 10 unicorns, they’re duplicative in the sense that multiple exists in a specific class, which is unsustainable for winner-takes-all markets. For instance, in the ASEAN ride-hailing area, whereas one unicorn is busy with regional geographic enlargement, the opposite merely co-exists by staying targeted on scope enlargement inside its residence market. This can by no means occur in a single nation market like China however now that the ASEAN experience hailing unicorns are lastly locking horns, the stage could also be set for a Didi-Kuadi like state of affairs to unfold.

ASEAN jumps on Chinese language 5G bandwagon. The tech world in the longer term will doubtless bifurcate into American and Chinese language-led platforms. As it’s, rising markets are adopting Chinese language enterprise fashions based mostly on bite-sized cost and have embraced Chinese language cellular apps typically bundled with low cost Chinese language smartphones. Wanting forward, 5G might be a recreation changer as its impression goes past smartphones to generic IoT units, having strategic implications for industries corresponding to autonomous driving. Consequently, the US-China Commerce Conflict will possible evolve right into a Tech Warfare and ASEAN can be pressured to decide on aspect.

Darren Tan, Golden Equator Capital

We’re excited by progress in the AI and deep tech sectors. The main target has usually been on consumer-focused tech in Southeast Asia as an rising market, however we’re beginning to see proprietary options emerge for industries corresponding to medtech and fintech. AI additionally has nice applicability throughout a variety of shopper sectors in decreasing reliance on manpower and creating value financial savings.

Knowledge analytics to uncover organizational efficiencies and buyer tendencies will proceed to be much more extensively used, however there may even be higher emphasis on securing such knowledge particularly confidential info in mild of a number of high-profile knowledge breaches in 2018. Instruments enabling the gathering, storage, safe-keeping and evaluation of knowledge will probably be important.

We’re seeing the emergence of extra institutional funds from North Asia. To date it has predominantly been Chinese language tech giants like Tencent and Alibaba, now we’re beginning to see Korean and Japanese establishments putting higher emphasis on funding in the Southeast Asian area.

Vinnie Lauria, Golden Gate Ventures

Much more capital flowing from U.S. and China into Southeast Asia, with VCs from each places quickly to open workplaces in the area

A recent wave of Collection A investments into Vietnam.

Ten exits over $100 million.


Amit Anand, Jungle Ventures

The emergence of a monetary providers tremendous app, assume the Meituan or WeChat however solely for monetary providers: The Southeast Asian millennial is likely one of the most underserved buyer from a monetary providers perspective whether or not it’s funds, shopper items loans, private loans, private finance administration, investments or different monetary providers. We’ll see the emergence of digital platforms that may combination all these associated providers and present a one cease monetary providers store for this digitally native shopper.

Digitisation of SMEs might be new fintech: Southeast Asia is residence to over 100 million SMEs which might be on the cusp of digital transformation. Generational change in possession, native governments push for digitization and elevated globalization have created an ideal storm for these SMEs to undertake cloud and different digital applied sciences at neck-breaking tempo. Startups focussing on this phase will get mainstream consideration from the enterprise group over the subsequent few years as they appear for new industries which are getting enabled or disrupted by know-how.

Kuo-Yi Lim and Peng Ong, Monk’s Hill Ventures

Lyft and Uber go public and present the path to profitability for different rideshare companies. This has constructive impact for the regional rideshare gamers but in addition places strain on them to exhibit the identical economics in ridesharing. Regional rideshare gamers double down on super-app positioning as an alternative, to exhibit worth in different methods as rideshare enterprise alone might not attain profitability — ever.

The commerce warfare between China and the US reaches a truce, however a basic sense of uncertainty lingers. That is now the brand new norm — issues are much less sure and corporations need to plan for extra opposed situations. Within the brief time period, Southeast Asia advantages. Corporations — Chinese language, American and so on — see Southeast Asia because the impartial floor. Funding pours in, creating jobs throughout industries. Acquisition of native champions intensifies as overseas gamers jostle for the lead positions.

“Solve the problem” – tech corporations will turn out to be extra outstanding… tech corporations which are real-estate brokers, recruiters, healthcare suppliers, meals suppliers, logistics… why: many industries are very inefficient.

Hian Goh, Openspace Ventures

Battle to high quality will occur. Fundraising throughout all levels from seed to Collection C and past shall be difficult when you don’t have the metrics. Buyers will need to see a path to profitability, or a capability to show worthwhile if the surroundings turns into worse. It will imply Saas corporations with secure money flows, vertical e-commerce with robust metrics will probably be engaging funding alternatives.

Investor choice will grow to be essential, as buyers take a wait and see strategy. Present or new buyers into corporations will probably be judged upon their dry powder in their funds and their means to fund additional rounds

The regulatory danger for fintech lenders shall be greater this yr, rising compliance value and uncertainty on licensing, which might result in consolidation in the market.

Heang Chhor, Qualgro

Southeast Asia: an intensifying battlefield for tech investments

There has by no means been a lot VC cash in Southeast Asia chasing fascinating startups, in any respect life cycle levels. The 10 most lively native and regional VCs have raised their second or third funds just lately, amassing at the least two occasions extra money than a number of years in the past, in all probability reaching a complete quantity near $1 billion. As well as, worldwide VCs have additionally doubled down on their allocation into the area, whereas prime Chinese language VCs have visibly said their intent to not miss the dynamic momentum. A number of progress funds have just lately constructed an area presence in order to focus on Southeast Asia tech corporations at Collection C and past. Not counting the quantity going to the unicorns, there may be now greater than $Three-Four billion out there for seed to progress levels, which can be Three-Four occasions the quantity of three years in the past. There are, in fact, many extra good startups coming as much as make investments into. However probably the most promising startups can be in a really favorable place to barter greater valuation and higher phrases. Nevertheless, they need to not overlook that, ultimately, what creates worth is how they make a distinction with their tech capabilities or their enterprise mannequin, how they purchase and retain the perfect expertise, with the funds raised, not solely how a lot cash they may have the ability to increase. Most native and regional company VCs are more likely to lose in this extra intense funding recreation.

Vital VC cash investing into so-called ‘AI-based startups’, however are there actually a lot (deep) Synthetic Intelligence capabilities round?

A very good portion of the SEA startups declare they’ve ‘something-AI’. Buyers are overwhelmed, if not confused, by the ‘AI claim’ that they discover in most startup pitches. Whereas there isn’t a doubt that Southeast Asia will develop its personal robust AI-competence pool in the longer term, sadly as we speak most ‘AI-based’ enterprise fashions from the area would nonetheless be simply ‘good algorithms or machine learning’ that may course of some quantity of knowledge to provide you with good-enough outcomes, that don’t all the time generate substantial enterprise worth to customers/clients. The numerous price range that a few of the very-well-funded Southeast Asia unicorns are placing into their ‘AI-based apps’ or ‘AI platform’ is unlikely to make a actual distinction for the shoppers, for lack of deep AI competences in the area. 2019 could also be one other yr of AI-promise, not realized. Hopefully, public and personal analysis labs, universities and startups will proceed to be (rather more) strongly supported (particularly by governments) to considerably construct greater AI expertise pool, which suggests rising and attracting AI expertise into the area.

Greater Collection A and Collection B rounds to gasoline extra convincing progress trajectory, in the direction of growth-stage fundraising.

Though conditions range quite a bit: typical Collection A in Southeast Asia was round $5 million, and Collection B round $10-15 million. Buyers tended to simply accept that usually corporations would increase cash after 18 months or so, between A and B, and between B and C. There was an growing variety of bigger raises at A and B lately, and very doubtless this development will speed up. The truth that VCs now have rather more cash to deploy into every funding will contribute to this development. Nevertheless, the required milestones for elevating Collection C have grow to be rather more round: minimal scale and very strong progress (and revenue) drivers. Subsequently, entrepreneurs should look for getting as a lot funding reserve as attainable, regardless of time between raises, to construct progress engines that take their corporations previous the milestones of the subsequent Collection, be it B or C. Sooner or later, we’ll see extra Collection A of $10 million and extra Collection B of well-above $20 million. Compelling companies won’t have an excessive amount of difficulties for doing so, however most Southeast Asia entrepreneurs can be clever to study to extra successfully grasp fundraising expertise for capturing a lot greater quantities than in the previous. In fact, this assumes that their companies are compelling sufficient in the eyes of buyers.

Vicknesh Pillay, TNB Aura

Out-sized valuations might be much less commonplace in 2019 as Southeast Asian buyers study from expertise and grow to be extra refined. Subsequently, we do see alternatives at Collection A/B for undervalued offers as a result of lack of early-stage funding whereas we anticipate to proceed to see the development of nearly all of enterprise capital investments going into later stage corporations (Collection C and past) as a result of decrease danger urge for food and ‘herd’ mentality.

2018 has additionally seen the speedy emergence of many company enterprise capital funds and innovation packages. However, 2019 will see giant firms chopping again on their allocation in the direction of startup investing which might be the simplest choice for them in case of opposed information to the jittery public markets in 2019.

With the expansion of AI, the necessity for API connections and elevated thought management to embrace tech, Southeast Asia goes to see an upsurge in SaaS startups and present startups shifting to a Saas enterprise mannequin. Therefore, we anticipate elevated investments into Saas corporations targeted on IoT and cybersecurity as hardware knowledge and software program are moved onto the cloud.

Chua Kee Lock, Vertex Ventures

Southeast Asia VC funding tempo has grown steadily and considerably since 2010 the place it began from lower than $100 million in VC funding in the area. For the primary eight months of 2018, the area’s VC funding was over $5.Four billion. For the entire of 2018, it is going to doubtless finish round $eight billion. For 2019, we anticipate the VC funding tempo to surpass 2018 degree and document between $9-10 billion. Southeast Asia will proceed to draw extra VC investments as a result of:

(1) Governments in Southeast Asia, particularly ASEAN, proceed their help coverage to encourage startups.

(2) younger demographics and the quick know-how adoption in Southeast Asia give rise to extra progressive and disruptive concepts.

(Three) international buyers wanting for a greater return and will naturally give attention to rising rising market like Southeast Asia.

The development in the direction of gig financial system will start to have an effect in the area. In developed economies just like the U.S, gig financial system is predicted to succeed in over 40 % by 2020. The younger inhabitants will look for extra freelance alternatives as a option to improve revenue ranges whereas nonetheless sustaining flexibility. This can embrace white-collar work like pc programming, accounting, customer support, and so on. and additionally blue-collar work like supply providers, ride-sharing, house providers, and so on. We consider that the gig financial system will develop to over 15 % in Southeast Asia by 2019.

AI-heavy or -driven startups will start to make inroads into Southeast Asia.

Victor Chua, Vynn Capital

The BIG convergence — there’ll extra integration between industries and sectors. Traveloka went into automotive rental, Blibli went into journey enterprise and these are just some examples. There’s plenty of synergistic worth between journey startups and meals startups or between property startups and automotive startups. Think about a future the place you journey to a metropolis the place you keep in an house you rented via a market (like Travelio, my portfolio firm), and when that you must ebook a restaurant you can also make the reservation by means of a platform that’s built-in with the property supervisor, and when you must transfer round you go right down to the automotive park to drive a automotive you lease from an automotive market. There’s clear synergy between selective industries and this results in an general convergence between corporations, between industries.

Extra channels to boost Collection B/C, early-stage corporations discover fundraising tougher — We now have seen numerous VC funds elevating or already raised progress funds, because of this there at the moment are extra channels for Collection A or B corporations to boost progress rounds. Because the market matures, there shall be extra competitors for investments amongst progress funds as there’s significantly extra progress in the variety of progress funds than corporations which might be elevating at growth-stage. On the flip aspect, the texture is that there’s a constant progress in the variety of early-stage corporations, but the quantity of capital in early-stage funds just isn’t rising as a lot as extra VCs favor greater and later levels, because of the maturity of their present portfolio corporations.

Newcomers gaining weight — there might be at the least 10 corporations that may hit a valuation of a minimum of $100 million. These valuations won’t be based mostly on a single market publicity. Corporations that increase bigger rounds might want to present that they’re regional.

Because of all of the VCs who took half, I definitely felt like the category instructor amassing assignments.