Money pours into Southeast Asia startups as China loses its luster

Money pours into Southeast Asia startups as China loses its luster

Written by Anshuman Daga and Yantultra Ngwe

SINGAPORE (Reuters) – Southeast Asian start-ups are enjoying a boom in fundraising by investment and acquisition funds that seek higher returns and ward off regulatory turmoil in Chinese markets, even with the risks of slowing growth.

Companies such as Insignia Ventures Partners and SoftBank-backed East Ventures are among the companies that have raised total billions for startups over the past year as the region’s 650 million residents have turned to digital platforms.

β€œSome of the largest institutions in the world are now devising strategies to invest and distribute capital in regions such as Southeast Asia, which, until six to seven years ago, might not have had the capacity to absorb checks of a large enough size,” said Vishal Harnal. , a managing partner of venture Fund 500 Global, with assets of $2.8 billion.

Harnal was one of dozens of investors gathering in Singapore this week at SuperReturn Asia, the private equity and venture capital conference, which tops Southeast Asia investment rankings.

“Today there is a much stronger appetite for India and Southeast Asia,” Joel Thickens, managing partner at TPG Capital Asia, told Reuters.

Led by Indonesia, Southeast Asia’s internet economy is expected to double to $363 billion by 2025 from the end-21 estimate of $174 billion in gross merchandise volume, according to a report citing Google (NASDAQ:), Temasek, and Bain & Company.

Grab Holdings listed on Nasdaq in December after a $40 billion merger, while its Indonesian rival GoTo raised $1.1 billion in a local listing this year.

This month, digital financial services group Fazz raised $100 million, and Indonesia’s Xendit, which sees itself as a Southeast Asian alternative to payments processor Stripe, announced a $300 million fundraising in May.

Investors said the enthusiasm continues despite due diligence for startups that require several months while valuations are under pressure.

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β€œFor lack of a better word, FOMO is there too,” Harnall added, referring to the β€œfear of missing out” that he saw motivates many institutional investors who have lost out on β€œenormous” returns because they have been late to support entrepreneurs in China.

Diversity from China

Southeast Asia is benefiting from strict lockdowns imposed by Beijing and other measures to curb the spread of COVID-19 in China and Hong Kong.

But despite the diversity of the funds, investors said the region’s highly divergent markets meant that a unified investment strategy was not ideal.

β€œIt’s not that they don’t believe in China, it’s that they downplay that exposure,” said Tang Kuk Yu, founding president of Affinity Equity Partners.

“Where would they go? One area that I constantly notice that everyone is very interested in is Southeast Asia. Unfortunately this is a very difficult market to penetrate.”

Signed up for the SuperReturn event, where there were 500 purported limited partners, providing capital to investors, such as the Houston Firefighters’ Relief and Retirement Fund, as well as about 700 acquisition and venture companies, such as Schroders (LON πŸ™‚ Capital, along with Chinese family offices.

Despite all the interest, the region may still have some way to go in its search for financing.

β€œThere are still individual American cities where startups raise more money than all the startups in the South,” said Julie Ruffolo, managing director of venture capital at the Global Private Capital Association, which says its 300 members manage more than $2 trillion in assets. East Asia”. .

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