Square Peg to raise US$550m, bullish on South-east Asian startups

[SINGAPORE] Australian venture capital firm Square Peg is raising US$550 million to expand its commitment to back startups in its key markets of Australia and Israel, with a growing focus on South-east Asia's booming tech markets.

"We do want to continue to double down in South-east Asia in particular," Tushar Roy, a Singapore-based partner at Square Peg, told Reuters in an interview. "We are currently exploring investment opportunities across most markets in the region."

Founded in 2012, the venture capital firm is one of Australia's largest, with more than US$1 billion in assets under management across multiple funds.

Roy said Square Peg's Fund 4, targeting new investments, and Opportunities Fund 2, designed to invest in later-stage follow-on offerings in portfolio firms, were set to complete their fundraisings in the first half of the year.

Venture firms have been ramping up investments in South-east Asia as rising consumer adoption of digital platforms since the Covid-19 pandemic fuels startups across many sectors.

"There's now more capital becoming available in these markets, to take these companies from early-stage to mid-stage to growth stage," said Roy, who moved from Sydney in 2020 to set up Square Peg's South-east Asia office.

"The overall prospects of success for companies from an end-to-end journey perspective are better today than they were, maybe 5 years ago," he said.

Last month, global venture capital firm Accel launched a US$650 million fund for Indian and South-east Asian startups, while Indonesia-focused Alpha JWC Ventures and AC Ventures raised new funding rounds late last year.

Square Peg's 50-plus investment portfolio includes Australian design collaboration platform Canva, Singapore-headquartered global e-scooter operator Neuron Mobility, and South-east Asian fintech firm FinAccel.

The VC firm invests in areas such as consumer Internet and software as a service, and mainly participates in companies' Series A and B funding rounds. It hired Piruze Sabunca, a former senior executive of US digital payments firm Stripe, as a partner in its Singapore office in late 2020.

Roy said a sharp fall in equity markets in recent months had affected private fundraisings of companies. "With round sizes stabilising and possibly getting smaller, you should see the commensurate effect on valuations." Still, capital was available for some companies, he said.

"You are seeing a flight to quality in private markets, where a smaller cohort of companies that have healthy unit economics, healthy balance sheets, healthy business and a proven product market are attracting more and more attention," he said.

REUTERS