Smaller funding rounds buck overall downtrend for Asean tech ecosystem

Singapore

CAPITAL inflows into South-east Asia's tech ecosystem has slowed down as expected amid the Covid-19 pandemic. But there was still optimism when it came to smaller funding rounds, a new report by Cento Ventures indicates.

The number of regional internet tech companies valued between US$100 million and US$500 million has also continued to increase, said the report by the Singapore-based venture firm, whose investments include fashion brand Pomelo and food and beverage player Grain.

For H1 2020, investments in South-east Asian internet technology companies stood at US$5.64 billion, 13 per cent lower than a year ago.

Meanwhile, the number of deals fell 15 per cent year-on-year to 315. This marked a less severe fall than in other markets such as Europe and North America, where deal counts fell 27 per cent and 22 per cent respectively.

Fund-raising activity in South-east Asia remained relatively buoyant despite the Covid-19 pandemic, thanks to US$3.6 billion raised in mega funding rounds of more than US$100 million, including capital raises by Grab, Gojek and Ninja Van.

However, there are signs of cooling; the mega-deals accounted for 64 per cent of overall deal value, a lower proportion than in the same period in 2018 and 2019.

Even so, capital inflows involving cheque sizes under US$100 million remained robust, growing 10.5 per cent to US$2.1 billion in H1. In particular, deals between US$10 million and US$50 million grew 33.3 per cent to a record US$1.2 billion, the highest level since H1 2013.

"The first half of 2020 has shown that tech investment in South-east Asia while not reaching new heights, does remain fairly strong," said the report's authors, Mark Suckling and Laphat Tantiphipop.

"That said, both investments and acquisitions take time to set up. Deals completed in H1 2020 may well have been originated before Covid-19 struck," they added.

Separately, the report noted that H1 saw the rise of more South-east Asian companies whose valuations exceeded US$100 million, such as Singapore's Doctor Anywhere and Validus Capital, as well as Indonesia's Kopi Kenangan and Waresix.

Sector-wise, US$2.76 billion of the total capital raised went towards firms that operate in multiple verticals, such as Grab and Gojek. Payments and retail firms also attracted strong interest, with total investments of US$692 million and US$406 million respectively.

Other trending sectors include real estate, advertising and marketing, business automation, and local services, the report said.

Surprisingly, healthcare startups attracted investments of just US$72 million, which appears soft compared to the US$223 million they raised for the whole of 2019. Other sectors that saw a decline in capital inflows included education, travel and non-gaming entertainment.

Looking ahead, the report is optimistic about recovery in deal flow when the pandemic subsides.

"We hope that the threat from the Covid-19 virus recedes significantly, that more investment activity can resume, and that 2020 overall turns out to be another year of growth for technology in the region," the report said.