Early-stage investor Antler still bullish on South-east Asia despite funding challenges
[JAKARTA] Even as the global tech sector continues to be bogged down by tighter capital funding, startups in South-east Asia are holding up reasonably well, a new report by Singapore-based early-stage venture capital firm Antler showed.
The annual report, released on Wednesday (May 24), noted that the wave of innovation which continues to disrupt industries has persisted despite the challenging landscape.
South-east Asia continues to lead the way in terms of the number of founders who submitted applications to Antler’s founder programme, and the amount being invested in the region.
More than 9,000 founders in South-east Asia applied to the programme last year, up from 7,000 in 2021. Last year, Antler’s portfolio raised more than US$400 million globally. The firm funded 72 companies in sectors ranging from e-commerce and fintech to logistics, in Singapore, Indonesia and Vietnam.
Antler’s portfolio companies have raised US$718 million globally as at the first quarter of 2023, with portfolio value standing at US$3.8 billion.
In an interview with The Business Times, Jussi Salovaara – the venture capital firm’s co-founder and managing partner in Asia – said that while South-east Asia continues to produce new startups, the investor focus and criteria for deciding which ones to fund have shifted.
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He noted that the end of the cheap-money era and start of higher interest rates have made startup founders realise that burning cash is no longer a viable path to successful fundraising. Instead, they have to do more to show a clear path to profitability in order to attract investor interest.
“Apart from a world-class founding team, we do want to see companies that have a solid line of sight to unit economics,” said Salovaara. “The companies we invest in must focus on profits, rather than blindly (go) for growth.”
By unit economics, he means that on every order, the company must make a solid net profit or a healthy gross margin.
“The problem starts when you are building market share, but losing on every order,” he said. “If a company does not have growth, it is not a startup.”
From Indonesia, South-east Asia’s largest economy, more than 3,890 startup founders submitted applications to Antler in 2022, up from 2,500 the year before. Among these, only 24 companies – in sectors such as e-commerce, fintech and education, with a quarter of them led by female founders – received funding.
The difficult funding environment has impacted Indonesia’s startup sector, said Salovaara, adding that many of these young companies are not profitable.
More founders, however, are being realistic with their expectations and are focused on profitability, thanks to investors who are more demanding in their assessments, he said.
Among the sectors Antler is focusing on in Indonesia, Salovaara cited fintech, which he described as “the biggest hyped-up sector”, which he expects will stay strong. He also spoke highly of healthtech, agritech and logistics tech, which will be driven by Indonesia’s large domestic market.
He revealed that Antler is putting in US$100 million in new investments in South-east Asia over the next few years, with about 40 per cent earmarked for Indonesia.
“I would like to be in a situation where we can deploy US$100 million in Indonesia alone, but that will take a few years,” he said.
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