Venture capital excitement cools, but bright spots remain in South-east Asia

THE days of supercharged tech valuations may be over. But even as investors turn more cautious, there are still opportunities to be captured in South-east Asia, said several venture capital (VC) players and experts who spoke at this year’s SuperReturn Asia conference.

Held at the Marina Bay Sands Convention Centre from Monday (Sept 19) till Thursday, the conference brought together fund managers and investors in the private equity and venture capital spaces, to discuss the latest market developments.

Globally, the pace of venture capital fundraising has moderated in 2022 (see chart), said Angela Lai, a senior research analyst at alternative assets data firm Preqin, during her presentation at the conference. Meanwhile, funds have shifted towards early-stage strategies and are deploying more slowly.

“Since the end of last year, as public equity markets declined from the peak, we see venture capital deal volumes have been coming down as well,” she said, adding that the market is seeing “down rounds” – or valuation cuts – ranging from 30 per cent to 80 per cent, with high-profile examples reportedly including Klarna, Stripe and Instacart.

While the impact on each tech company would vary with industry and exact financial performance, “the general direction is quite certainly down” as the market reassesses where valuations should be, Lai said.

Venture capitalists are also feeling the heat from challenging macroeconomic conditions, including rising interest rates, inflation and geopolitical tensions.

“There’s a lot of pressure on technology companies and valuations… To be honest, this has been disturbing my sleep,” said Jefrey Joe, co-founder and partner at Indonesia-based Alpha JWC Ventures, who also presented at the conference.

That said, Joe believes that the Indonesian market still has several bright spots for investors, such as tech-enabled consumer businesses and agritech. On these fronts, Alpha JWC has invested in Kopi Kenangan, a grab-and-go coffee chain, and AgriAku, a business-to-business marketplace for agribusiness goods.

Joe is also bullish on the country’s fintech sector. His firm has backed Ajaib, a stock trading app designed for Indonesia, where retail investing has boomed in recent years among the younger generation.

Jenny Lee, managing partner at GGV Capital, is optimistic about the development of entrepreneurial talent in South-east Asia.

The region has “very supportive government policies as well, ranging from Web 3.0 (and) food security issues, to energy transition and electric vehicle adoption”, and these sectors are poised to attract more talent, said Lee, who spoke at the conference as part of a panel on Asia-Pacific VC.

But even as VCs continue to invest in South-east Asia, a calibrated approach is required as the market is not as mature as the US and China.

“When capital starts going into a market where entrepreneurs are there but still not as mature, it takes a lot of cooperation with (VC funds’) general partners, to make sure that we’re helping to grow this industry in the right way,” she said.