Forget the unicorn – the US$50 million exit is the new South-east Asia dream
This article summarises an episode of Tin Men Capital’s video series featuring its co-founders, Jeremy Tan and Murli Ravi
JEREMY Tan and Murli Ravi, co-founders of Tin Men Capital, have been watching South-east Asia’s B2B technology landscape since 2017 and argue the market is finally moving beyond its obsession with unicorns.
They see a more practical future built on smart spending, acquisitions, and pressure on local giants to either innovate or get left behind.
B2B provides a resilient alternative
Tan believes the B2C model’s reliance on heavy funding makes it fragile within South-east Asia’s market. In contrast, he believes B2B software offers a more stable path. With better profit on sales and predictable revenue, software companies can grow without constantly chasing the next funding round.
The old playbook is broken
Ravi explains that because the consumer market is often a “winner-takes-all” scenario, capital can be a decisive weapon. He contrasts this with their areas of interest, which are not structured in the same way.
Tan adds that the recent market correction exposed the flaws in this approach. “The downturn that we last saw starting in 2021-2022 highlighted some of the downsides of investing using power law and using growth at all cost, usually linked with a lot of unicorn hunting as well as B2C models.”
Better profit on sales means more freedom
The economics of B2B software are more forgiving. High profit on sales gives founders breathing room and control over their own destiny.
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Tan explains, “(B2B software’s) margins are quite high. Anything from a blended IoT margins of 70 per cent gross to 80-90 per cent. That in itself means that it’s very capital efficient, allows you to plan your cash flow forward, and (you are) less beholden to the capital markets.”
You don’t need a large amount of cash
This financial independence stands in contrast to other tech sectors, such as hardware, where building a product requires a large upfront investment.
Tan argues: “To play the hardware game you need a lot of capital, which I don’t have. There are opportunities in the space in South-east Asia but at the same time it doesn’t need so much capital for us to succeed.”
The media obsesses over the wrong metric
A focus on efficient growth changes the definition of success. Tan points a finger at the media for its obsession with billion-dollar “unicorn” valuations, a narrative he believes pushes founders toward bad decisions.
The real stories are going unreported
Headlines tend to highlight only the largest deals, creating a misleading picture of the overall market.
Tan says: “The media doesn’t report anything less than a billion. I think that’s one of the follies of operating in this region, or maybe worldwide, where size matters. Actually, it is returns or multiples of returns that (matter).”
The unicorn chase can be toxic
The constant media hype distorts the market and creates a culture that makes founders of successful smaller companies feel like failures.
“This unhealthy obsession of unicorns is made worse by media writing about it,” Tan continues. “That creates an expectation among founders that if I’m not a unicorn, I am a failure. That’s so limiting… a unicorn doesn’t mean it’s a good investment.”
Mid-sized company sales deliver life-changing outcomes
If billion-dollar sales are the wrong goal, what should founders aim for? Tan points to the US$50 million to US$200 million acquisition range as the sweet spot in South-east Asia.
The action is in the middle market
This target is based on real data, showing it’s where most deals are actually happening.
Tan observes: “The bulk of the acquisition at this current state of development is 50 to 200 million. And if you’re capital efficient, we’ve done the math. At 50 to 100 million is life-changing money, not just for the founders.”
Local buyers are held back by a “build it myself” mindset
There’s just one problem holding back this wave of mid-sized acquisitions. Tan says large local corporations are stuck in a “build it myself” mentality.
The “not invented here” syndrome
This resistance to external innovation, whether it’s buying software or an entire company, remains a cultural barrier.
Tan explains: “You still see a fair bit of mindset here that permeates through the organization, whether it is buying a software or buying a company… as a mentality of I’ll do it myself. But we see that changing.”
DIY projects often go nowhere
These in-house projects rarely pan out, a lesson some companies learn the hard way.
Tan recounts one such case, “one of our portfolio companies engaged with one of the large corporates… they decided that, look, we want to do it ourselves”. “It was very disappointing. But a year later they came back and said, ‘look, we tried, couldn’t do it. So let’s talk.’”
Foreign competition will force local adaptation
If local giants won’t adapt on their own, Tan believes outside competition will force their hand. Buyers from North Asia and India are moving into the region, creating pressure that will compel local companies to start acquiring startups.
Outside buyers are moving in
A growing number of companies from Japan, South Korea and China are looking to South-east Asia for acquisitions, and they aren’t waiting around.
Tan states: “You’re seeing not just the Japanese and Koreans… (but) the Chinese increasingly. South-east Asia is a natural choice. I think that creates a nice little tension for assets here. And the difference now is there’s a desire to move quickly.”
Acquire or be acquired
For the region’s established players, this new competitive landscape presents a stark choice.
Ravi concludes: “The locally born corporates in South-east Asia are going to feel that they are facing threats, competition coming from all these other regions. And they have to wake up to the idea that someone is coming to eat their lunch.” TECH IN ASIA
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