By Neil Foo
There is a saying “No Money, No Honey” !! Now, the COVID-19 pandemic timing played a big part of attraction for the investments from the America, China and Europe in funding the enterprises in the South East Asia (SEA) with their ascension in the VC and PE world.
This phenomenon of the fund flows from all over the places can be described as “Fusion-ed” and “Fission-ed” right in the most rapid GDP growth region in the world, ie. the South East Asia !
With the recent hiking of adoption of technology such as e-commerce, fintech, e-hailing, edtech and SaaS such as QR Code, eKYC during the movement control of pandemic by each of the countries in the region, tech giants from both the U.S. and China have been clamouring to get into this flamboyant internet market.
SEA’s internet infrastructure came around relatively late-around 2010, a region home to about 670 million people.
As the matter of fact, some of the big boys have “Fusion-ed” by co-investing in the region’s rising stars “
- Alibaba invested in Tokopedia,
- com with travel portal Traveloka,
- Tencent, Google, Facebook and PayPal are co-investing in e-hailing Gojek,
- Japan Soft Bank took the big stunt with Grab ready
With all these acts, the investors are depositing for future explosive “Fission-ary” exit plan, be it for M&A, IPO strategic plans.
Pre-pandemic, it was very difficult to assess the sustainability of the companies. Now the funders and investors suddenly can make speedy and good decisions by evaluating the investees’ resiliency over the acid-test of economy downturn.
Fusion Vs Fission for Gold Rush to SEA
As U.S.-China relations remain tense, SEA becomes the sea of “honey” for the choices of investors and tech companies from both sides as they seek overseas expansion.
The Chinese digital economy fairy tales have become a source of inspiration for entrepreneurs in in SEA countries in various ways.
SEA is benefit from its position as the link of East and West from both market and capital market in which will see more talent and capital coming into the region.
Singapore-based Altara Ventures just debuted a goal to raise more than $100 million fund focused on early-stage tech startups in SEA with an eye on those with ties to China.
On top of the existing American and Chinese funds, Singapore is the regional finance hub and a strategic partner for the prominent internal investors and funds claim their slice of the market in SEA. Many of the Singapore-based venture capital firm raised round of series of Southeast Asian fund, with European investors coming on board as limited partners now.
In the past, European investors were relatively low in SEA. The lack of European investors in may be tied to the history of the business risk, connection and decision-making structure.
For example, as statistic shown, private equity and venture capital investors who have invested in ASEAN September 2020, 56% were from North America, 21% from Asia and 18% from Europe.
Now, European investors start to venture into SEA with several recently launched funds. In Indonesia, a private equity firm has been set up that aims to connect European money with Indonesia’s growing private equity.
As comparison, U.K. data provider shows 127 institutional investors in Europe are active in ASEAN-focused private equity and venture capital, as opposed to 322 in the U.S.
Certainly, Europe has been a little slower to tap into the growth opportunity of Asia but they are finally starting to realize that it is probably the only region that can get 5-6% growth pre-COVID.
Even when European investors take an interest in Asia, the first market they think of is China first.
American investors do concern about the hindrance of “multiple countries and multiple regulations” of SEA.
With the diverse set up of EU, compare to American investors, Europeans may be more familiar with the frictionless cross-border investing in different regulation, market, culture and etc.. which could similar to SEA nature.