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Southeast Asia Technology Investment Landscape

  1. Southeast Asia- Some perspectives Warren Leow Sept 2016
  2. Hello. My name is Warren and I wore many hats I’m still an economist/trader at heart. Hence, I chose marketplaces as a topic.
  3. 650 million people across 10 countries
  4. Attractiveness • Young, mobile-savvy population • GDP per capita increasing rapidly • Relative political stability • Several markets with more than 60m people • Investor attention is increasing, especially amongst Japanese, Korean, Chinese investors • Deals are ‘relatively’ cheap compared to other overheated markets such as US, China, India
  5. Source: World Bank; screenshot from Jungle Ventures slide deck on SEA funding; valuations from public sources SEA Addressable market = bigger than India, but lower valuations $15b $4b <$2b $5b <$2b
  6. Challenges • Not many technology entrepreneurs with scaling experience • Not many regional companies so far which are large enough for worthwhile exits • Fragmented market with each major country having its own language • Logistics, infrastructure and regulatory developments are not homogenous nor harmonised • No customs union nor full mobility of labour
  7. Examples of SEA startups Ecommerce Classifieds Marketplaces
  8. Examples of SEA startups On-demand Media Games
  9. Examples of SEA startups Enablers Payment Gateways Fintech
  10. Observations • ’Large’ companies emerging along 2 themes: 1) Indonesia and 2) regional • Multi-usage local platforms are taking shape (e.g. Grab and Go-Jek) which are built around high frequency use cases (instead of just chat) • Series B is where the opportunity lies; Current Series B gap is covered by sovereign wealth funds, Japanese investors and Rocket Internet. Some US private equity presence are surfacing (Coatue, Warburg Pincus, KKR) • Unlike other markets, SEA family offices and conglomerates can and are writing massive cheques (e.g. $500m for Matahari Mall) • Governments trying to play a larger role (e.g. Temasek, Khazanah) • Emergence of some companies with no need to exit: Tokopedia, Bukalapak, Traveloka, Grab, Go-Jek, Fusionex • >$500m exits (Jobstreet, iProperty) will accelerate over the next 3-5 years with more having a path towards being acquired (e.g. iFlix, aCommerce) • Very limited IPO market. Some successes on Australian Stock Exchange. Hence, IPO arbitrage is also possible. SEA needs a MOTHERS index.
  11. Opportunity sets • Exploit arbitrage and competitive advantage between US/Europe, JKTC and SEA, especially in terms of technical talent • Key globalisation success is to find route to market partners to roll-out quickly before the US startups saturate SEA • Choose 10 ideas and back each one with $10- 25m to scale • Work on exit paths with 5 year horizons