Southeast Asia Tech Investment – H1 2020

Report

August 21, 2020

Southeast Asia Tech Investment – H1 2020

With governments and companies in Southeast Asia responding and adapting to the emergence of the Covid-19 pandemic for much of the first half of this year, the impact of the pandemic on the region’s technology investment and exit trends inevitably become a highly anticipated topic. As such, it is our pleasure to share with you the data and insights we accumulated in our H1 2020 Southeast Asia tech investment report. 

Check out the full version here

The headline numbers tell the story of the Southeast Asia ecosystem`s resilience. Though the 15% decline in the total number of deals and the 13% drop in the amount of capital that invested are significant, but perhaps less than might have been expected. Meanwhile, more takeaways emerge as we take a closer look at the data;

Larger round sizes

Series A rounds now average $5.4M, up from $4.1M in 2019, and $3.4M in 2018. A trend toward larger round sizes seems to be underway and may be accelerated as startups choose to raise more money to ensure they have an additional cash buffer during uncertain times.

Indonesia and Singapore regain dominance

Having seen a surge of interest in Vietnamese deals, which made up 21% of the capital invested in 2019, H1 2020 saw a reversion to the more typical geographic distribution. 75% of the capital was invested in Indonesian startups, and the combination of Indonesia and Singapore startups accounted for 67% of the total number of deals done. While this is a reversion to the pattern we have seen in previous years, it may be somewhat influenced by the travel restrictions leading investors to focus more heavily on domestic deals.

Sector diversification continues

While investment continues to flow into the super-app companies (our ‘multi-vertical’ category) and to online retailers, we also continue to see growth across a wider range of sectors. In H1 2020, investment into startups in Payments and Logistics sectors has already exceeded the 2019 total. Fintech startups, other than payments, also saw strong interest. The healthcare sector, having seen a lot of new investment in 2019, accounted for less in H1 2020.

New unicorns

While we didn’t confirm any new unicorns in H1 2020, we did see an expansion of the group of startups exceeding $100M in valuation, and of course, some of the previous companies edged closer to the $1B mark. Key new names appearing are from both independently established companies, JustCo, and companies emerging from existing unicorns, Go-Pay.

Decline in exits

Liquidity events are where perhaps the greatest change has been seen. While the number of exits stayed consistent with the previous half-year, the proceeds generated fell by nearly 50%. Median exit deal size rose from $5M in 2019 to $27M, and the top decile amount fell from $242M in 2019 to $77M. Our suspicion is that some potential deals may have stalled, as the sort of extensive due diligence required by acquirers was harder to accomplish during this period.

Looking ahead to the rest of 2020

The first half of 2020 has shown that tech investment in Southeast Asia while not reaching new heights, does remain fairly strong. That said, both investments and acquisitions take time to set up. Deals completed in H1 2020 may well have been originated before Covid-19 struck. Pandemic-related restrictions were at their peak during Q2 of 2020, which means the full effects will likely only show up in the investment numbers for Q3 and Q4. Many startups in the region have continued to grow despite the various lockdowns, travel bans and other constraints placed on them. We hope that the threat from the Covid-19 virus recedes significantly, that more investment activity can resume, and that 2020 overall turns out to be another year of growth for technology in the region.

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