The venture capital funding drought that has plagued SE Asia for the past two years shows little signs of letting up. The total volume of equity funding in Southeast Asian startups declined in the second quarter, reversing the upward trend of the previous two quarters.
The total value of proceeds stood at $2.29 billion in H1 2024, marking a 36% YoY decline and the lowest level in over five years, according to DealStreetAsia – DATA VANTAGE’s latest report, SE Asia Deal Review: Q2 2024.
Indonesia is among the worst performers in the region as funding activities in the country hit a new low in the second quarter with deal volume dropping to the lowest level in more than five years.
Early-stage startup funding, however, surpassed late-stage funding in the first semester, marking a significant shift from the past five years when late-stage startups attracted more capital.
Moving to India, startups raised the highest funding in June in the first six months of the current year. Indian startups raised $2.24 billion in June compared to $1.85 billion in May 2024, according to the India Deal Review: Q2 2024 report.
Indian e-commerce startups took centre stage by accounting for the bulk of big-ticket funding transactions in the first half of 2024. The top six e-commerce startups collectively scooped up $1.9 billion in the first half of this year, making up for about 68% of the $2.8 billion raised through 14 megadeals ($100 million and above) during the period.
Earnings and financials
Southeast Asian payments platform 2C2P, which is majority-owned by Ant Group, significantly trimmed its losses in the financial year that ended on December 31, 2023, as revenues rose and expenses fell. The company posted a loss of $2.6 million in 2023, which is 83% lower than the previous year, according to recent filings with Singapore’s Accounting and Corporate Regulatory Authority (ACRA).
Naver-backed Planetarium Labs, a Singapore-incorporated open-source gaming platform, saw its losses swell 2.6x year on year even as its revenue increased more than 150% during the financial year ended December 31, 2023, regulatory filings showed.
Singapore’s sovereign wealth fund GIC posted an annualised real rate of return of 3.9% for the 20-year period ended March 31, 2024, compared with 4.6% in the previous year, according to its annual report released on Wednesday. The growth, its main performance indicator, was slowest since its 2.7% investment return in 2020.
ANEXT Bank, a Singapore-based digital wholesale lender backed by Chinese fintech giant Ant Group, saw its losses increase nearly 10% in 2023 as its revenue soared nearly 7x, according to filings.
The net profit of GoTo-backed Bank Jago rose 23% in the first half of 2024, thanks to a growth in the digital lender’s fee income, despite lower net interest income.
Analysis and interviews
ByteDance’s TikTok is testing new service offerings in Indonesia targeting major categories of leisure and food delivery as it continues to strengthen its presence in the market. With ambitions to rival regional e-commerce giants and transform its offerings, TikTok’s strategic moves signal a significant shift.
Indonesia’s last-mile delivery sector is facing testing times and struggling to stay afloat amid a decline in online shopping habits post-pandemic and a heightened price war that has made it difficult for smaller players to compete. A similar trend is playing out in the rest of Southeast Asia.
Notwithstanding the tepid deal climate and caution among LPs, venture capitalists in Indonesia are upbeat about the near-term prospects for startup fundraising in the country as valuations have moderated. On the other hand, VCs themselves are battling fundraising challenges.
New York-based investment firm Hunter Point Capital is focusing on educating Asian investors about the dynamics of GP stakes as a lack of exit opportunities, both in Southeast Asia and globally, drives up demand for the alternative asset class. “Asian investors are looking to understand the risk rewards dynamics of GP stakes, but I think we want to spend more time to help them understand the opportunity set,” said Conway Bate, Global Head of Capital Formation at HPC.
From the LP-GP quarters
In The LP View this week, we looked at how the dominance of state capital investors in China’s private market has meant that market participants expect a steep learning curve for fund managers looking to tap into the rising state-backed RMB opportunities.
Hades Financial Private Capital Group has closed a crossover fund at $1.6 billion as it looks to invest in North America, Europe, and the APAC markets.
i2i Ventures, Pakistan’s first female-led venture capital firm, has closed its inaugural fund with the backing of the IFC, which has committed $3 million.
Chinta Bhagat has stepped down from his role as Asia chairman and managing partner at private equity firm L Catterton after a five-year stint. He has moved on to a senior advisor role at the PE firm. Bhagat’s departure from the top role is the latest in a series of executive changes at L Catterton’s South and Southeast Asia offices in the last 18 months.
Foxmont Capital Partners, a Philippines-based early-stage venture capital investor, is in the market for its third fund, according to a disclosure by the Dutch Good Growth Fund. The Dutch investor may invest up to $8 million in the fund.
Join us for the ninth edition of the Asia PE-VC Summit in Singapore (Sept 17-18) to get a big-picture view as well as on-the-ground insights from over 60 top leaders operating in diverse markets of Asia. You wouldn’t want to miss these limited partner (LP) and private equity sessions.
Deal news
Indonesia’s second-largest telecom company, Indosat Ooredoo Hutchison, is looking to sell its fibre and submarine cable assets to become more asset-light. The telco is looking to raise $1.5-2 billion from the sale. Three Indonesian companies – Mitratel, Protelindo and XL Axiata – are understood to have expressed interest in the assets.
Grab Holdings has acquired Singapore-headquartered online restaurant reservation platform Chope, according to regulatory filings. Chope was backed by Ant Group and venture capital firm Square Peg Capital.
Temasek-backed 65 Equity Partners and Indonesia’s AC Ventures are weighing an investment in Singapore-based alternative milk brand Oatside. The company, which makes oat milk products, is currently raising a Series B round of funding.
Singapore’s competition watchdog said Grab has cancelled its proposed acquisition of Trans-cab, the country’s third-largest taxi operator.
Philippine digital health company Hive Health has closed a pre-Series A funding round with the backing of investors, including venture capital firms Gentree Fund and BEENEXT, according to regulatory filings.
From our Greater China desk
Chinese generative AI startup Baichuan Intelligent Technology has raised 5 billion yuan ($691.4 million) in a Series A funding round that attracted the likes of Alibaba Group, Tencent Holdings, and Xiaomi Corp. Led by Wang Xiaochuan, former chief executive officer of Tencent-owned search engine Sogou Inc, Baichuan entered the unicorn club just six months after its inception in April 2023.
An investment fund backed by smartphone maker Xiaomi has hit its target of 10 billion yuan ($1.4 billion) to back companies in the area of integrated circuits.
Singapore’s GIC is shifting the focus of its investment team in China to look for newer “niche opportunities,” Nikkei reported citing a senior executive, as the region’s largest economy is expected to take longer to transform itself into a new economic model.
State-owned Shenzhen Investment Holdings Capital has agreed to invest up to 1.6 billion yuan ($220 million) into a wholly-owned subsidiary of Hong Kong-listed Luye Pharma Group as part of the latter’s plan to boost its oncology drug business.
Bain Capital has strengthened its private credit team in Asia Pacific over the last year, as it sees the asset class gaining traction in the region. Last year, the firm hired Andrew Schantz from Canada’s largest pension fund, CPP Investments, as a partner for its private credit group based in Hong Kong. Since then, Bain has brought on five new hires to focus on the strategy.
From our India desk
Despite making significant progress in renewable energy, especially solar and wind, India faces a notable gap in climate investing, with far too much focus on Western markets currently, said a senior executive at LeapFrog Investments. “To reach global net-zero targets by 2050, 2060, or even 2070, we need to shift more investment to countries like India,” Stewart Langdon, Partner at LeapFrog, told DealStreetAsia.
Indian drugmaker Mankind Pharma has signed a deal to buy Bharat Serums & Vaccines Ltd from private equity firm Advent International for $1.63 billion. The deal will help Mankind expand into the Indian women’s health and fertility drug market.
Indian agri and farm sector-focused venture capital firm Omnivore is looking to expand its investment footprint to cover Southeast Asian countries where agriculture constitutes a significant part of the economy.
