Southeast Asia technology investment landscape

Warren LeowSept 2016

Hello. My name is Warren and I wore many hats

I’m still an economist/trader at heart and so can sense some arbitrage here

650 million people across 10 countries

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

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

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

Examples of SEA startupsEcommerce Classifieds Marketplaces

Examples of SEA startupsOn-demand Media Games

Examples of SEA startupsEnablers Payment

GatewaysFintech

Venture builders are a key part of the ecosystem

Some notable funds and programs worth keeping track of in SEA

Waiting for Chinese tsunami to arrive

Lets use an EU analogy to proxy for deal sourcing….

• Singapore = Switzerland• Malaysia = United Kingdom• Indonesia = Russia + CIS• Thailand = Germany• Vietnam = France, Spain• Philippines = Turkey• Myanmar = Ukraine• Malaysia + Thailand + Singapore = Scandinavia• Thailand + Vietnam + Cambodia = Iberia• Brunei, Laos, Cambodia, Timor Leste too small

Observations• Companies: 10-15 investable deals a year at $5-20m rounds

– ’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)– Emergence of some companies with potentially no need to exit: Tokopedia, Bukalapak,

Traveloka, Grab, Go-Jek, Fusionex, FPT, VNG, 123RF

• Funding: Series B is where the opportunity lies– Not many $50-100m funds in SEA; most VCs have no track record of exits nor scaling– Series A/junior B gap is mostly covered by sovereign wealth funds (Temasek, Khazanah),

Japanese investors (Softbank, YJ) & Rocket Internet– Some US VC and PE presence surfacing (Sequoia, Tiger, Coatue, Warburg Pincus, KKR)– SEA family offices and conglomerates can and are investing heavily (e.g. $500m for

Matahari Mall) to build infrastructure; e.g. Lippo, Djarum, True, Seedcom, Tune

• Exits: Strategic engineering is often required– >$500m exits (Jobstreet, iProperty, Lazada) 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- but SGX hasn’t delivered.– Japanese treading cautiously. SEA is a Chinese backyard. BATs are making a move.

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

• SEA is not yet a bubble, but startups need to balance burn with follow-on rounds

• Choose 10 ideas and back each one with $10-25m to scale; Work on exit paths with 5 year horizons

• A $200m fund to make $2-5b in 5-8 years

123RF: 3% revenue from SEA

Grab: 30 cities in 6 countries, 400k drivers, 21m downloads

vs

Go-Jek: 20m transactions a month in Indonesia alone

Tokopedia: 15m items a month

Iflix: Building a world-class startup out of SEA

What is Unicroach?• Connecting arbitrages between SEA with other parts of the

world. Now, it’s 6th in pecking order after US, China, Europe, JKTC, India

• Being 6th means it’s under the radar for startups just about to go global- hence, a Clone War ensures

• Everyone is a Whatsapp message away: Startups, investors, media, telcos, payment gateways, hosting solutions, ecosystem builders

• To unify the region into one- ’e pluribus unum’ with direct influence over 1000 people

• Contact warren.leow@123rf.com