Southeast Asia On A Road To Recovery
If resilience was the key theme that defined 2022 and 2023, this year is all about recovery. The economic experts believe it to be, particularly in Southeast Asia.
Asian Development Bank (ADB) , in its latest forecast, said the Southeast Asian economy will grow by 4.6% in 2024 and 4.7% in 2025, up from 4.1% in 2023. The growth is driven by robust domestic demand and a continued recovery in tourism.
Indonesia, the region’s largest economy, is expected to maintain 5% growth in the next two years, on the back of nicely growing consumption, public infrastructure spending, and improving investor sentiments.
On top of strong domestic demand and tourism comeback, recovering exports will propel growth in Thailand, Vietnam, the Philippines, and Malaysia.
Meanwhile, Singapore's GDP is projected to expand by 2.4% in 2024, up from 1.1% in 2023, supported by a recovery in manufacturing and external trade. Domestic demand will grow too, due to stable consumption and recovery in investment.
Speaking of investments, Singapore attracts the lion’s share of private investment in the region.
In the first quarter of 2024, Southeast Asian startups raised $1.4 billion in venture capital, across 177 funding rounds, per the latest report by Dealroom.co .
Of the total, Singaporean startups received US$1.1 billion in Q1 2024, followed by Indonesia which got US$151.7 million in startup funding, and the Philippines, where startups landed US$108.8 million.
Interestingly, while funding in most Southeast Asian markets was down in the quarter compared to a year earlier, the Philippines saw an increase of 221% in startup investments.
Here is the more interesting thing: While the funding in 2024 is still lagging behind previous years, early-stage and growth-stage funding is already consistent with pre-2021 levels in Southeast Asia.
Of the total 117 deals in Q1 2024, 90 rounds were over US$2 million, which is higher than in 2019 or 2020. It is only late-stage deals that have not yet recovered.
At US$758 million, fintech was the most funded sector in Southeast Asia, followed by semiconductors, which attracted US$200 million in Q1 2024.
April, however, has been a bit slow. According to data collated by DealSteetAsia, private capital raised by Southeast Asian startups during the month plunged 54% to US$227 million compared to March 2024. The deal count also dropped to 56.
Indian startups raised US$1.1 billion in April 2024, slightly more than in March, but the deal volume shot up to 115, the highest since September 2022. Meanwhile, startups in Greater China raised US$3.7 billion across 195 deals. Although the deal value was down, deal volume rose over 10%.
The higher number of deals in India and China signifies a rebound in dealmaking activity. If nothing goes off track, the Southeast Asian startup ecosystem is likely to follow the same trajectory in the coming months.
On that note, let’s dive into this week’s recap.
Buzzing Deals
➤ Singapore-based online bookkeeping and accounting firm Osome secured a US$17 million series B extension. The funding, which combines equity and debt from old and new investors, follows the startup’s earlier series B round of US$25 million raised in December 2022. The company, founded in 2017, employs over 400 people across multiple countries, including Singapore, Hong Kong, Malaysia, the UK, the Netherlands, and the Philippines.
Use of Funds: With a total Series B funding of US$42 million, Osome plans to enhance its automation capabilities and invest in customer service and marketing efforts. The development comes after the turbulent last year which resulted in mass layoffs at the end of 2023.
➤ Singapore-based anime venture studio Kasagi Labo raised a US$12 million pre-series A funding round. The investment came from Burda Principal Investments, CMT Digital, Superscrypt, Hashed, Sfermion, and Gold House Foundation. Founded in 2023, Kasagi Labo specializes in providing Japanese anime content through intellectual property licensing, distribution, and merchandising. Their offerings include original animations, limited edition merchandise, and virtual anime experiences.
Use of Funds: With the new funds, Kasagi Labo aims to forge new partnerships, acquire existing anime IPs, and expand its presence in Singapore, capitalizing on the global surge in anime popularity.
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➤ Climate tech startup BaniQL raised a US$1.6 million seed round, led by Beenext. BaniQL focuses on innovative, environment-friendly methods for nickel mining, aiming to reduce water, energy, and chemical usage. Their proprietary extraction process transforms metal waste and lower-grade nickel ores into nickel products with less heat and pressure. BaniQL operates across Indonesia, South Korea, Australia, and the Philippines.
Use of Funds: The funding will support the development of a prototype facility, expand R&D and engineering teams, and bolster general operations.
➤ Chinese tech giant Alibaba recently injected an additional US$230 million into Lazada, its Southeast Asia-focused e-commerce platform. This brings Alibaba’s total investment in Lazada to approximately US$7.7 billion since 2016 when it initially invested US$1 billion to secure a controlling stake. Notably, this marks Alibaba’s first funding into Lazada this year. In 2023, Alibaba had already invested over US$1.8 billion in the platform.
Use of Funds: The new funding aims to bolster Lazada’s position, as e-commerce players in Southeast Asia seek cost-effective strategies to outpace their competitors. Lazada’s Choice platform, launched last year, competes directly with Temu and Shein by offering low-cost products.
What’s Hot In Asian VC World
A slew of new fund announcements by Asian VCs, targeting new markets, and new opportunities happened this week.
➤ Singapore-headquartered venture capital firm Golden Gate Ventures hit the first close of its US$100 million Middle East and North Africa (MENA) Fund 1. The Golden Gate’s first fund for the region currently has US$20 million in commitments from anchor investors like Al Khor Holding, Al Attiya Group, and Sheikh Jassim bin Jabor al-Thani. Founded in 2011, the early-stage VC has invested in over 90 companies across its portfolio, empowering founders who are risk-takers.
Focus Area: Golden Gate’s new fund will focus on sectors like greentech, alternative energy, and B2B artificial intelligence, aside from backing edtech, fintech, and health tech startups.
➤ Singapore-based early-stage startup investment firm ThinKuvate launched its first India-targeted fund, ThinKuvate India Fund I with a corpus of US$12 million. Founded in 2015, ThinKuvate is an invite-only network of over 120 angel investors, focusing on B2B and B2B2C start-ups across health tech, fintech, AI, IoT, consumer tech, and marketing tech. Over the last seven years, ThinKuvate has invested US$5 million into 22 startups in Southeast Asia and India.
Focus Area: The new fund aims to back 12 to 15 early-stage startups per year starting the third quarter of 2024. Reportedly, the ThinKuvate team will first scout for investments not only in startup hubs like Bangalore and Chennai but also in tier-two cities like Nagpur and Raipur.
➤ Vertex Ventures Japan (VVJ) launched its inaugural US$64 million fund to back local startups. Dubbed Vertex Ventures Japan Fund I, it is anchored by Vertex Holdings, a Singapore-based VC investment holding company. It provides funding and operational support to a proprietary global network of seven independently managed venture capital funds across China, Israel, Japan, Southeast Asia and India, and the US.
Focus Area: Vertex Ventures Japan will invest in leading early-stage Japanese startups focusing on deep tech, digital transformation, AI, and the creator economy.
The Buzz in M&A Land
➤ Singapore-based company specializing in AI-powered digital behavior analysis Sqreem Technologies is acquiring TotallyAwesome, a local digital ad platform focused on marketing to Asia-Pacific youth. The deal size was not disclosed. TotallyAwesome team will join Sqreem’s global workforce. The deal comes a month after Sqreem acquired Trade Indy, an advertising firm from Melbourne.
With this acquisition, Sqreem plans to combine its AI tech with TotallyAwesome’s user base to help brands precisely tailor their engagement with kids, teens, and families safely and credibly.
➤ Indonesian telcos XL Axiata and Smartfren are in early talks of a potential merger. Axiata Group, the Malaysian conglomerate that owns XL Axiata, and a consortium led by Smartfren parent firm Sinar Mas have signed a non-binding memorandum of understanding to explore the merger. Such a deal would potentially create a US$3.5 billion entity with 100 million customers, where both parties will have a joint controlling shareholding.
The merger seeks to leverage Axiata Group’s telco expertise with Sinar Mas’ local scale and market knowledge.
➤ The US$1 billion acquisition of Reka AI by Snowflake has fallen through. Reka AI, a San Francisco-based AI startup with two Southeast Asian founders, recently launched Reka Core, its first multimodal language model. Working with images, audio, and video, Core competes with the leading LLMs from OpenAI, Anthropic, and Google. Meanwhile, Snowflake, an American cloud-based data storage and analytics service provider, released its large language model, Arctic last month.
The deal would have helped boost Snowflake’s business, as it sees generative AI as a key growth driver for its cloud-based data analytics offerings.
Managing Partner at Garden District Ventures. Currently on medical leave.
7moHyphen Partners: The recovery is very unequal amongst ASEAN nations, household debt is rising significantly, wage inequality is widening, and I have seen vastly more people sleeping on the streets: in Bangkok, in HCMC and Da Nang, and even in KL. In ADB’s own 2023 ‘Narrowing the Development Gap’ report, they looked at 39 economic indicators affecting residents across the region and found some stark statistics. So while the GDP numbers are starting to stabilize a few years on from the pandemic, individuals can’t pay for food or send kids to school with national GDP growth. Many residents of Thailand, Philippines, and even Singapore are being absolutely crushed by rising inflation and monthly costs. Overall FDI and VC/PE interest in the region are important as investment benchmarks, but ASEAN nations are quickly reaching an inflection point to deal with their own domestic finances—and growing populations that will require social services. “As the region emerges from the pandemic, fortifying health systems, raising the quality of education, and improving nutrition will equip our young workers physically, mentally, and emotionally and improve their productivity,” said ADB Director General for Southeast Asia Winfried F. Wicklein.