Southeast Asian firms are all set to spend big on generative AI

AI has emerged as the mega force driving stock gains in the developed markets amid the tough macroeconomic environment, the world's biggest asset manager BlackRock said recently in its mid-year outlook note. 

Well, this doesn’t come as a surprise.

In the past six months—since the OpenAI’s generative AI bot ChatGPT made its debut in November 2022 to be precise—the world’s top bourses have seen the shares of AI-related companies rally madly. Remember NVIDIA whose GPUs power ChatGPT servers? It is a trillion-dollar company now. And stocks of those which couldn’t keep up with the industry expectations have been punished as well. Google’s losing US$100 billion in market value is a case in point.

In the private markets across the world, VCs have woken up from their slumber in the so-called funding winter and begun chasing AI deals. No one wants to miss that generative AI wave—the most prominent technological transformation since the Internet arrived.

Back in Southeast Asia, companies have taken note. 

There is a sudden surge in AI adoption by businesses in the entire APAC region, according to a recent report by Dataiku . Particularly Southeast Asian firms, which are expected to increase spending on AI by 67% this year compared to 2022.

The report notes that AI platforms will be the fastest-growing software category between 2022 and 2026. Specifically, in Southeast Asia, spending on AI solutions is predicted to grow by almost 300%—from US$174 million in 2022 to US$646 million in 2026.

As for who will be spending this money, BFSI ( banking, financial services, and insurance) sector is predicted to be the top spender, accounting for 26.6% of AI spending by vertical. Followed by Manufacturing and then the government sector, which will account for an estimated 17% and 11% of AI spending, respectively.

This presents a big, enticing opportunity for entrepreneurs and investors who are already building the next wave of AI-first applications and AI-led business models.

On that note, let’s dive into this week’s recap.

The Rise of Green Investments

Hong Kong-based incubator and VC firm The Mills Fabrica plans to invest in Southeast Asian greentech startups this year. Founded in 2018, The Mills Fabrica is the venture arm of Nan Fung Group, a conglomerate involved in textiles, financial services, and shipping. The firm may invest up to US$3 million in startups involved in areas like agrifood tech and sustainable textiles. The underlying idea is to back projects in the circular economy, alternative ingredients, and conscious consumption, as well as novel materials, processes, and manufacturing systems.

In fact, The Mills Fabrica isn't the only one eying such projects. Early-stage startups that are into recycling and promoting the circular economy, are gaining more and more popularity with investors focusing on ESG. 

Singapore-based Ento Industries , which converts food waste into sustainable, high-quality protein for animal feed, has just raised undisclosed funding from private individual investors to expand food waste upcycling. Globally, non-recycled food waste accounts for around 8% of all greenhouse gas emissions, making it one of the top contributors to global warming. In Singapore, only 18% of the food waste is recycled, which is what Ento is trying to address. 

Another Singapore-based startup Neu Battery Materials recycles lithium-ion batteries, commonly used in electric vehicles, using electricity and regenerative chemicals. And it has just bagged a US$3.7 million seed funding round led by SGInnovate, an investor and ecosystem builder backed by the Singapore government. The two-year-old startup has recently set up a recycling plant in Singapore and plans to use this money to expand its automated recycling line to reduce staffing costs.

Action-packed Insurance Tech 

The past week has been quite active for Asia's emerging insurance tech sector. 

Hong Kong-based insurtech firm OneDegree has landed US$27 million in the second tranche of its series B funding round. Its backers include Gobi Partners, BitRock Capital, and Sun Hung Kai & Co. Limited, among others. In the first tranche, it had raised US$28 million. With the fresh money in its kitty, the six-year-old startup has raised over US$100 million to date. The new funds will be used to expand its offerings across Asia.  Ultimately, OneDegree plans to raise another round, most likely next year, and then go for an IPO after 2024.

Back in Southeast Asia, Thai insurtech firm Roojai has acquired the local general insurance business of Bolttech, a Singapore-headquartered multinational insurtech unicorn. Although the deal size was not disclosed, it will help Roojai to increase its market share in Thailand with a joint portfolio of over US$50 million in annual premiums. As per the company, it will also get a license to underwrite general insurance products. Founded in 2016, Roojai has a portfolio of over 160,000 customers for its motor, accident, and health insurance products.

Meanwhile, in Indonesia, insurtech firm Futuready has officially shut down, but it has not yet disclosed any reasons for ceasing its operations. Set up in 2016, Futuready was probably the first licensed online insurance broker in Indonesia. It helped its users find insurance products and offered them intermediary services to handle claims.

Earlier this January, another player in the insurtech sector Aigis pivoted to becoming a fintech service provider called Finnix. This is despite the fact that the insurtech industry in Southeast Asia saw increased demand, and thus investments in 2022, following the Covid-19 pandemic.

Buzzing Deals

The past week saw a slew of interesting deals happening. 

• OnePlus co-founder Carl Pei’s new consumer tech venture Nothing raised US$96 million in funding from  Highland Europe as well as its existing investors Google Ventures, EQT Ventures, C Capital,  and Swedish House Mafia. The investment comes ahead of the launch of its second phone next month. Just like last time when it raised US$70 million in its series B round in March 2022, a couple of months before the launch of its first smartphone. With the latest funding round, the London-based firm that focuses big on the Asia market has raised a total of US$252.9 million to date. Since its debut in 2020, Nothing has sold over 1.5 million devices worldwide.
• Taiwanese manufacturing giant Foxconn will be investing  US$246 million in Vietnam for producing and assembling telecommunications and EV components in the northern province of Quang Ninh. The company has just received regulatory approval from the country. With this move, the world’s largest contract electronics manufacturer, known for assembling Apple products, will be on track to become a significant player in the EV industry.
• Thai crypto exchange Bitkub is selling a 9.22% stake in the company to local game publisher Asphere Innovations for US$17.8 million. This share sale will help Bitkub gather additional capital, to expand its digital asset services in Thailand, where over 6.2 million people owned crypto as of last year. The four-year-old crypto firm allows users to buy, sell, and store cryptocurrency assets. The company has been operating in Thailand since it obtained a license from the country’s Ministry of Finance in early 2019.
• Singapore-based AI-powered marketing platform Needle has received US$1.2 million in its pre-seed round from Iterative, Ethos Fund, and Goldbell Financial Services. It will use the fresh capital to expand its team of data scientists, AI trainers, and engineers. Needle analyzes data from various platforms for e-commerce brands and provides personalized recommendations while automating campaign creation using generative AI. This helps its clients reduce costs and improve return on investment.
• Chinese food delivery titan Meituan is acquiring AI startup Light Year for US$234 million. This strategic acquisition will allow Meituan to gather talent in large language models and compete with Chinese tech giants like Baidu, Tencent, and Alibaba in developing generative AI services. 
• In Indonesia, eFishery , which offers aquaculture farmers B2B and supply marketplaces, smart feeding systems, and financing, has raised an additional US$47.7 million for its series D round. This brings the total funds raised for the round to nearly US$176 million.

And that’s the wrap for this edition of #ICYMI. We will continue to curate the weekly highlights of the Asian tech ecosystem in case you missed what made the buzz in the week that just went by. You can subscribe to #ICYMI to get it every Thursday to stay abreast of noteworthy tech developments.