What 2024 holds for Southeast Asian startup ecosystem

Southeast Asia seems to be better positioned in 2024 than last year, despite a not-so-bright global outlook. 

The region is expected to see improved growth this year on the back of a recovery in the electronics sector, steady domestic demand, higher public investment, and the ongoing rebound in travel and tourism.

Asian Development Bank projects the region’s GDP to expand by 4.7% this year, up from 4.3% in 2023. In line with these projections, analysts from Nomura Global Research expect ASEAN-5 countries—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—to grow by an aggregate rate of 4.5% in 2024, compared to 3.9% last year.

Then there are other signals that indicate things will take a turn for the better. 

Easing macro headwinds such as inflation and high cost of capital. Expected interest rate cuts by the US central bank. Solid earning growth estimates for public markets across geographies. And developing Southeast Asian economies emerging as alternative investment destinations to China. According to consulting firm Redseer, these factors should help regional public markets and drive positive spillover effects for the private markets. 

Speaking of Southeast Asian private markets, Redseers, in a recent report, said the intense focus on profitability will progressively ease this year. It also noted that startups responding well to the emerging demand-supply trends will regain traction. This means, there lies an opportunity for regional startups to get back on their growth trajectory. 

That being said, let’s take a quick look at what analysts and industry veterans feel 2024 holds for the Southeast Asian startup ecosystem.

• The funding situation is likely to improve: Many VCs in Southeast Asia expect fundraising to pick up in 2024 compared to last year. Still, the money is likely to flow into the tech firms that can demonstrate clear and viable paths to profitability. 
• The most active sectors in Southeast Asia: Along with E-commerce and Fintech, the new sectors that could see the next wave of investment opportunities this year include AgriTech, Artificial Intelligence, Climate tech, D2C brands, HealthTech, and Travel.
• Singapore and Indonesia to remain top destinations for investors: The country-level allocation of investments remains concentrated on Singapore and Indonesia. The two countries have cornered more than 70% of funding since 2019. And the trend is likely to continue this year as well. 
• IPO market to heat up: The focus of Southeast Asian startups on profitability will create a strong pipeline of IPO-ready companies in the next five years. Given that there are 50 unicorns and over 100 soonicorns, Redseer expects around 40 digital businesses in the region to be ready to go public by 2027. 
• The competition will become fierce: There is a shift in capital flow from China to Southeast Asia to develop the region as a key market. This translates into intensified competition for local players. Moreover, the next wave of Chinese tech entrepreneurship is coming to the region, which poses greater operational competition, thanks to the Chinese work ethic.

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

Buzzing Deals

The start of the year has been pretty robust when it came to fundraising.

• Asia Partners, a Singapore-based investment firm, just wrapped up fundraising for their second fund, Asia Partners II LP, pulling in US$474 million. This is a nice 23% bump up from their inaugural fund, which was closed at US$384 million. Now, they have US$1 billion worth of assets under management. What’s interesting is that its limited partners not only include institutional investors, family offices, and individual investors across six continents but also its employees and advisory board members, who contributed over 9% to the fund. Asia Partners plans to pump this money into Southeast Asian startups, writing series C or D checks of US$20 million to US$100 million. 
• Singapore-based semiconductor design and manufacturing firm Silicon Box, has just raised US$200 million in Series B funding from BRV Capital, Event Horizon Capital, Lam Capital, and TDK Ventures. The company’s co-founders also chipped in the round, which has skyrocketed Silicon Box’s valuation to over US$1 billion. Now that the two-year-old company that specializes in chiplet architecture has become a unicorn, it aims to expand its chiplet tech globally. The company already has a massive, US$2 billion facility in Singapore cranking out chiplets since October 2023. 
• Atome, a fintech company based in Singapore, just got a nice US$31 million funding from their parent company, Advance Intelligence Group. The buy now, pay later firm that operates across Southeast Asia and Greater China has also diversified its offerings to include insurance, cards, and investments. While the company has been growing in markets like Malaysia and the Philippines, it has cut jobs in Indonesia and exited from Vietnam. Nevertheless, the company is looking to fill 70 key roles across the region.
• Swap Energy, an Indonesian startup focused on EV batteries, just nabbed US$22 million in Series A funding. Qiming Venture Partners led the charge with a US$12 million investment, while GGV Capital and Ondine Capital threw in US$8 million and US$2 million, respectively. Founded in 2019, Swap Energy is making it easier to charge electric two-wheelers. It has set up over 1,300 swapping stations across Indonesia and works with local EV brands like Smoot and Minerva Electrons. Swap has also teamed up with Grab and Indonesia's state-owned power company, Perusahaan Listrik Negara, to create a more integrated EV ecosystem. 
• Maya Innovations, a fintech startup from the Philippines, recently raised an impressive US$80 million in a Series C funding round. This investment was contributed by several investors, including Jumel Holdings, First Pacific Company, PLDT, SIG Venture Capital, and Tencent. Maya Innovations is known for its digital payments company, Maya (formerly PayMaya). This new funding is an endorsement of the company's potential and impact in the Philippines' fintech sector.
• Komunal, an Indonesian fintech startup, has raised US$5.5 million in an extended Series A funding round led by Sumitomo Corporation Equity Asia and included other investors like Jafco Asia, Skystar Capital, Sovereign Capital, and Gobi Partners. Komunal's mission involves digitizing rural banks to drive financial inclusion in Indonesia. This funding will help it continue expanding its product offerings and develop close partnerships with more rural banks, particularly those outside Java and Bali.
• Semaai, an Indonesian agritech startup, has successfully raised US$4.7 million to expand its operations in Indonesia. This funding, led by CyberAgent Capital, comes at a time when the company has recorded a 15x increase in net revenue in the last 12 months. The capital raised will be instrumental in Semaai's efforts to grow its presence in the Indonesian market as it plans to expand its advisory services, collaborate with fintech institutions, and increase its footprint in Central Java.
• Singapore-headquartered MSME lending platform Funding Societies has received an undisclosed investment from Malaysia's sovereign wealth fund Khazanah Nasional and CGC Digital, a subsidiary of Malaysia's Credit Guarantee Corporation. This funding will help Funding Societies expand its Malaysian operations beyond its current locations. The platform, which also offers Islamic financing solutions, plans to serve over 25,000 MSMEs in Malaysia by 2025.

What Stood Out this Week

VinFast, a Vietnamese electric vehicle maker, is making a big move into the world's third-largest vehicle market, India. VinFast and the Indian southern state of Tamil Nadu just signed a deal to build the company’s first EV and battery manufacturing facility with an investment of up to US$2 billion. The initial phase will see a US$500 million investment over five years. This project, kicking off construction this year in Thoothukudi, is set to create 3,000 to 3,500 jobs locally. The plant in Tamil Nadu will have an annual capacity of up to 150,000 vehicles, compared with 250,000 at its main plant in Vietnam.

As the company takes the bold step of expanding globally, Vinfast is going through a major leadership shift wherein its billionaire founder Pham Nhat Vuong will be stepping down as chairman of the board and taking on the dual roles of CEO and managing director. Le Thi Thu Thuy, the current CEO, will transition to the role of chairwoman of the board.

Etherscan, known for its Ethereum blockchain explorer, has acquired Solscan, a similar tool for the Solana blockchain. This acquisition, for which deal value remains undisclosed, will help Etherscan expand its services across multiple networks. Solscan, launched in 2021, helps users view information in the Solana blockchain, an Ethereum alternative. Serving over 3 million users monthly in the Solana ecosystem, it lets them manage their accounts, track transactions, and look for investment opportunities across various crypto platforms. The acquisition comes at a time when NFT sales on the Solana network have seen significant growth, even surpassing Ethereum's.

OpenAI CEO Sam Altman-backed-iris biometric crypto project Worldcoin has expanded to Singapore by launching World ID, a digital passport providing unique proof of human identity, in the country. Tools For Humanity, the main developer of Worldcoin, has joined crypto and fintech associations in the city-state. Singaporeans can now prove their unique identity using World ID at various locations with the Orb, a special hardware developed by Worldcoin. Aside from Singapore, Wordcoin has also expanded World ID in Spain, Germany, South America, and Japan.

On the Downside

At the beginning of the new year, the news of several companies doing mass layoffs came as a downer. 

Southeast Asian ecommerce giant Lazada has let go of 30% of its staff across different markets. Departments that are most affected by layoffs are customer care, marketing, and commercial teams. The development follows a series of departures in its Singapore office including Lazada Singapore’s CEO Loh Wee-Lee. Founded in 2012, Lazada has a presence in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Chinese tech giant Alibaba, which acquired the ecommerce platform in 2016, replenished Lazada’s war chest with a total of US$1.8 billion investment in 2023 amid the increasing competition.

Globally, two big firms have also announced job cuts. Amazon-backed, US-based live streaming platform Twitch is letting go of 500 employees, or 35% of its workforce due to financial concerns and key executive exits. Meanwhile, global asset management firm Blackrock is set to terminate about 600 employees, or roughly 3% of its global workforce due to its tepid growth in the last two years amid challenging macroeconomic conditions. 

Separately, Chinese tech giant Baidu has called off its US$3.6 billion acquisition deal with Joyy‘s domestic live-streaming business YY Live, which has over 1.6 million paying users globally. Baidu’s affiliate, Moon, first entered into a share purchase agreement with Joyy in November 2020, primarily to widen its geographical reach. However, according to a filing on the Hong Kong Stock Exchange, the conditions for the deal “had not been fully satisfied” as of the end of 2023. Joyy is now seeking legal advice in response to Baidu canceling the acquisition.

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.