If one has to sum up how the Southeast Asian tech startup ecosystem fared in 2023, it would suffice to say just three words.
More smaller checks.
Regional tech startups raised a total of US$5.5 billion last year, 30% less than US$8.4 billion in 2022, according to a new report by January Capital.
However, Southeast Asia’s tech sector still saw the second-highest number of deals since 2018. At 855 investment deals, the deal volume was 30% higher in 2023 than 760 deals a year before.
Source: State of the ASEAN Technology Ecosystem Report CY2023 by January Capital
Much of the decline, in both deal count and investment amount, happened for series B and C+ startups. In contrast, seed-stage deals rose in value as well as volume.
In terms of markets, most capital flowed into Singapore and Indonesia, as usual. Singapore remained the most active startup hub in Southeast Asia, with a significant rise in the number of tech startup deals. Notably, Thailand, the Philippines, and Vietnam also experienced a year-on-year rise in deal count.
The amount of capital invested dropped sharply in all Southeast Asian markets except for the city-state where deal value remained at almost the same level as the year before. With investors going for proven business models, SaaS, healthcare, and e-commerce saw the most increase in the number of deals.
Interestingly, Indonesia and Singapore seem to have the highest rate of female founder participation in the entire region.
As per the data compiled by January Capital and Alternatives.pe, Singapore has 435 female-founded companies, which represent 7.2% of all tech startups in the city-state, while Indonesia has 391 female-run startups, making up 23.9% of the total tech startups in the country. Malaysia and Vietnam, both have 104 startups run by female founders, whereas Thailand and the Philippines have 54 and 18 such startups, respectively.
Source: State of the ASEAN Technology Ecosystem Report CY2023 by January Capital
As major VCs like Peak XV Partners focus on promoting women entrepreneurs in the region, female founder participation in the overall Southeast Asian startup ecosystem is likely to go up this year.
Speaking of 2024, the year hasn’t exactly started on a high note for Southeast Asian startups. The regional startup funding dropped to a 12-month low of US$246 million in January, as per the data collated by DealStreetAsia.
However, the deal count rose to 61—the highest since July 2023—which means investors are going to continue cutting smaller checks and pumping money into early-stage startups. Just like last year. For context, of these 61 deals in the region, 17 were pre-seed rounds and 13 were seed rounds.
According to a new report by DealStreetAsia, fewer VCs in Southeast Asia closed funds in 2023 as limited partners like pension funds and university endowments became more cautious and tightened their purse strings.
The number of closed funds dropped over 32% to 25 last year, compared to the record high of 37 in 2022. Regional venture investors raised a total of US$5.37 billion in 2023. However, B Capital's new fund contributed a massive US$2.1 billion to it.
Notably, only two debut funds achieved a final close in 2023, as opposed to 12 a year prior. Perhaps, LPs didn’t trust first-time funds to do well in the persisting challenging environment. Moreover, these two funds amassed a total of US$70 million, a sharp drop from the US$622 million gathered by debut funds in the preceding year.
However, this year so far, a handful of investors have already closed funds to back regional startups, including Asia Partners, AC Ventures, Climes Capital, and ABC Impact, among others. Several more are looking to do the same in the coming months.
For instance, Singapore-based PE firm Mizuho Asia Partners is understood to have amassed about US$270 million so far for its third fund, out of the total target corpus of US$350 million. Similarly, Thailand-based PE firm Lakeshore Capital is seeking to raise US$250 million for its third fund.
Meanwhile, ADB Ventures, the tech investment arm of the Asian Development Bank, is targeting to raise US$200 million for a new fund to back climate-focused startups in Asia.
Other investors in the pipeline are VinaCapital Ventures, which is looking at the final close of its US$100 million second fund in Q2 this year, and PE firm Triple P Capital, which is out there raising its second fund with a target corpus of US$200 million.
Buzzing Deals
Financial Times recently reported that Singapore state-owned investment firm Temasek Holdings is in early talks to become a backer for OpenAI. However, now that Elon Musk has sued Open AI CEO Sam Altman for allying with Microsoft and putting profit ahead of its original mission of developing AI that benefits all of humanity, it remains to be seen if the deal will materialize. If it does, Singapore will become closer to its dream of becoming an Asian AI powerhouse.
For now, let’s take a look at the deal that did happen this past week.
Singapore-based foodtech startup Ai Palette has successfully raised US$4 million in Series A1 funding from Tin Men Capital, boosting its total Series A1 funding to US$5.8 million. The company, which operates in the US and India, leverages AI and ML to help consumer packaged goods companies identify consumption trends and develop new product ideas more efficiently. Ai Palette’s technology, capable of analyzing 61 billion data points from over 150 data sources, includes a natural language processing algorithm that understands Asian languages. With the fresh capital, Ai Palette plans to venture into the beauty, personal care, and nutraceutical industries and aims to expand its presence in North America, Europe, and the Asia-Pacific region.
Singapore-based startup Drigmo, founded by ex-Googlers, has launched a new social app called Yolk.fm, which lets users interact with images and AI-generated stickers instead of text. Yolk.fmhas just raised US$1.25 million in pre-seed funding from Forge Ventures, Sequoia’s Scout Fund, DST Global, Temasek, and several angel investors from leading companies. The team behind the Drigmo app, which allows users to save restaurants they want to try next and share recommendations, and Yolk.fm is set on a multi-app strategy and plans to focus on expanding marketing, boosting R&D, and leveraging remote talent.
Alibaba has reinforced its position as a key player in China's AI sector. It just led a US$600 million funding round for the AI startup MiniMax, pushing up its valuation to over US$2.5 billion. This comes shortly after the e-commerce giant led a US$1 billion round in Moonshot AI, also valued at $2.5 billion. MiniMax, which specializes in social AI, develops AI companions and virtual characters for interactive experiences. Currently, the startup offers two AI character role-playing apps: Talkie for international markets and Xing Ye for China.
B2B embedded finance startup, Fairbanc has recently secured US$13.3 million in debt financing from Pegadaian's digital lending arm, a part of Bank Rakyat Indonesia. Founded in 2019, Fairbanc utilizes supply chain data from FMCG distributors for automated credit scoring and risk management, based on which it offers working capital to MSMEs. It also enables them to buy inventory on BNPL credit. The company will use the funding to expand its operations in Indonesia, promoting its Buy Now, Pay Later (BNPL) offerings for off-balance sheet financing. Moving forward, the company plans to strengthen its Indonesian market presence and venture into Vietnam and the Philippines.
Singapore-based Xcelerate, a governance, risk, and compliance platform, has successfully raised over US$25 million from Federated Hermes' private equity arm. This round also witnessed its existing investors Altair Capital and Exacta Capital Partners participating along with its co-founders. Founded in 2021, Xcelerate assists corporations in adhering to top governance standards and compliance requirements. The new funds are earmarked for strategic acquisitions and enhancing the company’s operations, team, and technology. It has already made significant strides in India's social compliance and risk management sectors and plans to extend its footprint to the Asia-Pacific region and beyond.
Indonesia-based earned-wage access (EWA) startup Wagely has raised US$23 million in its latest funding round, marking the largest investment received by an EWA company in the country to date. This development comes after Wagely achieved a milestone of 1 million salary disbursements since its inception four years ago. The funding round is led by Capria Ventures, with participation from a major private debt fund. The company will use the fresh funds to expand in Indonesia and Bangladesh.
What Stood Out This Week
The Southeast Asian conglomerate Sea Group posted its first positive annual net income of US$163 million for 2023 while clocking in US$13 billion in revenue for the year, up 5% from 2022. However, the New York Stock Exchange-listed company remained in the red in the fourth quarter of 2023, although its net loss of US$112 million narrowed from Q3’s US$144 million. Revenue for Q4 2023 stood at US$3.6 billion, 5% higher than a year ago, driven by the growth of Shopee, its e-commerce arm. Shopee’s sales surged by 23% to US$9 billion for the year, with its Q4 2023 revenue alone rising by 23% to US$2.6 billion over the previous year. This growth comes amidst the intense regional competition, notably from TikTok Shop in Indonesia. Additionally, Sea Group is set to expand its financial services footprint by acquiring Indonesian digital bank Hibank in the second quarter of 2024.
Online property portal PropertyGuru clocked a net profit of about US$820,000 for Q4 2023, a significant shift from a net loss of US$3.9 million in the same quarter the previous year, thanks to its growth in Singapore that offset the impact of tough markets in Vietnam and Malaysia. This marks the company's second consecutive quarter of profit. The company’s revenue went up by 3.5% y-o-y to US$30.9 million in the quarter. Over the full year, its net loss significantly narrowed by 88.2% to US$11.4 million, while revenue grew by 10.5% to US$111.6 million. To reach profitability, the company has been focusing on cost optimization, automation, and productivity improvements.
Thailand-based banking giant SCBX is buying Home Credit Vietnam, a leading consumer finance firm, for US$866 million. The deal, expected to be finalized in the first half of 2025 pending regulatory approval, will see SCBX's subsidiary Siam Commercial Bank taking complete ownership. This strategic acquisition follows Home Credit's exit from Indonesia and the Philippines. Home Credit, owned by the international investment firm PPF Group, entered Vietnam in 2009. It boasts the second-largest market share in the Vietnamese consumer finance sector with a 14% stake, nearly 6,000 employees, and 15 million customers. SCBX aims to use Home Credit Vietnam as a key operational base in Vietnam and expects immediate positive financial contributions to the group post-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.
