Guest author: Frank-Jürgen Richter, Chairman, Horasis
As the global startup investment slowdown begins to show signs of turning around, Southeast Asia’s startup ecosystem should prepare for a new fundraising landscape.
A new report released this month by Google, Bain & Co, and Temasek, an investment firm owned by the government of Singapore, revealed that investment into digital companies in Southeast Asia had reached its lowest level in six years.
Factors, including the global investment slowdown following the high-profile collapse of US-based Silicon Valley Bank, have played a role. In March, just after the bank’s implosion,
Singapore Monetary Authority Chief Fintech Officer Sopnendu Mohanty said, “Accessing capital will be the single biggest challenge” facing startups in the short term.
However, as the dark cloud that has hung over markets for the past year begins to show signs of clearing, and the coffers of regional and global investors fill once more, Southeast Asia is poised as a region ripe for investment. Founders, though, should be aware of the changing fundraising landscape.
Founders should be laser-focused on profitability
I have worked with Asian companies and governments for over a quarter century, organizing summits attended by heads of state, captains of industry, and entrepreneurs — most recently, the Horasis Asia Meeting being held in Binh Duong, Vietnam on December 3-4. My familiarity with the region gives me every confidence that Asian entrepreneurs will be able to emerge from the so-called “funding winter.”
The region embraces a business culture of maximizing efficiency and profit — a mindset that will serve technology entrepreneurs courting tight-fisted investors who are increasingly worried about profitability over valuation. According to McKinsey & Company, Asian organizations have “pioneered many of the approaches that define world-class business practices today, from lean manufacturing to global business services.”
Even as VC firms such as 500 Global and Vertex are closing new, multi-million dollar funds for Southeast Asian startups, founders should be prepared to show a clear path to profitability and exit. During an investor conference in September, a general partner at Singapore-based Qualgro told the audience that the firm “passed one investment where founders were very good, the market was great … but we couldn’t see where the exit would be.”
Startups should keep sustainability at heart
In recent years, some Southeast Asian countries have emerged as bright spots in the push toward sustainability. In 2021 Vietnam, a nation of just 97 million, became the world’s tenth-largest producer of solar power, and in August, Vietnamese electric vehicle (EV) company VinFast was trading higher than Ford and General Motors when it debuted on the NYSE.
It is imperative that the next generation of startup unicorns coming out of the region keep sustainability at heart. Not only will this keep Southeast Asian countries on track to hit their goal of net-zero emissions by 2050, but it’s also likely to give them a leading edge in the current investor climate.
While some startup sectors lagged during Q3 2023, late-stage companies in select industries such as semiconductors, AI, EVs and sustainability, received larger investments, according to data from Crunchbase. And last year, global public and private investment into green energy hit $1 trillion for the first time, up from $32 billion in 2004, according to BloombergNEF data.
A recent survey of digital economy companies across Southeast Asia showed that while 85% of respondents showed interest in sustainability, less than 50% had actually implemented sustainable practices in their organizations. Startups must go beyond intention and act on sustainability practices, or risk being left behind in the global funding push towards sustainability.
An end to the current global funding drought will come sooner than later, and Asian startups must remain poised to hit the ground running when the investment tides shift.
Frank-Jürgen Richter is the Chairman of Horasis, a global visions community that holds annual economic summits, including the Horasis Asia Meeting.
