Golden Gate Ventures | Venture Capital for Southeast Asia

Southeast Asia’s Startup Boom Seen Jumpstarting Regional Deals

(Bloomberg) — Mergers and acquisitions will drive technology startup exits in Southeast Asia in coming years, with the number of deals rising more than sixfold to at least 250 annually by 2020, according to Golden Gate Ventures.
The surge reflects an influx of capital investments into the region, policies that put foreign players at a disadvantage and global firms seeking a foothold in growth markets, the Singapore-based venture capital firm said in a report Tuesday. The tendency toward acquisitions contrasts with other markets including the U.S. where initial public offerings are typically the preferred way to cash out from an investment.

“In Southeast Asia, it’s the opposite,” Vinnie Lauria, managing partner at Golden Gate, said in a statement. “A trade sale will often result in larger financial returns than going public, especially if the acquirer has a strong strategic interest in the region.”

Like China a decade ago, Southeast Asia — home to 600 million people whose income is on the rise — is an emerging market on the brink of “something big,” the report said. In 2015, companies including Sequoia Capital, KKR & Co., Golden Gate and Singapore-based private equity firm Northstar Group started or backed Southeast Asia-focused new funds with a total capitalization of as much as $2 billion.

Increasing Internet and mobile penetration and affluence is spurring a regional entrepreneurial boom, nurturing well-funded startups like GrabTaxi Holdings Pte., Lazada and MatahariMall. Yet while they’re expanding in everything from e-commerce to ride-sharing across Southeast Asia, the region’s technology industry remains nascent compared with the West.

That’s changing as investment activity keeps pace with the market, driven in part by foreign companies’ desire to navigate complex and fragmented markets with the help of a local player.
Since 2005, there have been only 11 tech IPOs in Southeast Asia, compared to 127 acquisitions during the same period, according to the report. Some of the biggest recent tech startup acquisitions in the region include Seek Ltd.’s purchase of JobStreet, and REA Group Ltd.’s acquisition of iProperty Group Ltd., an online advertising business.

Original report by Yoolin Lee, Bloomberg