GrabFood drivers line up to collect orders from a store in Pisang Goreng Bu Nanik, Jakarta, Indonesia.
Dimas Ardian | Bloomberg | Getty Images
SINGAPORE – Southeast Asia’s tech startups had an aggregate valuation of $ 340 billion last year, and that number could more than triple by 2025, according to Jungle Ventures.
Jungle expects the region’s tech startups to be valued at $ 1 trillion in total over the next four years.
In its calculations, the Southeast Asian venture capital company took into account publicly available information on 31 start-ups with a minimum value of $ 250 million. Precautions have also been taken to accommodate issues such as many venture capital transactions that are not publicly disclosed.
“I was a bit surprised, but then I wasn’t,” says Amit Anand, founding partner of Jungle Ventures. He told CNBC that the real figure could potentially be much more than $ 340 billion.
“We’ve gone through the calculation of the envelope that it’s not hard to imagine that there’s a lot more data we’re not looking at, in terms of the rounds that either haven’t been announced or companies that are yet are under the radar, “he said.
“If you look at the rate of growth in Southeast Asia over the past 3-5 years, if it continues, which it definitely will, it will be heading for $ 1 trillion before 2025,” Anand added.
The potential of Southeast Asia
Around 400 million internet users live in Southeast Asia, 10% of whom went online for the first time in 2020.
According to a widely cited industry report by Google, Temasek Holdings, and Bain & Company, the internet economy in Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand – the region’s largest economies – is projected to exceed $ 300 billion by 2025.
The region’s start-ups have no shortage of financing options, as investors, including private equity, write large checks. In the first three months of the year, Southeast Asian startups are said to have raised a record $ 6 billion.
I think there is a lot of appetite in the IPO market.
Anand stated that investors are looking for “accelerated growth” in their investments compared to what they have received from other stationary industries.
The region’s start-up environment has what he calls the “Last Mover Advantage” – companies can learn from the successes and failures of their competitors in the US, China and India.
Some of the region’s prominent startups are about to go public, some of them have already announced blockbuster IPO plans.
Ride-hailing giant Grab announced in April that it would go public through a $ 39.6 billion SPAC merger, one of the largest blank check deals of all time. The newly merged Indonesian tech giant GoTo Group is also planning to go public soon.
Singapore-based real estate company PropertyGuru is also reported to go public through a SPAC merger, while Indonesian e-commerce company Bukalapak made its debut on Friday.
An IPO through blank check companies would open the start-ups to greater control by investors – especially in the US, according to Michael Lints, partner at Golden Gate Ventures.
“I think they were a little disappointed with where the SPAC market took them, so they will be more critical of the target companies that are now being listed,” he told CNBC.
Founders typically either sell their start-up to a larger company or take it public through an IPO, a process known as an “exit”. Mega SPAC deals like the one announced by Grab are still comparatively rare.
Lints stated that the exit values of most startups in the region are still below $ 1 billion, and most of them come through mergers and acquisitions.
Appetite for IPOs
Anand von Jungle, who is a passionate proponent of early-stage startups, said he is encouraging more of the company’s portfolio companies to go public in the region.
“I think the IPO market is in high demand,” he said, adding that investors are looking for new companies, industries and technologies that can generate additional returns from the market.
Anand stated that local stock markets do not yet have the capacity to handle mega IPOs, most of which are expected to be listed in the US to have dual listing IPOs.
“Governments have a lot to do before we get there, but that will free up another level of global liquidity,” he said.