Between 2023 and 2025, at least 700 start-ups are expected to exit.
Editor’s note: Michael Lints, a partner at Golden Gate Ventures, Golden Gate Ventures, an early venture capital firm based in Singapore So far, more than 30 companies have been invested in more than 7 countries in Asia . The company’s investment Internet and mobile startups span a wide range of industries, including e-commerce, payments, mobile applications and SaaS platforms, such as Go-Jek in Asia and Stripe in the US. This article has been licensed by Michael Lints.
Key Tips:
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New Market Opportunities: The first batch of institutional venture capital funds will be closed and is expected to exit in 2020-2022.
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Next buyer: regional technology giants, mergers and acquisitions of newly-rising unicorn companies, corporate risk, acquisition of strategic investments, resale between investment institutions such as PE, VC, securities The exchange’s support for the IPO will drive startups out of the way.
Southeast Asian technology start-upsEcosystems are rapidly maturing More and more money is flowing to emerging technology startups. Golden Gate Ventures, a Singapore-based venture capital firm that works with INSEAD, believes that with the rise of overseas venture capital, corporate strategic investment and unicorn companies, it is necessary to review and review the early exit strategy. Research. In this analysis, we conducted an in-depth review of historical exits (strategic acquisitions, listings, and sales) and made new predictions for the exit prospects for the next five years.
“The development of entrepreneurial ecosystems in Southeast Asia is booming, and now is the best time to start a business. European and American investors want to expand their investment in the region, and the exit of the future (startups and venture capital funds) will only increase them. Investment. The growing interest of companies in the field of start-up investment is undoubtedly a development that deserves attention. They may provide additional exit channels to fill the financing gap in some countries.” INSEAD Entrepreneurship and Family Business TeachingClaudia Zeisberger said.
The 2017 Sea Group is listed on the New York Stock Exchange. In 2018, Grab acquired Uber Southeast Asia. Since 2015, there have been at least six new unicorn companies in Southeast Asia… There have been many new developments in the past few years. Therefore, we decided to work with INSEAD to conduct a survey on GP expectations, reassess the exit prospects in Southeast Asia, and provide a new forecast.
The total amount of exits from start-ups in Southeast Asia (classified by exit mechanism)
In this new forecast, in order to make better use of historical exit data from Southeast Asia, global industry benchmark data, and INSEAD survey results, we have adopted a new approach. We predict that at least 700 start-ups will be exited between 2023 and 2025. This prediction is consistent with the attitude of the GP “overall optimism” from the INSEAD survey.
The main drivers of future start-ups are: Unicorn becomes the acquirer (for example, Go-Jek acquired 7 start-ups between 2017 and 2019), and venture capital firms invested more money ( Toyota Investment Grab became the world’s largest corporate venture capital investment in 2018), and global private equity fund participation continued to increase (represented by Huaping Investment Group’s investment in more than US$4 billion in Southeast Asia and China) and by Sea Group 2017 The listing of the stock exchanges, the strong support for the listing of start-ups.
Overall trends
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In general, when the start-up ecology enters maturity, most of the exits are driven by regional technology giants. But apart from Alibaba’s acquisition of Lazada, China’s large technology companies have not yet entered the M&A market.
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Although there are few publicly available data on secondary sales between Southeast Asian investment institutions, resales are expected to become a major trend after 2022.
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With the end of the investment cycle of the previous venture capital fund (the fund raised in 2010 – 2012), a large-scale exit will occur after 2022.
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The influx of new capital will enable more business models to drive more start-ups into growth and preparation for the market.
Active players
Regional companies are increasingly active in Southeast Asia. Countries such as Indonesia, Thailand, and Singapore are at the forefront of corporate investment in startups. In the past 8 years, the number of corporate venture capital firms (CVCs) has increased five-fold, and the amount of investment in the same period has increased by 63%.
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The picture on the left is the total number of venture capital firms in Southeast Asia; the picture on the right shows the total number of investment transactions that these investment companies make each year
In addition to regional enterprise venture capital funds, international companies such as Hyundai and Mitsubishi, as well as international media companies such as Naspers, Burda Media Group and Lotte, are increasingly interested in Southeast Asia.
Global private equity funds are known for their early investments in Southeast Asia. Although the investment growth is not as strong as the corporate venture capital fund, it has also increased investment by 30% in the past 8 years.
The picture on the left lists some of the global private equity funds that hold portfolios in Southeast Asia; the picture on the right shows the total number of global private equity funds that are traded annually in Southeast Asia
Southeast Asian venture capital funds are not far behind. In the past 12 months, a number of venture capital funds in the growth phase have initiated or completed financing. For example, Asia Partners, initiated by Nick Nash, was founded by East Ventures, SMDV and YJ Capital.EV Growth, and Golden Gate Ventures in partnership with Hanwha Assets. A total of 311 venture capital transactions were announced in 2018, with a value of $5.2 billion, an increase from 230 in 2017 and $4.1 billion.
Key Drivers
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A growing number of regional technology giants: Regional technology companies are expanding their market reach or expanding their product lines by acquiring companies (2015 – 2018 compound annual growth rate of 100%).
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The liquidity of each stage of venture capital is enhanced.
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Continuous support from regional and global stock exchanges. So far, there are not a large number of listed companies in Southeast Asia. With the increase in funds and market testing, more companies with listing conditions will emerge in the region.
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The first batch of institutional venture capital funds will be closed and will be withdrawn within the next two years. The first group of venture capital funds entered the Southeast Asian technology start-ups in 2010-2012, and the cycle ended roughly after 2020. The GPs of these funds will drive exit decisions before the fund closes. This means that M&A transactions, resale between venture capital institutions and talent acquisitions will increase significantly. Venture capital funds raised after 2014 will be withdrawn from 2022. This is the first time in Southeast Asia that the investment cycle has ended, which has a huge impact on the number of exits that have been achieved.
Results
In collaboration with INSEAD, we asked 10 GPs about the prospects of a healthy start-up for Southeast Asian start-ups. About 65% of respondents believe that the global benchmark for exit can be applied to Southeast Asian start-ups to a certain extent. About 54% of respondents believe that Southeast Asian start-ups and stakeholders are under-prepared for possible negative impacts. One of the main reasons is that the founders and managers have no relevant experience or believe that there will be no negative impact.
For the question “What do you think is the most important factor affecting the exit prospects?”, the main answers are as follows:
+Investment increases; funds and strategic partners increase in size; high valuations make exits more attractive.
+Unicorn companies become acquirers; resale between investment institutions occurs in the late stage of investment; more and more companies achieve strategic investment or incubate external companiesGrowth; formation of regional integration.
+ GDP growth in Southeast Asia.
+A lot of start-ups are mature and start thinking about going public; stock exchange support.
-increasing competition; the stock market does not understand the mechanism of venture capital.
Note: where + is positive and – is negative
Conclusion
The increase in existing venture capital will drive more business models feasible, scalable companies to enter the growth stage and become potential for multinationals, technology companies and private equity funds Acquisition target. The growth of late financing from private equity funds (30%) and corporate venture capital (63%) will have a significant impact on the exit prospects.
Golden Gete Ventures predicts that mergers and acquisitions, trade sales and inter-institutional resales are the main drivers of Southeast Asian start-ups. Currently, the strongest acquirers are local and regional technology giants, not Chinese companies or global technology companies.
The region and the US stock exchange remain optimistic about the prospects of technology startups for several years to come. Institutional investors need to increase their understanding of the hidden potential of Southeast Asia.
Regional technology giants will continue to acquire start-ups to strengthen the platform and expand the market.
Reminder. This report fails to draw conclusions as to whether historical exits bring good returns to venture capital funds and their GPs. From the current ecological outlook, reinvestment can be expected, but the premise is that the first batch of investment must first complete a large-scale exit.
Edit | Guo Chen@出海
Figure | Pixabay
