PEs pin hope on Southeast Asia
Last year, Southeast Asia focused-private equity funds—global and regional—raised nearly US$3 billion in new capital. This year, fundraising by these PEs has nose-dived. As per a recent report by DealStreet Asia, till last month, only one Southeast Asia-focused PE fund had managed to reach a final close at US$126 million, as compared to seven such funds last year.?
And understandably so. Limited partners are super cautious given the worsening geopolitical situation, rising global inflation, and increasing interest rates.?
However, the report also notes that despite the distressed global economic situation, investors “increasingly view Southeast Asia as a safe haven, relatively insulated from geopolitical risks and poised to benefit from the realignment of global supply chains.”
What has further strengthened investor confidence in the region, as per the report, is a medley of factors—an improved track record of providing exits, a strong run of IPOs, secondary rounds, and global strategic investors picking up stakes in regional businesses.?
Consider this: Between January and September 20 this year, six Southeast Asia-focused funds have secured an interim close, raising US$1.47 billion , while there were 12? interim closes with US$2.31 billion in total proceeds last year. The gap isn’t as huge considering the current circumstances.?
Moreover, five new PE funds focused on the region were unveiled this year. Overall, there are 43 Southeast Asia-focused funds that are currently in the market to raise capital, with a combined target of over?US$11?billion .?
But above all this, DealStreet Asia’s researchers believe that the slowdown in fundraising by Southeast Asia-focused PE funds is unlikely to continue next year because LPs will have a better reading of risks. And because the Southeast Asian economy is expected to grow better than many other emerging markets as well as developed economies.?
Unsurprisingly, growth capital has accounted for over 80% of the total money raised by PE firms focused on Southeast Asia, in the last five years. Usually, PEs write large checks for majority stakes in growth to late-stage businesses, but there is a chance that they may start looking into early stages as well.?
For instance, Southeast Asian PE major Northstar Group has launched a dedicated VC fund to invest in early-stage startups. This comes after years of writing relatively smaller checks for regional startups like GoTo Group , Bank Jago, Ula , Pintu , and TIKI .
Given that the Southeast Asian startup ecosystem is on the rise, it won’t be surprising if other PEs follow the suit.?
On that note, let’s dive in for this week’s recap.
The big fat deals this week
The New York-based PE firm Warburg Pincus will invest US$350 million for setting up a digital insurance platform, Oona Insurance. Oona, which currently operates Indonesia-based Asuransi Bina Dana Arta and Philippine-based Mapfre Insular Insurance Corporation, will rebrand these companies and bring them under the Oona name. These two entities are expected to give the new platform an immediate foothold in the Southeast Asian market.
Meanwhile, Singapore-based experience entertainment company Cityneon Holdings has landed a US$105.5 million check from Temasek-owned 65 Equity Partners. The company, which creates immersive, phygital experiences for clients like Disney, Universal, and Marvel has also rebranded to Neon.
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Equally notable is the ?US$ 550 million fundraise by Square Peg—one of the largest Australian VC firms—for its fifth fund to invest in tech startups across Southeast Asia, Australia, and Israel. Of the total, US$350 million is earmarked for early-stage startups while the rest will go to late-stage companies.
Climate financing on the rise in Southeast Asia
The Asian Development Bank (ADB) is leading a US$135 million financing round for Vietnam-based automotive firm VINFAST , which will use the funds to manufacture the country’s first fully-electric public transport bus fleet and first electric-vehicle charging network. The move is aimed at cutting down emissions from the transport sector, which accounts for 18% of annual greenhouse gas emissions in Vietnam.
Separatey, Indonesian solar energy firm Xurya—which brings expertise in sourcing, developing, operating, and maintaining distributed solar projects for its customers—has just received US$33 million in additional series A round led by Mitsui & Co.?
More action in Metaverse and NFT space
Thai metaverse firm Translucia has bought a major stake in the local esports startup Infofed. The deal—estimated to be an eight-digit sum in dollars—is a part of the joint venture to promote esports in Southeast Asia and make Thailand its regional hub. The duo will also develop esports content for Translucia’s metaverse.
On the funding side, East Ventures has just led a US$1.7 million funding round for Singapore-based NFT startup AWST . The two-year-old startup, which is working with payment giant Stripe for processing NFT transactions, helps companies and brands in launching NFT collections across different blockchain protocols.?
This and That
Southeast Asian tech giant Grab will be shutting down its Indonesia’s cloud kitchen arm, GrabKitchen in December due to its inconsistent growth in the last four years. The move will affect 10 to 20 employees, some of whom will be transferred to other divisions, while others will be laid off.
On the other hand, digital payment startup Fazz is expanding fast, with an aim to triple the number of businesses using its platform annually in Indonesia and Singapore. The Tiger Global-backed company—which offers integrated services including payments, savings, and credit to 300,000 small and mid-sized businesses across these two countries—had raised US$100 million in a series C funding round last month. It intends to use those funds to develop new features to woo more businesses in the region.