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Investors are doubling down on Southeast Asia’s digital economy
Southeast Asian tech companies are drawing the attention of investors around the world. In 2020, startups in the region raised over $8.2 billion, about four times more than they did in 2015. This trend continued in 2021, with regional M&A hitting a record high of $124.8 billion in the first half of 2021, up 83% from a year earlier.
This begs the question: Who exactly is investing in Southeast Asia?
Let’s explore the three key types of investors pouring money into and driving the growth of Southeast Asia’s tech ecosystem.
Over 229 family offices have been registered in Singapore since 2020, with total assets under management of an estimated $20 billion.
Big tech
Southeast Asia has become an attractive market for U.S. and Chinese tech firms. Internet penetration here stands at 70%, higher than the global average, and digital adoption in the region remains nascent — it wasn’t until the pandemic that adoption of digital services such as e-wallets and online shopping took off.
China’s tech giants Tencent and Alibaba were among the first to support early e-commerce growth in Southeast Asia with investments in Sea Limited and Lazada, and have since expanded their footprint into other internet verticals. Alibaba has backed Akulaku, M-Pay (eMonkey), DANA, Wave Money and Mynt (GCash), while Tencent has invested in Voyager Innovations (PayMaya), SHAREit, iflix, Ookbee and Sanook.
U.S. tech firms have also recently entered the scene. In June 2020, Gojek closed a $3 billion Series F round from Google, Facebook, Tencent and Visa. Google, together with Singapore’s Temasek Holdings, invested some $350 million in Tokopedia in October. Meanwhile, Microsoft invested an undisclosed amount in Grab in 2018 and has invested $100 million in Indonesian e-commerce firm Bukalapak.
Venture capitalists
In Q1 2021, Southeast Asian startups raised $6 billion, according to DealStreetAsia, positioning 2021 as another record year for VC investment in the region.
The region is also rising in prominence as a destination for investment capital relative to the rest of Asia. Regional VC investment grew 5.2 times to $8.2 billion in 2020 from $1.6 billion in 2015, as we can see in the table below.
Image Credits: Jungle VC
Southeast Asia also has many opportunities for VC investment relative to its market size. From 2015 to 2020, China saw VC investment of nearly $300 per person; for Southeast Asia — despite a recent investment boom — this metric sits at just $47.50 per person, or just a sixth of that in China. This implies a substantial opportunity for investments to develop the region’s digital economy.
The region’s rising population and growth prospects are higher due to China’s population growth challenges, alongside the latter’s higher digital economy market saturation and maturity.
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Aspire raises $32.5M to help SMEs secure fast finance in Southeast Asia
Aspire, a Singapore-based startup that helps SMEs secure working capital, has raised $32.5 million in a new financing round to expand its presence in several Southeast Asian markets.
The Series A round for the one-and-a-half-year-old startup was funded by MassMutual Ventures Southeast Asia. Arc Labs and existing investors Y Combinator — Aspire graduated from YC last year — Hummingbird and Picus Capital also participated in the round. Aspire has raised about $41.5 million to date.
Aspire operates a neo-banking-like platform to help small and medium-sized enterprises (SMEs) quickly and easily secure working capital of up to about $70,000. AspireAccount, the startup’s flagship product, provides merchants and startups with instant credit limit for daily business expenses, as well as a business-to-business acceptance and other tools to help them manage their cash flow.
Co-founder and CEO Andrea Baronchelli tells TechCrunch that about 1,000 business accounts are opened each month on Aspire and that the company plans to continue focusing on Southeast Asia, where he says there are about 78 million small businesses, leaving plenty of room to scale (applications can be made through Aspire’s mobile app and are reviewed using a proprietary risk assessment engine before getting final approval from a human). Aspire claims it has seen 30% month-over-month growth since it was founded in January 2018 and expects to open more than 100,000 business accounts by next year.
Baronchelli, who served as a CMO for Alibaba’s Lazada platform for four years, says Aspire launched to close the gap left by the traditional banking industry’s focus on consumer services or businesses that make more than $10 million in revenue a year. As a result, smaller businesses in Southeast Asia, including online vendors and startups, often lack access to credit lines, accounts and other financial services tailored to their needs.
Aspire currently operates in Thailand, Indonesia, Singapore and Vietnam. The startup said it will use the fresh capital to scale its footprints in those markets. Additionally, Aspire is building a scalable marketplace banking infrastructure that will use third-party financial service providers to “create a unique digital banking experience for its SME customers.”
Baronchelli adds that “the bank of the future will probably be a marketplace,” so Aspire’s goal is to provide a place where SMEs can not only open accounts and credit cards, but also pick from different services like point of sale systems. It is currently in talks with potential partners. The startup is also working on a business credit card that will be linked to each business account by as early as this year.
Southeast Asia’s digital economy is slated to grow more than six-fold to reach more than $200 billion per year, according to a report co-authored by Google. But for many emerging startups and businesses, getting financial services from a bank and securing working capital have become major pain points.
A growing number of startups are beginning to address these SMEs’ needs. In India, for instance, NiYo Bank and Open have amassed millions of businesses through their neo-banking platforms. Both of these startups have raised tens of millions of dollars in recent months. Drip Capital, which helps businesses in developing markets secure working capital, raised $25 million last week.
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