10 years ago, the tech startups in SEA were considered an up-and-coming ecosystem to look out for. But the rise in numbers, talent, capital, success stories, and consumer adoption in tech companies to date has now put SEA amongst the top 3 or 4 tech ecosystems in the world.
It is even estimated that SEA’s tech startup ecosystem will have a collective valuation of US$1 trillion by 2025, according to the Singaporean-based venture capital (VC) firm, Jungle Ventures (Jungle).
During a Wild Digital SEA 2021 panel, SEA’s Senior Writer of The Ken, Ka Kay Lum (Kay) virtually sat down with Amit Anand, Founding Partner from Jungle Ventures to get his insights on what led to such a prediction, and the future opportunities it poses for tech startups in SEA.
Young, qualified leaders are joining the chat
“We started to see very qualified, ambitious entrepreneurs leave their jobs from huge academy companies like Google or Facebook, or come back from the US universities to start building companies in SEA,” Amit pointed out.
He believes that having better quality founders has been one of the reasons that led to such successful valuations in SEA companies.
Furthermore, Amit noted that one of the industries that may have high chances of succeeding are software companies serving B2B markets. Though such companies have been around even 20 years ago, the panelists addressed that their adoption has been much more significant in the past decade.
That’s because many SMEs today are being run by younger entrepreneurs, where the second and third generations of family businesses have now taken over. Writing about SMEs in Malaysia, we can attest to this phenomenon taking place in all kinds of businesses from kopitiams to furniture companies too.
These individuals have been educated globally and are now tech-savvy. So when they take charge of their family businesses, they want to have everything on mobile to manage their businesses efficiently.
Governments + global pandemic = digitalisation
Another reason why there is huge potential for tech companies, especially those dealing with B2B software, is due to governmental efforts to push SME adoption of digitalisation.
“Governments in the region have realised that SMEs make up 2/3 of the country’s GDP, and if they don’t modernise these entrepreneurs, the country won’t be able to develop at a pace they want to,” added Amit.
Then came the pandemic which brought about the urgency for businesses small and large to go digital. And whoever wasn’t already adopting tech in their businesses is now forced to, if they don’t want to get left behind.
“So we’re on an irreversible path now where these 60-70 million small companies in SEA, and 100 million more in India are adopting software for everything, from back to front-end office operations, to e-commerce, payments, and automation,” Amit said.
He also noted that this shift in software adoption has been an immense one. 10 years ago, Jungle saw huge failures in its software company investments because of a lack of market adoption. “Now, we’ve seen some phenomenal successes,” Amit added.
SPAC as a more accessible way to go public
During the discussion, Kay brought up that one of the bigger trends in the global startup ecosystem has been companies pursuing Special Purpose Acquisition Company (SPAC) deals.
Briefly, a SPAC is a company with no commercial operations and is formed strictly to raise capital through an initial public offering (IPO). SPACs are created for the sole purpose of acquiring or merging with an existing company, and they have 2 years to complete an acquisition or else must return their funds to investors.
A company can go public through the SPAC route in a matter of months, while the conventional IPO process is an arduous process that can take anywhere from 6 months to more than a year.
From Amit’s perspective, SPAC is important for startups in SEA as it is an easier entry point to gain an IPO with a US$1 billion valuation. This is in contrast to larger companies with valuations of US$20 billion, as it is a natural choice for them to get listed on exchanges.
A benefit of being acquired by or merging with a SPAC that’s sponsored by prominent investors is that it can also give a company experienced management and enhanced market visibility.
Hence, Amit’s VC firm highly encourages its portfolio companies to achieve this milestone, as it has long-term benefits for SEA’s tech startup ecosystem as a whole.
Any SEA country could be the next silicon valley
When looking at the largest startup ecosystem in SEA, the first 2 markets that often come to mind are Singapore and Indonesia.
Prior to this, it used to be Malaysia and Singapore, according to Amit. But he also pointed out that industry experts are now predicting that Vietnam will be the largest market in 2 years.
“I think that’s the beauty of SEA, there’s no one silicon valley in the region and there are already 3 or 4 that are building up in SEA, and we are extremely proud and in support of it,” he spoke on behalf of VCs in the region.
Moreover, when it comes to investing in companies, he shared that Jungle is generally agnostic about where a company is based. Instead, his VC firm is looking at companies and founders that can build a regional business by expanding their services to multiple countries.
This is especially so for tech companies that can address a larger market outside of their own country.
Thus, for entrepreneurs pitching their solutions in hopes of scoring an investment from Jungle, Amit concluded with one piece of advice: Pitch how your solution can do better in terms of execution, compared to all the other companies that are trying.
We think ideas are cheap and execution is priceless. So when you come and talk to us, and this would apply to other VCs too, explain to us about how you made that 0 to 1 work, what is your plan from 1-10, and that would give you a better shot at winning an investment.
Amit Anand, Founding Partner at Jungle Ventures
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Featured Image Credit: Amit Anand, Founding Partner at Jungle Ventures