When we entered the year 2021, the Southeast Asian (SEA) tech startup ecosystem and surrounding areas were all about facing the aftermath of the pandemic. There was an air of determination as businesses prepared to seize opportunities in a post-pandemic society. There was also excitement over major plans such as IPOs of leading unicorns in the region.
Fast-forward to September. As we are closing into the last quarter of the year, we learn that there are both reasons to be optimistic and cautious. We see some startups continuing to secure funding rounds; we even see new unicorns popping up in the region. The IPOs are finally happening.
But 2021 is still a year like no other. As the pandemic continues to rage on, both founders and investors found themselves finding the same challenges over and over again, leading us to ask the bigger questions: How do investors view the startup ecosystem in this time and age? What are the trends that they are able to note? What kind of opportunities are there to pursue?
e27 reaches out to global investors in our e27 Pro network to understand their views and insights about the matter.
The startups we see
Early in the pandemic, there were several verticals that gained popularity as demands for their services increased with the implementation of lockdown measures in many countries. Healthcare and e-commerce came up on top of this list; this trend also continued throughout the first half of 2021.
“There are still gaps between demand and supply in certain sectors such as health care. If you look at the number of patients per doctor ratio, or if you look at the number of the bed-patient ratio, it is still way behind [when compared to developed markets]. There is a way to solve these problems by reallocating the healthcare resource or increase the productivity by using digital solutions,” says Ryu Hirota, Partner at Spiral Ventures, in a call with e27.
He also stresses that this is a trend that we can expect to remain popular in the latter half of the year.
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As investors become warier about the sustainability aspect of a startup’s business, they also begin to see increased popularity in sectors such as enterprise solutions or B2B. This is particularly true in smaller markets such as Taiwan.
“Investors want to invest more in the B2B sectors. Because in Taiwan market, it can be quite hard for B2C companies to gain volume when they are only focussing on the local market,” says Brandon Chiang, Executive Vice President at Cornerstone Ventures.
He also added that from the marketing aspect, B2B services tend to be easier to promote compared to the B2C one.
With the pandemic situation, there have to be some changes in the way founders and investors find each other. Previously, they counted on serendipitous meetings at tech conferences and similar events to build their networks. But this year, they have to rely on online channels such as the Connect feature, available exclusively for e27 Pro members.
For Hirota, while the firm has not followed the connections it makes over Connect with an investment, the feature has become a reliable tool to meet new people.
“For first-time founders, they may not have access to investors so naturally, they go to platforms such as e27 or government initiatives such as Enterprise SG,” he says. “We would be happy to follow up with them for the Series A funding rounds.”
For Samuel Santoso, Analyst at Cornerstone Ventures, it has enabled the firm to make connections in markets that they do not usually pursue.
“We have seen a lot of startups from the Philippines that have shown great potential,” he noted.
How IPOs change the tide
Last year, as the pandemic began to take its stronghold in the region, there were concerns about early stage funding rounds. Startups may struggle to raise seed funding rounds as investors become more careful, looking for certain options.
Hirota acknowledges that the situation with the pandemic can be harder for companies that have never raised any funding. This is because the networking that they manage to secure with their angel or seed funding round will help them get introduced to a network of later stage investors.
“Those VCs can help companies by making warm introductions to later stage investors,” he says.
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But despite this known challenge, there are also factors that encourage early stage companies to continue to form. One of them being the startup IPOs that have happened this year in SEA and other Asian countries. For example, in Taiwan alone, there were three IPOs by far with more expected to come.
“They have encouraged young students, entrepreneurs who are trying to involve themselves in the tech industry,” says Chiang. He also added that these IPOs have even inspired sea turtles –young professionals that have studied and worked abroad– to return and build companies in their home country.
The impact of having a notable IPO is also noted by Hirota. He points out that the recent groundbreaking IPO by Indonesian unicorn Bukalapak has triggered greater interest from Japanese investors in the Southeast Asian market.
“The frequently asked questions by Japanese investors have always been about liquidity or ways to exit in SEA,” he elaborates. “There has been M&As and IPOs of Sea Group in NASDAQ and Razer in Hong Kong … but there have always been questions about liquidity in SEA for SEA. But now we can finally answer this question.”
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Ready to start fundraising? Start building your investor network! Use our Connect feature to directly connect, engage, and speak with the most active investors in the region. Connect is exclusive for e27 Pro members, but you can try it out for free. Head over here to start connecting.
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