Funds Flow in Southeast Asia, Giving Tech Unicorns Wings

In Asia, the marquee names seem to be ones that are attracting attention when it comes to investors’ appetites — and money! — and so they are big, and getting bigger.

Consider the fact that, earlier this month, Go-Jek, the Indonesian ride-hailing firm, said it has closed the first phase of a fundraising round, with a bit more than $1 billion garnered from the likes of Mitsubishi, a new investor, and a spate of existing investors including Tencent Holdings, Google and JD.com.

That fundraising activity brings the latest valuation of the firm to $10 billion. And the commitment from the investors is substantial. As Nikkei Asia Review reported, Mitsubishi’s stake was “as big as tens of millions of dollars.”

The Go-Jek funding news underscores the heavyweight backing of strategic investors, where for example, Mitsubishi has an eye on collaboration potential between far-flung businesses that span operations already in Indonesia, such as logistics and convenience stores.

The money is concentrated, at least for now and at least in terms of where it is headed. For Go-Jek the fundraising story is not over, as the company is targeting a total of $2 billion in the current money-raising round.  The firm is locked in a battle with Grab, also a ride-hailing firm and one that is also targeting the Southeast Asia region. The two companies are tapping the fundraising well, and where Thailand’s Central Group, a retailer, at the end of last month confirmed that it has invested $200 million in Grab’s Thailand operations. In another example of cross-pollination, as reported in channelnewasia.com, Central Group and Grab will “work” together on food and groceries and logistics.

Cross-pollination of business units, and cross-border focus within the region extends a trend that has been seen over the past year where unicorns have, for lack of a better term, been taking flight.

Per research from Cento Ventures, Southeast Asia has been fertile ground for tech investments and that will continue in the current year. The firm said that last year alone, Internet technology investments in the region were nearly double the tally seen in 2017. In the latest year that investment amount touched $11 billion, far outstripping the $5.8 billion seen in 2017.

But drill a bit deeper and the investments are revealed to be rather concentrated bets. Of the $11 billion, 70 percent was allocated to five companies. Before the latest funding news noted above, Grab had grabbed $3 billion, Lazada had $2 billion and Go-Jek had snagged $1.5 billion. The same five companies had just over 50 percent of investments in 2017 — indicating even greater propensity to bet on the same few horses, er, unicorns.

One huge tech investor may be eyeing at least something of a speed bump, which gives room for other investors to step in and pony up investments in the unicorns. The Wall Street Journal reported Wednesday (Feb. 6) that Japan’s SoftBank Group — which of course has taken stakes in firms like Uber, and in the region under discussion in this article, Grab — has spent as much as half of the $100 billion Vision Fund that debuted two years ago. The Journal estimated that the $7 billion-per-quarter investment pace that has marked previous periods means that there’s a year and a half of investment dry powder that can be tapped — absent any more fundraising, that is.

By and large, the pipeline is flowing. As Cento noted, with several later-stage investment rounds pushing companies across far-flung tech verticals rapidly toward the $1 billion valuation mark, typically the tipping point where firms become “unicorns.” Among those companies, said Cento, are PropertyGuru, which garnered $180 million in 2018, and Ninja Van and Carousell (respectively a logistics firm and a consumer-to-consumer marketplace for secondhand items), which each raised $85 million.

Cento also noted that Indonesia has accounted for as much of 70 percent of the capital investments, with Grab and Go-Jek among the FinTechs getting the most allocations, according to the data.

Might the money be shifting, and in a long-term manner? Nikkei Asian Review reported in an interview in September of last year that, according to Peter Xu, chief executive officer of the incubator Plug and Play China that “valuations in China are two to three times higher than in Silicon Valley.” Investor interest in Indonesia may make sense in an economy where, say, a trade war is absent (such as that between the U.S. and China) that could hit growth; Indonesia’s economy is growing at roughly 5 percent annually.

Still, at least for now, China remains the breeding ground for what we might term the “mega” unicorn (at least in terms of valuation). ByteDance, which is the parent company of Toutiao, a media site, is valued at $75 billion, while Didi Chuxing, the ridesharing and AI juggernaut, commands a $56 billion valuation, as recorded by CB Insights. In between those two lies Uber at $72 billion.