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Southeast Asia Deal Review: Q1 2020

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Southeast Asia Deal Review: Q1 2020 SOUTHEAST ASIA DEAL REVIEW: Q1 2020 A quarterly update on investments in privately-held companies in Southeast Asia d e a l s t r e e t a s i a . c o m Southeast Asia Deal Review: Q1 2020 TABLE OF CONTENTS A note from the authors 3 Fundraising for startups in Southeast Asia: An Overview Deal volume and value surge in Q1 4 Indonesia's startups garner maximum capital 5 Singapore remains the most exciting market for deals 6 Trendspotting by deal stage - Median value dropped in Q1 7 Trendspotting by deal stage - Average deal value declined in Q1 8 Trendspotting by deal stage - Early-stage activity remains high 9 Top sectors in Southeast Asia 10 Southeast Asia's Key Markets An evaluation of fundraising activities across markets Singapore 11 Indonesia 13 Malaysia 15 Thailand 17 Philippines 19 Vietnam 20 Myanmar & Cambodia 22 Methodology 23 d e a l s t r e e t a s i a . c o m Southeast Asia Deal Review: Q1 2020 A NOTE FROM THE AUTHORS Southeast Asia had a good start to the year as investments in the first quarter surged in both volume and value terms, driven by mega rounds announced by Gojek and Grab. The performance is also in line with the seasonality in fundraising, which tends to pick up significantly in the first and third quarters, shows our historical data. A closer look at the Q1 data, however, shows signs of weaknesses. Investors appear to be allocating fewer dollars across the board from seed to Series C funding rounds. The botched WeWork IPO and concerns over an impending global economic slowdown had already been weighing on investor sentiment. The economic disruption caused by the COVID-19 pandemic has further dampened risk appetites. In light of this uncertainty, we expect the second quarter to challenge Southeast Asian startups in ways they have not been tested before as investors turn more risk-averse and businesses scale down expansion plans for the sake of survival. We hope you find this quarterly update useful. Andi Haswidi Deepshikha Monga Head of Research, ASEAN Editor [email protected] [email protected] d e a l s t r e e t a s i a . c o m P a g e | 3 Southeast Asia Deal Review: Q1 2020 1 DEAL VOLUME AND VALUE SURGE IN Q1 FIG 1.1 DEALS IN SOUTHEAST ASIA IN THE FIRST QUARTER There was a spike in the number of deals in the first quarter as startups raced to finalise funding rounds amid deteriorating market conditions globally due to the spread of the COVID-19 pandemic. N u m b ) e m r $ o The number of deals reached 146 in the ( f e d u e first quarter, higher than 101 in the previous l a a l s V quarter and 127 in the same period last l a a n e n year. D o u n c e Despite the spike in deal volume, the total d value of transactions only grew by 3 per cent year-on-year to $2.6 billion, indicating the volume surge was led by smaller early- stage investments. Deal Value ($m) Number of deals announced d e a l s t r e e t a s i a . c o m P a g e | 4 Southeast Asia Deal Review: Q1 2020 2 INDONESIA'S STARTUPS GARNER MAXIMUM CAPITAL FIG 2.1 DEAL VALUES IN SOUTHEAST ASIA IN THE FIRST QUARTER Indonesian startups secured $1.3 billion in funding in the first quarter to take the top Gojek raised spot among Southeast Asian markets. $1.2b The total was largely driven by a $1.2 billion investment secured by super app Gojek, which was disclosed in March. Singapore was a close second as startups based in the city-state announced new investments worth $1.2 billion during the Grab raised first quarter. Grab accounted for more than $856m 70 per cent of the total; it announced an $856 million investment in February. Deal value ($m) d e a l s t r e e t a s i a . c o m P a g e | 5 Southeast Asia Deal Review: Q1 2020 3 SINGAPORE REMAINS THE MOST EXCITING MARKET FOR DEALS FIG 3.1 DEAL NUMBERS IN SOUTHEAST ASIA IN THE FIRST QUARTER Singapore saw the most transactions in the first quarter at 68 deals. This was largely due to the wide variety of startups operating in the city-state. What differentiates Singapore from others s l a e is the increased capital going into more d f o sophisticated sectors such as deep tech r e and green tech. b m u N Indonesia trailed second in Q1 with 36 deals, followed by Malaysia (14), Vietnam (12) and Thailand (8). Number of deals d e a l s t r e e t a s i a . c o m P a g e | 6 Southeast Asia Deal Review: Q1 2020 4 TRENDSPOTTING BY DEAL STAGE: MEDIAN VALUE DROPPED IN Q1 FIG 4.1 MEDIAN VALUE OF DEALS PER INVESTMENT STAGE A closer look at deal value data suggests that investors are reducing their allocations across the board. The median value of deals from seed to Series C rounds dropped in the first quarter relative to the previous quarter. ) m $ ( We believe there are two scenarios at play e u here. First is the growing concern regarding l a V startup valuations following WeWork's l a e botched IPO in the final quarter of last year. D Second, we suspect that investors are becoming more risk-averse as the COVID-19 pandemic wrecked economies and global financial markets. d e a l s t r e e t a s i a . c o m P a g e | 7 Southeast Asia Deal Review: Q1 2020 5 TRENDSPOTTING BY DEAL STAGE: AVERAGE DEAL VALUE DECLINED IN Q1 FIG 5.1 AVERAGE VALUE OF DEALS PER INVESTMENT STAGE We also compared average deal values, which again indicate that investors reduced their allocations in Q1 this year, at least relative to the previous quarter, ) across all funding stages. m $ ( e u l a This first quarter deal data, however, does V l a not reflect the true extent of the impact e of the COVID-19 pandemic on startup D fundraising. We expect to see further weakness, both in terms of deal numbers as well as value, in the second quarter. d e a l s t r e e t a s i a . c o m P a g e | 8 Southeast Asia Deal Review: Q1 2020 6 TRENDSPOTTING BY DEAL STAGE: EARLY-STAGE ACTIVITY REMAINS HIGH FIG 6.1 NUMBER OF DEALS PER INVESTMENT STAGE Our data on the total number of deals per investment round further supports the view that investors may be more risk- averse. There were only two deals at the Series C s l stage in the first quarter, down from 7 in a e d the previous quarter and 6 in the same f o r period last year. On average, we saw e b more than five Series C rounds per m u quarter last year. N On the other hand, there was a pick up in seed round deals, which surged to 49 in Q1 2020 from just 30 in the previous quarter. d e a l s t r e e t a s i a . c o m P a g e | 9 Southeast Asia Deal Review: Q1 2020 7 TOP SECTORS IN SOUTHEAST ASIA FIG 7.1 NUMBER OF DEALS AND DEAL VALUES ACROSS SECTORS E-commerce startups reported the highest number of deals in the first quarter. There was also growing investor interest in edtech and Super apps deep tech. Singapore registered the most raised $2.1b edtech deals, but it was Indonesian startup Zenius that bagged the largest investment of D s e l a $20 million in the sector. a l e V d a f l o u r e Most investments in deep tech went to startups e ( b $ m focusing on AI and machine learning. m u ) Indonesian firm Eureka raised $20 million in the N quarter, the most among deep tech startups. Trailing far behind super apps, green tech attracted the second largest investment at $152 million, led by Singapore-based clean energy solutions provider Sunseap. Number of deals announced Deal value ($m) d e a l s t r e e t a s i a . c o m P a g e | 1 0 Southeast Asia Deal Review: Q1 2020 8 SINGAPORE FIG 8.1 NUMBER OF DEALS AND DEAL VALUES ACROSS SINGAPORE Much like their counterparts globally, startups in Singapore raced to complete their funding rounds in the first quarter as the COVID-19 pandemic gained momentum. N ) u m m $ ( b A surge in positive cases in March has led e e r u l to a partial lockdown in the city-state, o a f d V l which will further hit dealmaking in the e a a e l s second quarter. The government has D stepped in to provide financial assistance to startups but investors are less likely to part with their capital easily in this environment. d e a l s t r e e t a s i a . c o m P a g e | 1 1 Southeast Asia Deal Review: Q1 2020 SINGAPORE FIG 8.2 FIG 8.3 10 LARGEST FUNDRAISING IN Q120 TOP BUSINESS VERTICALS IN Q120 BASED ON (EXCLUDING GRAB'S $856M ROUND) NUMBER OF DEALS (EXCLUDING SUPER APPS) d e a l s t r e e t a s i a .
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