Southeast Asia Tech Investment – H1 2019 ABOUT CENTO VENTURES dmp

Cento Ventures is a venture capital firm focused on technology startups - Founders with great ambition building products and services emerging from the digital transformation of We look for founders who want to build large digital companies that are promising growth markets, particularly Southeast Asia. leaders in their category. In a fragmented region, such as Southeast Asia, We are based in and backed by a team well experienced in operating across multiple countries often essential. Our preference is for internet business. We operate three funds that invest across industries business models that are light on physical assets and where the founders through a disciplined, well-researched approach to locate technology have ambitious plans to scale internationally. investment opportunities originating from the Southeast Asian region. Cento Ventures is convinced that the opportunity exists for Southeast Asian Our investments are guided by three main principles: founders to build transformational digital companies, and we look forward to - Sectors ready for digital transformation working with more startup teams to create new success stories. There is a great opportunity for technology to solve some of the inefficiencies Learn more about us at cento.vc or our Facebook or Linkedin pages. present in emerging markets. However, technology alone does not digitalise industries. Most of our investments apply innovative business models to large industry sectors that are set in their ways, using technology as an enabler. - Tech startups at an early stage, but with proof points Our investments are usually at Series A, where we lead the round. This helps us establish a solid relationship with the founder, and to influence company strategy. We only invest once a company can show that a market exists for its product and that it is ready to use extra capital to scale.

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Introduction INTRODUCTION dmp

The headline story of Southeast Asia is the sustained investment in technology investment - Investments to increases in proportion with increasing geography and sector diversification. Close to $6B was invested during the As compared to 2018 where accounts for more than 70% of the capital invested in first half of 2019, lower than that of first half of 2018. However, we expect the total investment Southeast Asia, there seems to be greater geographical diversification in capital deployed. in 2019 will match the total investment amount in 2018 as local champions like Grab, Go-jek, Investment into Vietnam is increasing, making up 17% of the capital invested in 2019 H1, a Traveloka and Tokopedia continue to attract sizeable funding rounds. Besides that, a growing significant to 2018 where it only made 5% of total capital invested. Indonesia captured a cohort of new companies valued in excess of $100M will attract significant capital. smaller proportion of the total capital invested. Investments into Malaysia, and A closer look at the data partly emphasizes the progression of existing trends, but also appear to be consistent to previous years reveals interesting findings emerging in the first half of 2019: - Logistics and healthcare attract more interest - Record number of deals We also continue to observe investment into a wider range of sectors. Fintech, Healthcare The first half of 2019 sees investment in more than 300 companies, a record high in our data and Logistics startup investments demonstrate solid growth. While Fintech has attracted set for the region. The amount invested, remains ‘relatively’ constant relative to 2018. While interest since 2017, Logistics and Healthcare are two key sectors that have attracted more we continue to see ‘mega-deals’, tech investment in Southeast Asia appears to be more interest in the first half of 2019. diversified in 2019. ‘ - Absence of landmark exits - A new set of unicorns? While the number of liquidity event in the first half of 2019 is relatively high, the total proceeds Although the majority of capital will likely continue to be associated with a few familiar names, remains low as we have not yet seen a landmark exit during the year. In 2017, the largest we also observe a growing cohort of other late stage companies who are raising larger liquidity event was the listing of Sea Group in NYSE while in 2018, the region sees the rounds, putting them above the $100M valuation. As these companies mature in the coming merger of Grab and Uber Southeast Asia. The largest liquidity event in the first half of 2019 year, they may follow the fundraising trajectory of the current SE Asian unicorns. remains Go-jek’s $72M acquisition of Coins.ph in the Philippines. - Increasing early stage activities Small deals (less than $500K) experienced a spike in the first half of 2019, after remaining Thank you fairly flat between 2016 - 2018. We note that the increase in the early stage activities is partly Mark Suckling driven by deals invested by a number of new accelerators/ incubators such as Antler, SKALA and Accelerating Asia. Laphat Tantiphipop Marco Hadisurya

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Investment landscape $6B INVESTED IN H1 2019 dmp

$ 9, 00 0 332 3 50 The number of Southeast Asia internet Capital invested, $M and deals done, # technology related investment continues to set

$ 8, 00 0 a new record in first half of 2019 even though 3 00 the total capital remains relatively constant relative to 2018. The tech investment during $ 7, 00 0 this half of the year is less concentrated as 2 50 only 50% of the total capital invested is $ 6, 00 0 220 209 contributed by ‘mega deals’, lower than 70% 183 193 197 in 2018

190 2 00 $ 5, 00 0 177

149 Furthermore, the increase in number of deals $ 4, 00 0 1 50 done in this half of the year is mostly driven by the increase of early stage deals (< $500K). 108 104 $ 3, 00 0

1 00

$ 2, 00 0 Notes: The numbers exclude the investment portion

5 0

$ 1, 00 0 carved out for secondary exits, and include various events that while count as investment $247 $989 $899 $970 $1,468 $2,043 $1,154 $4,216 $8,306 $3,622 $5,993 in technology companies, are considered non- $ - - 2014 H1 2014 H2 2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 2017 H2 2018 H1 2018 H2 2019 H1 VC, e.g. ICO, project financing, corporate spin-off. Some early stage incubator-funded Capital Invested # of Deals companies are not yet included in our data Source: Cento research

6 INVESTMENTS INCREASES AT MOST DEAL SIZES dmp

$0.5M or smaller deals** $0.5M+ to $2M deals $2M+ to $5M deals

164 94 254

205 117 110 111 59 53 147 92 124 42 41 110 111 56 19

$26 $45 $34 $27 $24 $49 $64 $147 $139 $137 $116 $194 $72 $134 $145 $203 $190 $357

2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E $5M+ to $10M deals $10M+ to $50M deals $50M+ deals

56 19 70

14 33 10 25 26 36 31 25 7 17 22 6 12 5 10

$101 $132 $213 $196 $265 $433 $199 $540 $639 $710 $930 $1,915 $774 $872 $2,342 $4,098 $10,403 $9,125

2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E

Source: Cento research Capital invested, $M **Various incubator funded early stage companies are yet to be included in the data Deal # 7 SERIES B DEAL SIZE GRADUALLY INCREASES dmp

Deals done by series, # Average deal size by series, $M

12.0 14 11.5 11.4 25 21 10.7

26 33 9.8 32 109 22 25 39 25 101 146

110 86 6.2 9 11

55 249 3.3 3.2 2.8 2.7 194 2.4 174 176 2.3 157 122 0.7 0.4 0.5 0.5 0.5 0.6

2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1 Pre A A B C+ Pre-A A B

Source: Cento research

8 VIETNAM GAINS LARGER SHARE OF CAPITAL INVESTED dmp

Share of capital invested by country 1.3% 2019 H1 48% 25% 7% 2% 17% In 2019 H1, Indonesia and Singapore continued to capture the majority of investment activity in Southeast Asia. Indonesia loses large share of 1% 0.6% 2018 77% 13% 3% 5% capital invested due to the absence of ‘mega- deals’, although potentially this may change during the second half of the year. 2017 60% 19% 9% 8% 2% 2% Vietnam gains the larger share of capital invested as it produces more late-stage company such as 2016 67% 15% 7% 6% 3% 2% Tiki, VNPay and Vntrip. Singapore also maintains its share of capital distribution as a new cohort of later-stage companies such as QExpress, 2015 37% 32% 11% 12% 4% 3% Carousell and Taiger continue to raise larger Share of deals done by country rounds. On the share of deals done, the trend is fairly 2019 H1 26% 36% 8% 6% 19% 4% consistent with the last few years data with similar general increase in Vietnam’s deal count as we 2018 33% 30% 11% 8% 15% 3% are seeing more early stage deals in the country.

2017 30% 34% 12% 10% 8% 5% Notes: The data excludes Sea Group (Garena), Grab, 2016 29% 31% 12% 11% 8% 9% Lazada and other companies that have a truly regional footprint and are therefore hard to allocate to a particular country. 2015 24% 29% 20% 10% 10% 8%

Indonesia Singapore Malaysia Thailand Vietnam Philippines Source: Cento research Country of origin is defined as where the company was founded and where it is believed to generate its core revenues

9 VIETNAM CONTINUES TO ATTRACT MORE CAPITAL dmp

Capital invested and deals done in Malaysia Capital invested and deals done in Thailand 76 37 38 37 32

52 26

41 43 18 33

16

$31 $111 $116 $214 $150 $173 $28 $125 $99 $174 $78 $76

2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E Capital invested and deals done in Vietnam Capital invested and deals done in Philippines 110 29 29

24

18 49 15 40 28 30 9 19

$36 $44 $58 $48 $286 $731 $10 $28 $39 $36 $33 $38

2014 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 2019E

Source: Cento research Capital invested, $M Deal # 10 LOGISTICS, HEALTHCARE - KEY GROWTH SECTORS dmp

Capital invested by sector, $M Proceed (US$M) 2014 2015 2016 2017 2018 2019 H1 While online retail (e-commerce and C2C) and Multi-vertical $53 $270 $770 $2,550 $5,895 $2,394 local services (on-demand services and urban transportation), along with ‘multi-vertical’ Travel $13 $78 $176 $400 $51 $454 companies (often a mix of the two) remain the Retail $182 $229 $935 $937 $1,874 $303 most heavily funded categories, other Financial Services $7 $130 $134 $189 $407 $242 categories are attracting increasing attention. Logistics $15 $34 $64 $136 $124 $143 Healthcare $12 $26 $37 $102 $12 $128 The Financial Services and Travel sectors Advertising and Marketing Technology $22 $117 $25 $78 $34 $96 continue to attract investment. The Logistics and Healthcare sectors are emerging as some Payments and Remittances $26 $85 $115 $112 $240 $58 of the most funded sectors. Entertainment / Non-Gaming $4 $52 $83 $393 $75 $57 Real estate $2 $9 $17 $53 $259 $56 By deal count, we have also seen emerging Local services $376 $442 $827 $49 $100 $49 interest in other categories such as Real Business Automation $13 $28 $30 $78 $94 $40 Estate, Business Automation and Advertising Education $7 $12 $9 $16 $60 $15 and Marketing Technology. Employment $4 $11 $10 $20 $24 $14 Others $0 $1 $3 $5 $3 $13 Comms & communities $23 $16 $48 $0 $10 $3 Entertainment / Gaming $8 $11 $11 $5 $4 $2

Source: Cento research

11 SERIES B REMAINS A CHALLENGE BUT IMPROVING dmp

% of companies raising seed round that raised follow-on rounds 100% We tracked Southeast Asian startups that announced seed funding between 90% 2013 - 2015 and compare the rate of

80% follow-on fundraising with data from the US and Europe where it appears that 70% startups in Southeast Asia have been able to attract Series A funding at a 60% broadly similar rate. We also observed a clear rise in Series B follow-on 50% funding rate for the 2013 cohort, and a 40% gradual increase for 2014 - 2015, compare to the previous year data. 30%

20% Although we believe the follow on funding rates will continue to increase 10% through time, it is still too early to tell how Southeast Asia later stage funding 0% Seed Follow-on Round 1 Follow-on Round 2 Follow-on Round 3 environment compared to those of a

SE Asia 2013 SE Asia 2014 SE Asia 2015 US 2008 - 2010 Europe 2010 more mature ecosystem.

Source: Cento research https://www.cbinsights.com/research/venture-capital-funnel-2/ http://www.atomico.com/news/the-state-of-european-tech-2016 12 THERE IS A GROWING CROP OF $100M+ COMPANIES

SEA beyond recognized leaders: dmp Ø 4 companies with combined value of ~$4B are crossing into ”unicorn” territory in 2018: PropertyGuru, Zilingo, Qoo10 and Bukalapak Ø ~40 companies with valuations above $100M and combined value of $ 6-7B

Regional Singapore Indonesia Vietnam Malaysia Thailand Philippines

Southeast Asia has produced companies valued above $1B with Bulakapak, Zilingo, PropertyGuru, ~10 B ~10 and Qoo10 crossing the “unicorn” zone.

A more comprehensive view of the region’s capability to generate shareholder value in digital space is provided by looking at companies we

~1+ B ~1+ believe are valued in excess of $100M, based on a recent substantial financing or liquidity event and known business developments.

M-Daq Akulaku

Carro ~100+ M* ~100+

RupiahPlus

Publicly-listed company New Entry Source: Cento research * List of US$ 100M+ companies is not exhaustive

13 OTHER $100M+ COMPANIES PRESENT IN THE REGION dmp Select $100M+ enterprise value businesses executed via prior acquisition / non-third party funded subsidiary

Regional Singapore Indonesia Malaysia Thailand Vietnam Philippines An overview of the value being created in the digital space in Southeast Asian would be incomplete without noting:

Search • A significant and growing set of digital businesses previously acquired by or created within larger companies and continuing to grow ~100+ M* ~100+ around their respective opportunities within Southeast Asia • A number of overseas players - usually from adjacent markets in North Asia - focusing on Southeast Asia as a primary source of growth • A number of Southeast Asia- Select $100M+ enterprise value businesses by global players targeting SE Asian market or by SE Asian based players targeting a global originating companies that build opportunity. their domestic advantage into a

Bigo Revolution Razer significant international footprint Precrafted beyond Southeast Asia

Source: Cento research Source: Cento research Publicly-listed company * List of US$ 100M+ opportunities is not exhaustive

14 MORE CAPITAL TO SE ASIA VS. OTHER GROWTH MARKETS dmp

Tech companies investment in growth markets ($M) Over the past 5 years, SE Asia has 1,163 consistently attracted significantly more capital into tech investment relative to other growth 893 market. It is perhaps worth noting that LatAm 1,976 recorded relatively similar amount of funding to SE Asia in 2013.

Furthermore, other growth markets like LatAm, MENA and Africa have also seen relative increased investment in tech companies over the past five years albeit at 560 different rate. 679 1,141 11,917 Interestingly, each region has also seen 367 investments driven by “mega deals” in 2018: 972 • LatAm: Rappi ($185m), Nubank ($150m) 500 277 and Movile ($500m) 291 5,371 • MENA: Careem ($200m) 594 3,515 • Africa: Webuycars ($98m), Frontier Car 1,888 Group ($130m) and Jumo ($52m)

2015 2016 2017 2018 SE Asia LatAm MENA Africa

Source: LAVCA, Partech Ventures, Magnitt Research, Cento Ventures Research

15 M&A & SECONDARIES PROVIDE MOST LIQUIDITY dmp

Proceeds realized at exit, $M Liquidity events, # Exit valuations, $M

$327 5 Exit Valuations decrease 931 due to lack of landmark exits in H1 2019. We expect FY 6 2019 results to be more $250 201 similar to past years

4 $187 1

$151 5 390 $110 9 35

$65 $55 $50 $55 $55 $30 $20 $24 894 1099 1082 2084 2232 362 28 41 68 56 44 55 $13 $8 $2 $6 $5 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019H1

Trade Exit + Secondary IPO Trade Exit + Secondary IPO Top decile Top quartile Me dian

Source: Cento research

16 EXITS ARE HAPPENING, BUT STILL RELATIVELY FEW IN NUMBER dmp

Liquidity events and proceeds, <$1M Liquidity events and proceeds, $1M+ to $5M Liquidity events and proceeds, $5M+ to $20M 13 34 12 12 14

10 11 24 10 22 23 8 9 8 18 6 15 4

$9 $16 $9 $9 $19 $9 $22 $38 $31 $50 $37 $21 $76 $109 $169 $92 $150 $96

2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1 Liquidity events and proceeds, $20M+ to $50M Liquidity events and proceeds, $50M+ to $100M Liquidity events and proceeds, >$100M

7 4 4

3 3 3 5 5 5 4 2 2 2 2 2 2 3

$162 $189 $160 $265 $173 $104 $239 $220 $163 $111 $301 $132 $1,057 $543 $620 $3,397 $1,856

2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2019 H1

Source: Cento research Amount, $M Events, # 17 KEY ACQUIRERS ARE FROM SE ASIA & APAC REGION dmp

Country of origin of acquirer, by deals done, 2013-2019H1* Country of origin of acquirer, by capital invested, 2013-2019 H1*, $M

45 2,109

29 27

948

703 13 12 11 564 489 9 9 7 363 6 5 204 3 176 145 2 2 2 86 67 61 48 47 40 40 24

UK UK USA USA India Japan Korea China China Japan Korea Fr ance Vietnam Norway Norway Thailand Vietnam Malaysia Thailand Australia Ger many Australia Indonesia Malaysia Ger many Singapore Indonesia Philippines Singapore Philippines Netherlands Netherlands

SE Asia Countries Others SE Asia Countries Others

Source: Cento research *For 180 liquidity events

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Methodology METHODOLOGY dmp

Key premises: In this report, we analysed and verified close to 3,000 financing and liquidity events. Inevitably, a few large deals would avoid detection on occasion of exceptionally secretive nature of the transaction or Numbers and conclusions in this study rely upon a company’s reported last round valuation. At best this due to the methodology we apply. It is also our impression that we are likely seeing only half or less of is a partial reflection of a company’s true value. To all in our audience who appreciate the importance of the pre-Series A activity in the region due to a sheer volume of deals in $ 10 - 250K range happening in financing terms over headline valuations, and who recognise that a more complete understanding of any the market – while total dollar value of inflow and outflows is unlikely to be impacted heavily, do take underlying business is helpful, we apologise. To atone for this oversimplification, we’d like to take this our “number of deal” assessments for pre-Series A with a large handful of salt. Finally, as new facts opportunity to give a commendation to the great work being done by a few in academia who probe come to light and as erstwhile announcements are verified, we adjust our databases retroactively, deeply into the contradictory nature of how tech valuations are reported, and produce splendid research leading to mild inconsistencies between various versions at the same period. that will one day help us as an industry upgrade our reporting systems and, perhaps, change how tech company narratives are formed. In this report, our recognition goes to Will Gornall and Ilya A. Category definitions and company profiles include: Strebulaev (professors at the Sauder School of Business at the University of British Columbia and the This report aims to describe the state of financing and liquidity generated by companies focused on Stanford Graduate School of Business, respectively) for their comprehensive work on “Squaring Venture digital technology-driven opportunities in Southeast Asia. The exact definition of what a digital Capital Valuations with Reality”, available here: technology-driven opportunity constitutes is a subject of much debate. While leaving biotech, new https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455 and with media coverage materials and space tech out is relatively straightforward (but including software and digital services http://nymag.com/intelligencer/2018/11/fake-unicorns-are-running-over-the-venture-capital-industry.html enabling these industries), telling an offline company with digital elements apart from a business where value creation is primarily tied to either its technology core or its digital distribution is anything but Geographies covered: simple. This iteration of our report does not make an attempt at covering some of the newer digital ecosystems We have generally taken a view that if something is valued as a technology company, we can trust its within ASEAN beyond the customary six countries, or the developments in counties starting to gravitate investors that it probably is. At the same time, we also endeavour to exclude categories that, while towards SE Asia venture scene such as Pakistan, Bangladesh, Sri Lanka, , and Taiwan. adjacent to digital economy, tend to attract non-VC capital to a degree where their financing / liquidation events interfere with the signal from the rest of the ecosystem (notably, excluding the Data sources and completeness : companies with valuations determined by token economics). Furthermore, we currently do not include Our data is compiled from a number of sources, although we primarily rely on public press traditional TV stations, content producers, telcos, IT infrastructures and system integration companies announcements and community disclosures from the companies and their investors. Our team as well as holding level entities that buy or develop technologies in addition to their core business into researches the validity of claims to an extent possible and supplements incomplete information with our reporting. Hence, this excludes a number of otherwise very important names absolutely worth a insights from our own industry sources and, on occasion, somewhat educated guesswork. closer look under different circumstances such as MyRepublic, Airtrunk, NetTV, One Championship, and others that would occasionally be included in other digital ecosystem reports. It also excludes tech- savvy conglomerates such as FPT Group or Emtek.

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Company classification: • Financial Services: companies that apply technology into traditional banking services i.e. lending, wealth management, etc. Country of origin: • Healthcare: provision of goods and services revolving around medical and wellness services Determined by the country in which the company was founded, and has its primary base of operation including, but not limited to, e-pharmacy, medical tourism and telehealth (defined in terms of revenue, if known). At the (subjective) point where the company has both operations in multiple countries in Southeast Asia and substantial revenues generated in multiple • Local Services: platforms that connect local merchants/ service providers to consumers in an urban countries, then it may be classified as Southeast Asia / regional in the country of origin. setting including, but limited to, ride-hailing services, local search and directory and food delivery Sector classification: • Logistics: companies that facilitate the movement of goods including, but not limited to, acquiring, storing and transporting of goods Cento’s definition of the industry segment in which the company’s primary business focus sits. A full taxonomy of sector allocation is listed below. In cases where a company focus on multiple sectors with • Payments and remittances: companies that facilitate movement of capital different units generating thought to generate substantial revenue, then multi-vertical category is used. • Real Estate: construction, buying & selling and management of real estate assets, including the tools We also note that a company’s sector may change as the company progresses; the company’s sector facilitating those activities is evaluated according to the primary business focus during the event of financing. • Retail: companies that sell or rent goods using internet technology, including tools that facilitate those • Advertising & Marketing Technology: companies that facilitate the acquisition of customers activities e.g. Store-front management software, POS systems, etc. including coupons and rebates, price comparisons and affiliate marketing • Travel: tourism and hospitality • Business automation: tools that automates non industry-specific business activities such as CRM, ERP, workplace communication tools, etc. Fund definitions:

• Comms & communities: social networks and dating Mapping fund allocations is an inexact science. We count the number of funds that have been observed doing early stage tech investment in Southeast Asia. We also try to assess the allocation of those funds • Education: provision of goods and services revolving teaching and learning, including adult training to the region. In some cases (e.g. Cento Ventures) that is equivalent to 100% of their AUM. In many and education others with a broader, or no particular geographic focus, Southeast Asia allocation is an estimate based • Employment: companies that manage and facilitate the management of employees including on information received from the fund manager, or the relative number of deals that they have done onboarding, benefit, payroll, etc. within the region compared to elsewhere. Besides that, the collected fund information is also compared with third-party data sources such as Pitchbook and Preqin. • Entertainment/ Gaming: gaming development, distribution and publishing Currency: • Entertainment/ Non-gaming: content production and news aggregation $ refers to United States Dollar (US$) unless otherwise stated.

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Deal definitions: Deal type: Deal stage: We focus mainly on venture capital deals – investments made by fund entities into early stage startups, whether they are from independent funds of corporate venture capital entities. This is a subset of the Each series definition is determined as follows: total number of early stage tech deals in the region. - Pre-Series A: amounts of $10K - $1M. Purpose of investment tends to be building the idea/team; in We separate the following from most of our data, apart from the ‘total capital invested and total deals some cases, the company generates revenue. done’ chart: - Series A: amounts of $1M - $3M. The product has been built and proven via initial but repeatable - Corporate transfers: events where a corporate entity funds an entity in the region in which it owns a revenue. Investment purpose tends to be establishing domestic position, and sometimes scaling majority or significant minority stake (e.g. Rocket Internet, Lippo Group) regionally. - Project financing: A deal which was a partnership for an identified purpose – e.g. Grab-Honda. - Series B: amounts of $3M-$10M. Investment purpose tends to be building scale, either domestically or regionally. - Non-Southeast Asia deals: e.g. India and China focused companies that happen to use Singapore for their corporate domicile. - Series C+: any amount invested later than Series B. Series C, Series D, later series investments, pre-IPO, mezzanine. We have also estimated a particular company’s valuation through a recent substantial financing or liquidity event and known business developments

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www.cento.vc

[email protected]

+65 6816 2810 Contact Office address: 56B Pagoda Street, Singapore 059215

Mailing address: Cento Ventures, 3 Church Street, Level 8, Singapore 049483

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