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 Singapore 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. 2 dmp Introduction INTRODUCTION dmp The headline story of Southeast Asia is the sustained investment in technology investment - Investments to Vietnam increases in proportion with increasing geography and sector diversification. Close to $6B was invested during the As compared to 2018 where Indonesia 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, Thailand and A closer look at the data partly emphasizes the progression of existing trends, but also Philippines 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 4 dmp 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.