Yearly, Temasek groups up with Bain & Firm on the e-Conomy SEA report. It covers Southeast Asia’s digital economic system and is revealed by Google. This yr’s report, revealed as we speak, underscores what many startups and traders already know—the area’s funding panorama is at present difficult to navigate. On the intense aspect, there’s nonetheless loads of “dry powder” left to deploy.
Personal funding to digital economy-related sectors has fallen again right down to 2017 ranges, after hitting file highs in 2021. Within the first half of 2023, whole funding was $4 billion, which implies it is extremely unlikely to succeed in the $27 billion raised in all of 2021. Deal depend fell to 564 within the first half of 2023, in comparison with 2,697 in all of 2021. The funding decline impacts all levels of startups, from seed to E+, and is occurring throughout Southeast Asian markets.
Whereas the report says that the drop in funding is “consistent with international shifts in the direction of the upper prices of capital and points throughout the funding lifecycle,” it additionally notes that Southeast Asia funds have returned much less capital to traders than funds targeted on different areas, and startups are below stress to indicate they are often worthwhile and have clear exit methods.
Out of traders surveyed by Bain and Temasek, 87% mentioned that fundraising had turn into more difficult, whereas 64% mentioned they’d seen a drop in diligence and top-of-funnel exercise. 88% felt that exits had been turning into tougher.
“SEA-focused funds have seen considerably decrease distributions to paid-in capital in comparison with different funds which might be targeted on different areas, suggesting issue in elevating returns for traders,” mentioned the report. One purpose for that is rate of interest hikes that decreased the variety of IPOs and listings on regional exchanges. Valuation reductions for secondaries additionally elevated.
The digital economic system is anticipated to succeed in $295 billion by 2025, however as Reuters notes, that determine has been lowered from the estimate of $330 billion given in final yr’s e-Conomy SEA report.
On a extra upbeat observe, the report discovered that “dry powder” is on the rise, regardless of investor warning. There was $15.7 billion in non-public fairness and enterprise capital funds dedicated (minus the quantity known as for funding) in 2022, increased than $12.4 billion in 2021.
In 2023, Southeast Asia’s digital economic system income additionally hit $100 billion for the primary time, rising at 27% CAGR since 2021, with e-commerce, journey, transport and media contributing $70 billion. GMV is anticipated to develop at 11% to $218 billion in 2023.
As well as, digital funds are rising in popularity, making up greater than half of transactions in Southeast Asia now.