VCs see opening for Southeast Asia exits – AVCJ Forum

“We're just getting to the point now where the quality companies that got funded early on are proving themselves and starting to broaden out their options. And we're also seeing a broadening of the type of investors who are paying attention,” said Shane Chesson, co-founder of Openspace Ventures, at the AVCJ Singapore Forum. “It may not be a Southeast Asia-specific exit; it could be people from other parts of Asia or global capital pools.”

Chesson noted that the level of attention from strategic buyers, secondary investors and public markets in Southeast Asian start-ups has increased significantly from 2014 when Openspace (then named NSI Ventures) launched as the first Series A fund focused on Southeast Asia. High-profile trade sales such as Alibaba’s purchase of Lazada in 2016 and the US IPO of Sea Group last year have helped drive up interest among global investors and demonstrate the viability of the region’s start-up community.

Investors are also encouraged by the example of India, another market with a relatively young start-up ecosystem where exits have historically been seen as a challenge. 

“What has been quite remarkable for India, certainly in the last three or four months, is that you’ve seen big trade sale exits – obviously Flipkart is the one that people talk about – but you've also seen domestic IPOs of VC-backed companies,” said Dominic Goh, a vice president of HarbourVest Partners. “With Southeast Asia being a slightly less mature market compared to India I would expect that over the next couple of years we’re going to see the same trends here.”

As exit opportunities spread in Southeast Asia venture investors may find themselves presented with multiple options and have to choose the best one. Jeffrey Chi, vice chairman for Asia at Vickers Venture Partners, said his firm debates exit scenarios for its portfolio companies on an almost monthly basis, and it has to be careful not to let these issues affect its relations with the investees.

It is also imperative that GPs view these potential developments in the proper context and not lower their investment standards because exits may become easier in the future. While all entrepreneurs start small, VC investors must distinguish between those who will be content with limited success and those with the ambition to build companies with a lasting impact.

"When we invested in Go-Jek's Series A we weren't investing in a guy who wanted to build a small motorcycle taxi business on the streets of Jakarta. He already had a vision to go into food, into logistics, to build something that would solve so many daily problems that you'd have to build a payment network around it," said Chesson.

The AVCJ Singapore Forum is being held in Singapore on July 18-19. For more information, go to www.avcjsingapore.com.

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• Topics
• Southeast Asia
• Venture
• GPs
• IPO
• Trade sale
• Singapore
• AVCJ Events
• Vickers Venture Partners
• Openspace Ventures
• HarbourVest Partners