The problem with Southeast Asian VC

At the forum itself, participants offered more perspective and some insightful numbers.

According to Patrick Grove, chairman and CEO of Catcha Group, last month ASEAN overtook the US by internet users and at this month it will surpass the US in terms of total number of 3G connections. Fast forward three years and ASEAN will have twice as many 3G users as the US.

But there are only about 20 venture capital firms active in ASEAN compared to 1,000-plus in the US, 600 in China and 400 in India.

AVCJ Research data show that early-stage investment in Southeast Asia is already $278 million so far this year, only the fourth time in the last decade it has topped $200 million. In the bumper years, Singapore received the vast majority of capital and the key deals, while early-stage, don't fit the profile of your average VC.

The irony is that Southeast Asia first emerged as a venture capital market before China and India. So where has it all gone wrong?

Grove offered two reasons. First, too many VC firms are launched by the likes of bankers, consultants and mid-level managers from Yahoo who don't have direct experience building a business from the ground.

The same criticism could be leveled at some Chinese and Indian VCs, but those markets have still prospered. What they have that Southeast Asia does not are robust entrepreneur communities driven by a combination of returnees from the US and interaction with Silicon Valley. Many VC firms in these countries are either affiliates of or have strategic alliances with Silicon Valley investors.

The second reason is scale. The thesis for the majority of VC investments in China and India has been the potential to rollout a service nationwide. In Southeast Asia, where social, economic, cultural and lingual barriers are longstanding, this is more challenging.

Several companies have succeeded in making the jump - each of the seven largest listed internet businesses in Southeast Asia have entered multiple markets - and it will be interesting to see how many others follow suit as ASEAN integration reaches new levels. Other participants at AVCJ Singapore noted that what started as a manufacturing-led phenomenon is now crossing into the services sector.

Is there an angle for venture capital?

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Venture
• Southeast Asia
• Early-stage
• Venture
• Southeast Asia