The hothouse: Southeast Asia VC

Southeast Asia is fast-becoming a hotbed for technology start-ups. As many have analyzed, at least on paper, the region looks to be a promising market for mobile technology companies. A combined regional population of over 600 million people, many having more than one mobile account, are very alluring statistics. Internet penetration is also growing at a fast rate with 40% of the population now active users.

While that may pale when compared with the figures from China and India, the opportunity is very real. Indeed, technology companies from these two powerhouses, plus Korea and Japan, are embracing the potential for the ASEAN countries. Indonesia alone has a substantial number of internet users, while the various segments of the internet economy - from e-commerce to delivery to payments - are less competitive than in China, although the market is rapidly evolving.

As more investees look for growth in Southeast Asia, it is comes as no surprise that the venture capital investors funding them are also setting up shop locally. Sequoia Capital's last two India funds have included an allocation for Southeast Asia while GGV Capital has made investments in the region from its Sino-US funds.

Shanghai-headquartered Gobi Ventures first entered Southeast Asia in 2010 with an ASEAN fund backed by Singapore's Media Development Authority. Last month it set up its second regional venture, launching a new $14.5 million vehicle with Malaysia Venture Capital Management (Mavcap). This marks a reversal from an earlier trend which saw Southeast Asian VCs, especially those from Singapore, spend most of their time and money in China.

However, unlike China, Japan, Korea and other more developed markets, Southeast Asia has fewer technology success stories to tell. The companies from that have achieved "unicorn" status certainly have interesting investor bases given the dynamics discussed above. For example, mobile internet and gaming platform Garena recently closed a $170 million Series D round - at a valuation of $3.75 billion - that was led by Malaysia's Khazanah Nasional. Other investors include China's Tencent Holdings, General Atlantic and Ontario Teachers' Pension Plan.

According to market watchers, Garena and fellow unicorn Grab - a ride-hailing app formerly known as GrabTaxi - might only be the tip of the iceberg. When or whether this actually happens remains to be seen. However, one thing is clear. Investors need to familiarize themselves with the Southeast Asia venture market. And for those that took their time with China/India/Korea/Japan, the message is don't miss the boat.

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• Topics
• Southeast Asia
• Venture
• Fundraising
• Technology
• TMT
• Indonesia