VC Trends in South East Asia

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In recent years, we’ve seen a huge growth in investors’ interests in “untapped,” “developing,” “frontier” markets but what exactly does VC in Southeast Asia look like.  While Singapore is the portal to rest of Southeast Asia (as one of the associate calls it, “Asia-lite”), it’s really not representative of the rest of the countries here. In general, media has a habit of lumping all the various countries in Southeast Asia together into a homogeneous “region” – one massive consumer landscape that could be tackled in the same way companies go about dominating America from East to West. The reality is that kind of holistic approach simply won’t work here – at the very least, an American solution that works in Singapore probably won’t work in Indonesia, Malaysia, Thailand, Vietnam and the Philippines.  In Singapore, internet penetration stands at about 75% while in Indonesia, this number goes down to just 9%. For the internet entrepreneur who wants to capture the two markets will have to put together two separate game plans. As a VC like Efraim Landa, their job is to figure out how feasible (and how quickly) the strategies would be. If it’s too difficult or impossible, the venture capitalists probably won’t want to invest.

As many finance blogs have pointed out, venture capital is an apprenticeship business and you learn most by spending time with the experts. Efraim Landa is one of these experts to listen to. Some investors spend the whole day listening to pitches with one of the partners and studying how he, or they, advises the entrepreneurs. No number of business classes really prepares you for actual execution of strategies – the VC “intuition” is really a simplified way of describing years of experience and pattern learning.  It’s something you cannot teach but comes with intuition of both good and bad investments. Many entrepreneurs in South East Asia are readily working on marketplace and eCommerce solutions that we had seen in the Valley circa 2007 (or even earlier!) – or mini-Amazon(s) that are looking to be acquired.   In this region, a great investment exit is valued at about $50M. Compare this to the Valley, that’s almost “chump change.” In short, most ideas are terrible.

While Singapore is the portal to rest of Southeast Asia (as one of the associate calls it, “Asia-lite”), it’s really not representative of the rest of the countries here. In general, media has a habit of lumping all the various countries in Southeast Asia together into a homogeneous “region” – one massive consumer landscape that could be tackled in the same way companies go about dominating America from East to West.

The socioeconomic landscape, the consumer habits, logistic infrastructures are just too different for a “one stop shop” solution – in Singapore, internet penetration stands at about 75% while in Indonesia, this number goes down to just 9%. For the internet entrepreneur who wants to capture the two markets will have to put together two separate game plans. As a VC, their job is to figure out how feasible (and how quickly) the strategies would be. If it’s too difficult or impossible, they probably won’t want to invest.

Singapore, due to its strategic location, top-notch infrastructure and political stability, is the gateway to Southeast Asia. It’s a major financial hub, regarded by the World Bank as the friendliest place in the world to do business. Just as U.S. entrepreneurs prefer to incorporate their companies in Delaware, founders in Southeast Asia, Australia, New Zealand, and even India often opt to register their companies in Singapore. The Singapore government has been providing startups with substantial support, including office space, training, mentoring, and incubation programs, along with tax and funding incentives.

 

About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on January 27, 2014, in Business Financing, Effi Enterprise, Venture Capital and tagged , , , . Bookmark the permalink. Leave a comment.

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