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emerging industry trends for venture capital in Southeast Asia

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It’s been a busy first quarter of the 2019 financial year for the Kindrik Partners Singapore office, especially for venture capital fundraising. It’s early days but we can already see a few trends starting to emerge in VC markets this year:

More later stage deals (and funding)

We are seeing a big rise in later stage funding rounds. Think series B+ compared to series seed and series A.

A couple of years ago Southeast Asia (and Singapore in particular) had an abundance of institutional seed and series A investors, but few series B+ investors. However, talking to potential investors back then it was apparent that the main issue was a lack of investible later stage companies in the region, rather than a lack of money to invest in later stage deals.

Now, many companies that raised money from those seed and series A investors in the last 24 months are ready to raise some serious expansion capital. This has resulted in a higher number of offshore series B and later stage funds targeting the region.

Singapore’s existing VCs have also matured. Many regional VCs are now raising their second or third funds. In many cases this means larger funds with the ability to write the kind of cheques necessary to participate in later stage funding rounds.

More foreign investors interested in Singapore startups

In a related trend, we are seeing foreign investors leading more deals into Southeast Asian technology companies, particularly from the US and Japan. The rise of regional unicorns like Grab and Sea have shown that large returns are possible when investing into tech companies with a Southeast Asian focus.

This trend may also be driven by a significant return of US capital from recent high profile tech IPOs, and a more conservative view of the Chinese and European markets. This all makes SEA tech companies a logical target for high growth investments.

A thirst for deep tech

Previous investment trends in Southeast Asia have tended to focus on a particular vertical, most notably e-commerce and fintech. This quarter we have seen a shift in focus to technology platforms. Specifically – AI, machine learning, and other deep-tech plays.

This trend is vertical agnostic. Just this quarter we have seen target companies using AI/machine learning in the robo-advisory, advertising, music, e-commerce, enterprise back-end, and product manufacturing verticals.

The Southeast Asia tech investment scene is really starting to mature. It’s good news for startups of all stages, and particularly ones who have been focusing on their technology platform. Watch this space for more updates on the Singapore startup and venture capital scene.

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