Southeast Asia is expected to produce at least 10 new unicorns by 2024, according to a report released by Bain & Company.
This is given the region’s investment growth as an important catalyst amidst a maturing line of startups. Bain & Company reports that the new phase of investment growth with deal value projected to a total of US$70 billion over the next five years.
“Since 2012, 10 unicorns including Grab, Go-Jek, and Traveloka have created a combined market value of US$34 billion, ranking Southeast Asia third in the Asia Pacific (APAC) region, behind China and India,” the firm added.
Deeper integration of the Association of Southeast Asian Nations (ASEAN) markets encourages companies to expand across borders, accelerating their growth.
Bain & Company’s report drew on Grab as an example which received US$340 million in several rounds of venture funding in 2014 after moving its headquarters from Malaysia to Singapore. By adding new services, Grab expanded rapidly across eight ASEAN countries and eventually bought out rival Uber’s regional business in 2018.
“Grab is the region’s number one ride-hailing business and its biggest startup success story, with a market capitalization of US$11 billion,” Bain & Co stated.
In 2017, the number of recorded venture capital deals saw a four-fold increase to 524, as compared to 2012, and private equity deal value increase 75 percent to US$15 billion, breaking out of a decade-long phase of flat growth, the report highlighted.
A bulk of new capital went to technology companies, with deal counts rising 40 percent in 2017 from 20 percent in 2014, the report highlighted. More than 60% of Southeast Asian investors surveyed cited that technology is their main target for 2019, primarily fintech. The region also produced its first set of unicorns during this time frame.
“It’s a jarring acceleration,” Bain & Co said. “Investment in Southeast Asia over the past decade has been surprisingly low, given the region’s average economic growth of 7% a year, a burgeoning middle class and a rapidly growing pool of digital natives.”
Private equity investment in the region in the past decade hovered roughly between US$6 billion to US$9 billion, the firm added.
“The tipping point took longer to reach but years of solid economic growth, government support for startups and perseverance by private equity funds created the conditions for a rapid transition to the next phase of growth,” Bain & Co said.
The report also noted how investors are attracted by the region’s strong macroeconomic fundamentals, the chance to invest in emerging regional firms and a deepening secondary market for deals of all sizes.
Meanwhile, strong exit momentum and healthy returns are also contributing to a faster pace of investment by accelerating a healthy recycling of capital, Bain & Co. highlighted.
In 2017, exit deal value in the region rose to US$16 billion, up 86 percent from the previous five year average, the report noted.
“That virtuous investment cycle helps private equity fund managers feel more confident about raising new funds and putting capital to work,” the firm said. “And as private equity funds expand their portfolios, they broaden the potential market for secondary transactions.”
Whilst Singapore as Southeast Asia’s investment hub, the report noted that startup ecosystems are emerging across the region. A separate survey indicated that nearly 90% of investors see Indonesia and Vietnam as the ‘hottest’ Southeast Asian market outside of Singapore in 2019.
“Together, Indonesia and Vietnam generated 20 percent of the region’s private equity deal value over the past five years, and that percentage is likely to grow,” Bain & Co added.
With growth of investment in the region and a strong and healthy ecosystem in the region, another line of Grab, Go-Jek and Traveloka in the fintech industry might come to light in the next few years.
From Chinese phone maker Xiaomi to online service platform Meituan-Dianping, a huge number of Chinese tech unicorns are reaching maturity and has announced their intentions to IPO this year.
According to Dealogic, there are a total of 26 Chinese tech companies offering to sell US$85 billion worth of new shares, which accounts for 9 percent of the international IPO volume.
Among this new wave of Chinese tech companies rushing to sell their shares include three companies that rank among the world’s 20 largest internet firms: Xiaomi, Meituan-Dianping, and Didi Chuxing.
Recently listed, Xiaomi has reportedly drawn the interest in investment from three of the wealthiest people in China. Li Ka-Shing is said to invest US$30 million in the phone maker, while Alibaba founder Jack Ma and Tencent Chairman Pony Ma have also taken stakes in Xiaomi.
However, not all can be said the same for other pricey valuations.
Ping An Good Doctor, China’s largest online healthcare platform which debuted on the Hong Kong stock exchange in May has seen the slid of its shares below 11 percent of its IPO price on the second day of trading, as reported by Reuters.
This was amidst a reported retail oversubscription of 663 times for its US$1.12 billion IPO, as well as being backed by seven cornerstone investors including U.S. asset manager BlackRock, Singapore sovereign wealth fund GIC, and Canada Pension Plan Investment Board.
Tencent-backed Yixin, that debuted in November 2017 also shared the same experience, where it opened at HK$10 in the day only to be later trimmed by 5 percent at the end o the session, closing at HK$8.12. Its retail portion of the IPO was 560 times oversubscribed.
What this says is that investors are interested to pour money into promising IPOs, but are also quick to withdraw in hope of making a quick profit during times when shares first debut.
There’s also a reason why companies are tapping into the public market in haste. That’s to take advantage of a recent change in Hong Kong’s listing rules where biotech companies without revenue or profit the chance to apply for public listing.
Besides that, the city’s bourse had also launched a China Depository Receipt program that allows China tech giants listed in Hong Kong or in the United States to have a dual-class offering in the mainland.
It’s an ownership structure widely used by tech giants in the United States and gives founders stronger voting rights than other shareholders. Besides, after years of rapid growth in their home market, some Chinese tech firms are also now looking for the opportunity to expand to overseas market.
Xiaomi, for example, plans to expand into Europe to compete with Apple and Samsung in the smartphone market. Companies are simply in good shape and ready for further growth.
Hurun Research Institute reports that 151 companies in China have attained unicorn status by the end of the first quarter, with half of these unicorns incubated or backed by industry titans such as Alibaba and Tencent Holdings. Their combined valuations exceeded 4 trillion yuan (about US$630 billion).
Moreover, according to a professor of accounting at Peking University Paul Gillis, there’s a fear of missing out and Chinese tech companies might receive pressure from investors to join in and join big. He added that Meituan-Dianping’s valuation target of US$60 billion is hard to understand, given that the company has revealed a steep loss of US$2.9 billion last year from share-based compensation.
“Still there will be demand for shares,” said Ken Xu, a Shanghai-based partner at investment from Gobi Partners. “Both XiaoMi and Meituan are household names in China and market leaders in their respective business segments and may eventually rise to challenge the country’s traditional tech trinity – Baidu, Alibaba, and Tencent.”
“Their valuations are indeed at very expensive levels,” Xu says. “If you look at their fundamentals, then the targets aren’t very reasonable. But everyone is betting that these companies will become the next big thing in China, and people are worried about missing out.”
Moving forward, we have yet to expect Didi Chuxing and Meituan-Dianping which are slated for a Hong Kong listing later this year. The company based in Beijing is said to be targeting a US$60 billion valuation.
Meanwhile, even bigger listings are slated down in the pipeline, Ant Financial is also gearing up for a public float that may happen as early as next year. The payment affiliate of Alibaba has just completed a mega funding round in June that valued the company at US$150 billion.
With all these blockbuster IPO still standing in place, the fizz for Hong Kong IPO is not likely to go out anytime soon. Down the road, Hong Kong and China together could even end up being the largest issuing market for IPOs.
Food delivery continues to dominate the flow of big capital and investors in India’s startup ecosystem with Swiggy being the latest to enter the unicorn league.
The food delivery startup has successfully raised US$210 million in its latest round of funding from Russian billionaire Yuri Milner’s DST Global and existing backer Naspers.
DST Global is one of the world’s most influential tech investor which counts Facebook, Airbnb, and Alibaba in its investment portfolio. For DST, this will be its third investment in India after online retailer Flipkart in 2014 and cab hailing firm Ola in 2015.
The round also saw participation from US-based hedge fund Coatue Management and existing investor Meituan Dianping, a China-based provider of on-demand online services.
It is with this latest funding round that Swiggy’s valuation has increased to US$1.3 billion as per sources with direct knowledge of the development.
Besides, this also officiates the Bengaluru-based firm as one of the fastest internet companies to join the Unicorn club four years after it inception. That is less than half the time it took for its rival food tech company Zomato to earn the title.
The last valuation of Swiggy was at US$700 million in February when it raised US$100 million from Naspers and Meituan Dianping.
With this round, Swiggy’s existing capital will cross US$466 million, which is essential as it continues to compete with Ant Financial-backed Zomato and new competitor entering the space, which includes UberEats and Foodpanda.
Swiggy currently has 35,000 restaurant partners and 40,000 delivery executives across 15 cities. It will use the additional capital to ramp up its supply chain network, expand to new markets and scale its headcount especially in the technology function.
Sri Harsha Majety, the CEO of Swiggy explains, “using this investment, we will continue to widen Swiggy’s offering, along with bolstering our capabilities and plugging the gaps in the on-demand delivery ecosystem.”
Swiggy has also been reportedly looking to increase its supply by exploring investment options with cloud kitchen players and restaurants for its Swiggy Access model even as the firm is working on a pilot of medicine delivery under its offering Swiggy Dash.
If anything, this deal is expected to escalate the fierce competition in the food delivery space, and to an extent boost innovation of the services to grow beyond ride hailing.
According to a Bloomberg report, more than 400 food delivery apps were operational in India between 2013 and 2016. The industry grew by 150% year-on-year and has an estimated Gross Merchandise Value (GMV) of US$300 million in 2016.
At the same time, this sector has witnessed a lot of consolidation. While some ventures with unique ideas has managed to survive, others succumbed to market forces simply due to lack of bad timing or lack of funding.
Currently, the momentum in the food delivery market in India is lead by Swiggy with about 11 million monthly orders followed by Zomato at about 7 million orders across India and UAE. While FoodPanda records about 1 million and UberEats about 750k per month.
However, all is not fixed as in related news, Swiggy’s rival Zomato also raised a US$400 million funding capital, a news that came a few days after Swiggy’s own announcement of a US$210 fresh funding.
However undeniably, the food delivery industry is nearing saturation. Question is – who will come up on the top: Swiggy, Zomato or new entries like FoodPanda or UberEats?
Much like the bicycle-trend in China where millions of people in cities across Asia use rental bicycles for short-distance travel, the United States is now in the middle of an scooter-sharing boom.
You won’t believe it. But electric scooters are taking over San Francisco. Made available to rent using phone apps, electric scooters are taking over cities in the United States the same way bicycles have proliferated across Asia.
Companies like Bird, LimeBike, and Spin have spread so quickly that cities are struggling to figure out how, or if, they should regulate how people use these deckless scooters.
Similar to bike-sharing in Asia, local residents complain about obnoxious parking, riders taking over pedestrian sidewalks and scooter trend especially introduce a more significant safety concern than bicycles.
However. the bike-sharing trend is healthily growing with LimeBike being the favored competitor having raised US$50 million in funding from Andreessen Horowitz and Coatue Management.
Despite that, the surprising fact though is that the company winning in this trend according to Axios is Xiaomi.
Yes, the Xiaomi. The Chinese company has a product called the Mi Electric Scooter and the report states that it is what is personalized by Bird, BlueDucks, and Spin. Besides that, Ninebot another scooter designer company cashing in on the trend is also a Chinese company.
While it remains to be seen if scooter sharing can become a cultural institution like ride-hailing or if it’s a passing trend, undeniably the healthy competition will play a big role in fueling this electric scooter startup wars in the near future.
Is Internet killing retail? Summit Media, a publisher in the Philippines is stopping its line of printed magazine as it shifts its titles online. That is starting from today, Summit Media, the publisher of popular magazine titles in the Philippines will no longer be producing print editions of magazines in its network and is going fully digital.
This announcement from Summit Media is a transformation long brewing in the midst of the changing publishing landscape. For its full digital transformation, the 450-strong company will be closing down six remaining print editions of brands already thriving online.
The company’s magazine titles still officially in print circulation prior to the announcement were Cosmopolitan, FHM, Preview, Top Gear, Town & Country, and YES! Magazine. These brands are already thriving online as Cosmo.ph, Preview.ph, Pep.ph (for YES!), Topgear.com.ph, FHM.com.ph, and Townandcountry.ph
This thus marks the end of Summit’s 23-year run as a leading publisher of magazine titles.
Summit Media president Lisa Gokongwei-Cheng explained that this move is to embrace the preferences of the highly connected audiences which now prefer to consume content.
Currently, the company’s websites that bring its popular magazine brands online boast of over 20 million unique monthly users and 33 million followers on social media platforms. It declares itself as the Philippines’ leading digital lifestyle network as well as belonging to the country’s top two local digital media companies.
Of course, this move is not unique and coincides with Mediacorp’s decision to also axed a number of its lifestyle magazine titles, with the closure of 8 DAYS, i-Weekly and ELLE.
That said, a different story is ongoing for the online retailers as they move from clicks to bricks.
Question is, among all these changes, can media-based business owners still eke out a living?