Last week, we organized a fireside chat with our friend Dmitry Levit from Cento Ventures on the investment scene in Southeast Asia, key trends, comparison with LATAM and what to look out for in 2021.  We had covered the highlights in another blog, and here, we’re covering the questions from the crowd and the combined answers from Dmitry and Jianggan. 


On overall investments and business in Southeast Asia (SEA) … 

  1. Investment seems to be centered around Indonesia in SEA. What’s your view of investment and digital economy outlook for Vietnam, Thailand and Malaysia?

At high level, up to 80% of investment into SEA originates outside of SEA. Most of the overseas decision making hubs seem to be focused on covering the largest geographical market first. As such, Indonesia will still be absorbing a significant level of capital for the next couple of years. Also, being outside of SEA, many investors do not have the full visibility of the region and Indonesia is simply an easy story to understand and gets the most visibility. 

Singapore being the most developed country in the region – will continue to receive the attention it’s getting.

Due to a couple of factors including general excitement around the economy, stock market and strong pandemic handling – Vietnam will be shining quite brightly still. 

Vietnam receives the same waves of enthusiasm over certain business models as the region does but usually with a lag of 6 months. For example, if you see big funding going into B2B procurement for retail – you can expect a couple of companies in Vietnam raising for the same half a year later. 

Vietnamese mobile developers are also quite a force to be reckoned with – the country produces gigantic digital companies like Amanotes when least expected. It will be soon that the world will start noticing the mobile development prowess of Vietnam. 

On a similar note, we’re also quite impressed with the state of Vietnamese banks and how they’re catching up with digitizing their services. On the digital financial services front, Vietnam might start punching at the level of Thailand. 

Thailand and Malaysia

And that leaves little space for Thailand, Malaysia and Philippines which is not entirely a bad thing. It is inconvenient for entrepreneurs, but they will build better and stronger companies as a result that will eventually attract investment and appreciation. 


  1. How would you see the payments landscape evolving in SEA (Xendit, 2c2p, VNPAY)? Would there be consolidation in the next 3-5 years, similar to what we see on a global level?

One way to look at the “acceptance” payment landscape in SEA would be to look at it through 2 levels – at the Stripe level or at the Ayden level. 

Payment companies at the Stripe level are typically serving small simple merchants and are managing several million dollars of transactions a month at most. There are 1-2 types of payment and operation within a single market or segment. At the Stripe level, you would have proliferation of players in each market – figuring out how to serve smaller businesses better. They will eventually consolidate on each country level. 

Payment companies at the Adyen level are serving multiple jurisdictions at the same time, have hundreds of payment facilities, are constantly hit with creative fraud every second and want their platform to be heavily armored. At the Adyen level, it is a network position. You will have to dominate the region to be successful – there is a significant fight for that position right now. 


  1. Do you see American/ European startups coming into Southeast Asia anytime soon? Seems most of the players coming into the region are mainly Asian.

The challenge is that the expectation from customers here is quite different to that in the west. So there’s a need for localized customer service and organisational structure required, which may pose as a challenge.

However, we do notice a number of American/European players who are in SEA, or at least trying to get into the B2B SaaS space. 


  1. What’s your view on local startups IPO in their respective markets and would the American IPO trend continue? 

The existing infrastructure and connectivity of global markets in the United States makes New York a prime location to list, if you can. However, there is hope for some of the region’s exchanges especially with IDX (Indonesia Stock Exchange) and SET (Stock Exchange of Thailand) with some rather large offline IPOs happening quite frequently.

HKEX (Hong Kong Exchange) would be an interesting one to watch seeing that many Chinese tech companies are there. Although, it would take some education for people to be familiar with what’s going on , the listing requirements and the capital market. 

However by far, the largest chunk of liquidity by listings will come from US exchanges. Besides, banks that bring companies to list in the US charge higher fees, so there is incentive there.


On industry specific questions…

  1. Can you explain why investment in healthcare and education lag in 2020 compared to 2019?

On education, it is not that investment in 2020 was small but rather investment in 2019 was rather large. Also, an interesting factor about edtech was that 2020 saw a big drop in government support (e.g. Indonesian government subsidies) and this could have led to caution amongst the investor community. 

As for healthcare, our observation is that not many business models deployed in SEA work well solely online. It often requires a large investment into offline infrastructure. And of course, in 2020, offline infrastructure became prohibitively difficult to deploy due to pandemic restrictions.  

If we take a look at examples from China, Ping An became a strong bank, insurance and financial player by building an effective on-the-ground promotion team across the country BEFORE venturing into healthcare. By then, they already had the infrastructure, the ground promotion forces and customer service capability. That’s how Ping An Good Doctor came about. 

We are seeing the reverse here in Southeast Asia. Entrepreneurs are building the infrastructure from scratch and purely focused in the healthcare segment , and this would take a much longer time to bear fruit. 


  1. Both in Latam and Southeast Asia, are Key Opinion Leaders (KOLs) key to ecommerce and have you seen emerging KOL linked startups? 

Yes, we see plenty of them emerging. In China, we know of multi-channel agencies which systematically grow, mould and manage KOLs. We do see a few of them coming to SEA looking for acquisition targets and their comments post due diligence of the region is quite consistent.

They see the promise in the region as players are trying different things but in terms of the level of sophistication, it is not there yet. We will need to wait for startups that are not merely doing agency work to emerge. We see the same thing happening in LATAM. 


  1. We’ve seen Gojek and Sea invest in Indonesian banks. Do you expect to see other tech companies (Indo/regional) invest in Indonesian banks and if so why?

As covered in the Momentum Works Digital Banks in Indonesia report and briefings, this makes sense for tech companies to acquire the company with an existing banking licence and enough credibility to win deposits to get into the fintech scene. 

However, we do expect that these tech companies will keep their profitable fintech services outside their digital bank. This will allow them more flexibility in leveraging their use case, and achieve profitability. 


  1. Would like to get some insights about B2B companies in Indonesia (Ula, Gudang Ada, Super, Warung Pintar) & how it compares to other markets? 

The fundamentals in this space are built on three business models:

  1. Charge a subscription model to store operators
  2. Earn from the difference between the cost and price of sale of the products you are selling. 
  3. Lend money against various capital flows

Lending seems to be the flavour of the day and there seems to be an adjacent boom in SME services like accounting software. This seems to be the battleground for the next few years and  we hope to see more verticals and types of goods coming in, along with creative ways to earn margin from that. 


  1. We recently had a conversation on Impulso that many businesses in Indonesia are targeting warungs (mom-and-pop stores). Does it work and are there similar models in China? 

Whether it’ll work – wait for our upcoming ecommerce report on Indonesia (coming out very soon)! 

We found there was no comparable business like warung in China. There are a few nationwide B2B ecommerce startups there that are focused on very specific verticals, but not one that’s in general B2B distribution and is getting big (as with what’s going on in Indonesia).

On the other hand if we take a look at India, we see Udaan growing aggressively. In fact, the investment into B2B ecommerce in Southeast Asia happened after the Udaan story, led by Indian investors. 

At the end of the day, distribution in each country is unique and different – in Southeast Asia, it might be a little tricky as distribution channels already exist especially for high margin items that are controlled by large conglomerates. It will take some creativity and innovation to break away from that and create a business model to make meaningful margin. 


  1. One of MW’s predictions is how e-commerce will see a complete boom. I’m curious what’s the view on e-commerce enablers that are pursuing IPO ambitions like SCI Commerce and aCommerce? 

It would seem that a significant multi-country ecommerce enabler in SEA would make sense. Straight up logistics with brutal competition and negative margins would ensue. There should be consolidation before IPOs, but it seems like public markets today absorb all sorts of economics as long there is growth. On this note, check out ecommerce enabler Baozun in China as a benchmark. They are invested by Alibaba, China’s biggest ecommerce player. 


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].