In the world of tech investment in Southeast Asia, there are new rules emerging that are reshaping the landscape. Previously, the prevailing notion was that narrative beat substance – a well-presented story by charismatic founders trumped solid financials and profitability. However, in the last few months, a significant shift has occurred.
Investors are now placing more emphasis on profitability and proper unit economics. They no longer penalize companies for not achieving exponential growth rates, but instead ask insightful questions about the sources of sustainable growth. This change has resulted in longer due diligence cycles and a more discerning approach to investment decisions.
The market dynamics have shifted due to capital outflows, leading smaller, practical, and agile players to gain a competitive advantage over their larger counterparts. The era of rapid growth and abundant capital is fading, making way for a more focused and sustainable approach to investment.
In the context of this changing landscape, it is essential to recognize that even the most promising narratives can falter. The saying, “With the wind, even pigs can fly,” highlights the importance of riding the current trends and aligning with market demands. However, it fails to account for the fact that the direction of the wind can change, and sometimes, it can cease altogether. This realisation cautions entrepreneurs to be mindful of the shifting winds and adapt their strategies accordingly.
Chinese entrepreneurs, who have been remarkably successful in recent years, have become noticeably quiet. While the reasons for their silence remain speculative, it is clear that they, too, are navigating a changing landscape. Amidst these transformations, it is crucial to assess the market as it is, rather than creating new animal-based comparisons or metaphors.
Questions arise about the relationship between the Middle East and Southeast Asia. Middle Eastern funds are raising significant capital, and their investments could facilitate the expansion of Southeast Asian companies into the Middle East. However, the dynamics of this relationship are complex and warrant further exploration. Understanding the potential opportunities and challenges requires a deep examination of the diverse Middle Eastern markets and their liquidity.
When it comes to sustainability-focused startups, the question arises as to how they fit into the Southeast Asian landscape. While all startups should strive for sustainability, the term often refers specifically to climate tech ventures. The intersection of fintech, payments, and b2b SaaS in the sustainability sector is critical. These elements are interconnected, and the success of one relies on the development and integration of the others.
The potential for Chinese tech companies to compete in Southeast Asia remains a subject of interest. Chinese businesses, across various industries, have shown a strong desire to expand beyond their domestic market. This trend extends to tech companies, which are actively exploring opportunities in Southeast Asia. Chinese entrepreneurs are registering local businesses and leveraging platforms like TikTok to tap into the Southeast Asian consumer base. The complexities surrounding this issue necessitate a deeper exploration beyond the scope of this discussion.
Predicting the future is challenging, particularly given the multitude of factors at play, including geopolitics and regulatory environments. However, climate tech appears to be one of the breakout sectors of 2022, and its growth trajectory resembles that of early-stage crypto-enabled gaming. The integration of sustainable practices and technological advancements is crucial for the development of Southeast Asia’s ecosystem.
As for the future of tech investment in Southeast Asia, it is difficult to provide an exact forecast. However, an adjustment of 10-20% in the market is expected, with the first quarter of this year experiencing a more significant decline due to market panic. The stabilization of the market is anticipated, and the region’s resilience suggests that Southeast Asia has limited room to fall compared to other regions.
In conclusion, the rules of the game in Southeast Asia’s tech investment landscape are evolving.
Check out part 1, part 2, and part 3 , as well as the full transcript of this event summary.
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