[Report] Tech Investments in Southeast Asia H1 2022

2022 was not, by any means, a great year for the global tech industry. 

For the past year, there has been a growing number of concerns in our community. Questions such as “is the tech industry losing steam?” and “are investors giving up on the tech industry in Southeast Asia?” were raised after numerous Fed rate hikes and other events, clouding the future of the landscape. 

In collaboration with Cento Ventures, we are releasing the H1 2022 Tech Industry in Southeast Asia report, which aims to paint an accurate picture of the Southeast Asia tech industry in 2022.

The complimentary report is available in English and Chinese. Download your copy here.

Here are some highlights of our report:

• Strong start to a tumultuous year

2022 started off well for tech, as Southeast Asia’s tech ecosystem received US$6.6 billion in investments in H1 2022. 

However, the number of deals decreased 23% from H2 2021 as more companies are opting to reduce costs or borrow instead of issuing equity in the face of deteriorating capital markets.

As public markets nose-dived across the world and IPO window(s) closed, pre-IPO mega-deals slowed down across growth markets, Southeast Asia being no exception with just 9 US$ 100M+ investment events in H1 2022.

Surging instead is the late growth stage, with deal activity in US$ 50-100M per deal range growing 3X+ year on year as late stage investors retreat from mega deals and shore up the finances of their portfolio companies.

• Surging Series B valuations

The fundraising run in 2019-2022 has expanded the AUM of most early-stage SEA VCs dramatically, shifting their erstwhile Series A focus towards US$ 10M+ deals and Series B opportunities. The same set of opportunities in H1 2022 attracted the attention of global late-stage investors looking to move upstream and even further away from quickly souring US$ 100M+ investments.

As a result, Series B valuations surged 50% in Southeast Asia, Series A valuations slowed their growth considerably. GPs sought safety in tech-adjacent deals, adding commodity traders, F&B franchises, and retail chains to their repertoire.

• Battle of narratives and search for the next growth story

The median Series B pre-money valuation in H1 2022 exceeded regional median exit valuation by a factor of 2.1x in Indonesia, hence investors have begun searching for the next regional growth story. 

H1 2022 saw the Philippines’ steady rise overtake Vietnam’s volatile market yet again, as the narratives of Vietnam’s “Next China” and the Philippines’ “Next Indonesia” are being tested against each other.

• Imbalances and contradictions abound

Thrusted into the 2022 slowdown from years of high capital availability, the regions’ many imbalances and contradictions have been thrown into sharp relief. 

The distribution of VC’s funding remains broadly disconnected from the economic power of underlying economies, with Malaysia and Thailand (with combined nominal GDP nearly equal that of Indonesia) receiving 20% of Indonesia venture funding.

Valuations continue to vary wildly, with a 6-8x gap between median pre-money valuations in the most and least funded markets across Series A and Series B. In at least Indonesia and Singapore (Vietnam is closing in), median Series B pre-money valuations met or exceeded regional median exit valuations. 

• Exit proceeds hit a high note

Between the crop of IPOs in H2 2021 and H1 2022’s robust trade sales, Southeast Asia has just seen US$5B of liquidity distributed to investors over 12 months, the strongest on record.

Encouragingly, the top quartile median exit valuation has continued its steady rise from under US$100M in 2018 to nearly US$ 0.5B in H1 2022, setting a new benchmark for the value of a well-built regional digital platform.

• Digital financial services remain key in the Southeast Asia market

Responsible for 75% of overall liquidity in H1 2022, digital financial services have absorbed nearly 50% of all SEA investments in the same period, up from just 8% in early 2019.

The sector’s vitality reflects rapid upgrades to payment infrastructure and regulations, a variety of bank charters available to tech companies, and the shift of focus by existing digital platforms as they leave the “super-app” thesis behind in favour of financial services origination and distribution.   

More insights

The Southeast Asia Tech Investment 2022 report is free – and you can obtain your copy here. 

For more insights into industry players and key events, such as Food Delivery Platforms in Southeast Asia 2022 and Off the Record – Web3’s Brutal Year, find our other reports here.