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A look at SEA’s startup scene for next decade: “1.5 gen” entrepreneurs, IPO boom, mega-mergers

Golden Gate Ventures, a venture capital fund in Southeast Asia founded by Silicon Valley natives, marked its 10th anniversary yesterday (July 15) with the launch of a special-edition ‘Southeast Asia Startup Ecosystem 2.0’ report.

It delves into the developments that have shaped the startup ecosystem in the region over the last decade, as well as predictions for the next decade.

“The ‘Southeast Asia Ecosystem 2.0’ report traces the meteoric rise of the region to become a formidable force on the global stage in the last decade and what the next 10 years will bring. This in many ways mirrors the Golden Gate Ventures story,” said Vinnie Lauria, founding partner at Golden Gate Ventures.

In the last decade, the VC firm has launched four funds and has been part of the journey of their portfolio companies becoming unicorns.

SEA startup ecosystem 2.0

The SEA startup scene grew the fastest in terms of capital inflow in the last decade, with total capital invested per annum increasing 50 times from US$130 million in 2010 to US$7.7 billion in 2020.

Mega deals (>US$100M and) and later-stage (C and above) have been driving up total capital deployed / Image Credit: Golden Gate Ventures

The close of the decade also culminated in 15 mega-deals of over US$100 million each, accounting for over half of the total capital invested. Food and transportation, fintech and logistics were amongst the verticals that drew the most investments.

Meanwhile, the top three verticals with the highest number of startups with more than US$50 million financing in the past 10 years are e-commerce, fintech and entertainment and media.

generation 1.5 and 2.0 entrepreneurs
Some “1.5 and 2nd generation entrepreneurs” / Image Credit: Golden Gate Ventures

The last decade also saw the emergence of the “1.5 and 2nd generation entrepreneurs”.

First generation entrepreneurs typically came from corporates, as there was no existing startup pool, explained Golden Gate Ventures.

Post-2015 however, mega rounds raised by Grab, Gojek and Rocket Internet companies uplifted funding across the stages, encouraging diversity in terms of culture, background and expertise, among the new generation of entrepreneurs.

This sparked the rise of “Generation 1.5” — former senior employees of high-growth tech companies. As it takes an average 8.3 years from start to exit, we are on the precipice of seeing Generation 2.0 take off.

What’s also worth noting is that the path to success has been Indonesia or regional. Indonesia has been the market requirement for about 75 per cent of the unicorns in SEA, while less than half of the unicorns target just one market.

Market coverage by 15 unicorns in SEA
Market coverage by 15 unicorns in SEA / Image Credit: Golden Gate Ventures

Unicorns in SEA as of 2021 include Bigo Live, Bukalapak, Carro, Gojek, Grab, Lazada, OVO, Patsnap, Razer, Sea Group, Tokopedia, Traveloka, Trax, VNG and VNPay.

What the next decade holds for SEA

With a continued rise in e-commerce adoption, mixed with a growing GDP capita over the next decade, social commerce is predicted to rise as a percentage of overall e-commerce, similar to what has evolved in China over the past decade.

It will also be bumper years for medtech to come. In a post-pandemic world, medtech will be a rising trend as a means to provide healthcare access for a large demographic and improve infrastructure challenges in SEA.

Medtech fundraising in SEA is expected to cross US$1.5 billion by 2025. These industries include healthcare, home healthcare, medtech AI, biotechnology, medtech information systems and the like.

Despite the maturity of the fintech ecosystem in more developed markets, ASEAN countries spot further upside potential with its growing internet population and observably unbanked consumer base, which present an attractive opportunity for e-wallets and neobanks.

Fintech landscape of ASEAN vs mature markets
Fintech landscape of ASEAN vs mature markets / Image Credit: Golden Gate Ventures

While digital wallets presently capture a modest market share of payments across the board, the region is expected to leapfrog in digital infrastructure and for fintech-only unicorns to emerge.

Lastly, there will be an exponential uptick in B2B SaaS startups. Similar to the United States, B2B and B2B2C startups will capture a greater share of the total capital deployed, an average of 40 per cent by 2030, with US$30 billion invested into B2B over the next decade.

In addition to Singapore and Indonesia, Golden Gate Ventures predict that Vietnam will emerge in 2022 as a major startup ecosystem in SEA.

It has already solidified its growing prominence, and Golden Gate Ventures expect to see stronger signs of SEA-focused VC funds putting more effort into early-stage investments in Vietnam.

ipo boom sea
Anticipated exits include PropertyGuru, Grab, Carro, Carousell / Image Credit: Golden Gate Ventures

The next decade will also see a boom for IPOs. The number of IPOs in SEA is expected to cross 300 by 2030, as more local startups seek an exit in domestic public markets.

merger sea
More mega-merger roll-ups to come / Image Credit: Golden Gate Ventures

Finally, as large tech companies vie for the top spot in their vertical, Golden Gate Ventures are betting on mega-mergers in SEA.

The SEA startup ecosystem will enter a new phase of maturity in the next decade marked by a sharp rise in IPOs in the region and more mega-merger rollups. Founders will have to operate at a much higher level than before as the pace of growth in SEA is going to be faster in the next decade than the last.

Startups will need to be much more polished and scale faster. VC firms will likewise need to offer much more than funding, experience and connections. It will be an ecosystem on speed.

– Michael Lints, partner at Golden Gate Ventures

Featured Image Credit: Grab / Reuters / Mashable


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