Middle Eastern investors fill vacuum left by SoftBank in SEA venture scene

Some global investors who missed the Southeast Asian venture boom are now quietly betting on the region’s startups, attracted by saner valuations and a chance to tap into a rising market.

The step-up in activity is rippling across the world, from Middle East funds to South Korean companies. This comes as heavyweight foreign investors – who were active during the boom – have stopped or slowed down investments amid macroeconomic pains.

Image credit: Timmy Loen

Southeast Asia experienced rapid growth from 2019 to 2021 as international tech investors rushed in, contributing to around US$41 billion poured into the region, as per Preqin data.

Their presence helped drive an explosive rise in valuations, but recently, VC funding has struggled to match the same heights.

Average pre-money valuations at series A and B stages were down 34% and 42% in the first half of 2023 from the same period a year earlier, a study by private market data platform Alternatives.pe indicates.

This prompted new players to enter or increase their exposure to Southeast Asia amid the lull.

“These are investors who missed the likes of Sea, Grab, and GoTo,” says Roshan Raj Behera, a partner at Redseer Strategy Consultants. “They missed the entire wave but saw that there are big companies coming out of Southeast Asia… and found that current market conditions are good for a bigger presence here.”

Joel Shen, a partner at law firm Withersworldwide, is seeing more limited partners invest directly in startups instead of only through VC funds.

“[Many] would now have developed a better understanding of the region and, over the years, developed a confidence to make direct investments,” says Shen.

Middle Eastern investors have emerged in greater numbers over the past two years. Gulf-based funds participated in 59 deals from 2022 to 2023, up from seven deals in 2018 to 2019, data from Refinitiv shows.

Among them, sovereign wealth funds were a major driver of investments. The Qatar Investment Authority led the US$150 million equity financing round of mixed martial arts promoter One Championship, and last year, it backed Malaysian car ecommerce unicorn Carsome.

See also: Mapping Middle Eastern investors fueling Asian tech firms

Meanwhile, other Middle East investors are also expanding to the region. Aramco Ventures, a unit of oil giant Saudi Aramco, made its first Southeast Asia investment when it led a US$10 million round in Singapore-based sustainable tech startup Redex in October.

Late-stage vacuum