Catcha Group’s 8 predictions for the SEA tech scene in the next 2 years

Photo credit: Fancy Crave

2017 ended with a bang: Uber closed a major deal with Softbank; fake news dominated social media; bitcoin and cryptocurrencies went mainstream; and initial coin offerings surpassed early-stage VC funding for internet companies.

With all that’s been happening globally, what’s in store for the Southeast Asian (SEA) tech scene?

We spent some time reflecting on our learnings from the past year and have pulled together a report to analyze the next stages in the evolution of the region’s tech ecosystem as we see it. Here are our predictions for the SEA tech scene over the next 24 months:

1. By the end of 2019, SEA will have 460m internet users and $10b raised in private tech funding

Over the last 18 years, we have seen SEA internet users exceeding that of major countries such as Japan, UK, and Russia. 2017 marked a pivotal year, where the number of internet users in SEA exceeded that of the US.

At the current growth rate, we forecast that by the end of 2019, we will have 460 million internet users in SEA, creating a massive addressable market that will drive private tech funding from both regional and foreign investors.

2. First decacorns will emerge from SEA

The SEA tech ecosystem in 2017 is interestingly similar to that of China in 2008. SEA had 330 million internet users to China’s 300 million, while the combined valuation of the leading tech companies in both regions stood at about US$22 billion, respectively. (China: Baidu, Alibaba, and Tencent. SEA: Grab, Go-Jek, Razer, Sea Group, Tokopedia, Traveloka, and iflix.)

An extrapolation of SEA internet users—assuming recent growth rates—puts the number at 460 million users for 2019. This is similar to that of China in 2010 (459 million users).

By using China as a proxy and inferring a relationship between the number of internet users and the valuation of the leading tech companies, we estimate that the combined valuation of the companies mentioned above could potentially reach up to US$86.5 billion. This implies that the average valuation of each could reach up to US$12.4 billion.

If this assumption holds true, it would give birth to the region’s first group of decacorns.

3. A new unicorn will be built in less than 3 years from launch

In the early 2010s, Rocket Internet’s entrance into SEA brought in an abundance of capital and talent. At the same time, Amazon Web Services (AWS) started offering its services in SEA and lowered the cost of “starting up” significantly. This had a positive knock-on effect on the number of early-stage companies as well as the amount of funding in the region.