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Eric Tan · · 7 min readExit landscape in SEA: What startups need to understand before raising external funds
Photo credit: Pexels.
Startup founders need to understand the exit landscape from the perspective of financial investors—venture capitals (VCs) or private equity (PE) funds. Recently, Garena, South East Asia’s most valuable tech startup, was reported to appoint Goldman Sachs for a US$1 billion IPO in the US, the largest IPO ever from a SEA-based tech startup.
So, how does the exit landscape look like in the region?
SEA vs global tech public market
According to a report by Tech in Asia, there have only been 13 tech IPOs (consumer facing, web 2.0 type) since 2001 from SEA startups. However, other than Migme, these are all mainly bootstrapped startups, which unfortunately has been facing much criticism from the media for its poor performance.
In other words, there haven’t been any home run style exits for financial investors so far in the region. In most cases, IPO in SEA is just a modest fundraising event.
Photo credit: State of South East Asia Tech Startup Ecosystem in 2016.
Global Trending IPO in 2016. Photo credit: EY.
As shown above, it has been challenging for SEA startups in the technology, media, and telecommunications (TMT) sector to raise funds. A report by Deloitte showed that the TMT sector is ranked as second to the lowest in both deal value (US$371 million) and IPO count (29) from 2014 to 2016 in the region. This is in contrast with how TMT performed globally in comparison to its peers in other sectors in 2016.
On the other hand, according to EY, tech IPO scored 185 deals (US$12.7 billion) against 171 deals (US$18.4 billion) in the industrials sector and 132 deals (US$13.5 billion) in healthcare. This is a very telling sign that SEA investors have considerably less appetite for technology businesses in comparison to their European and American counterparts.
Therefore, a huge tech IPO is unlikely to happen in the near term as investors’ confidence in the tech businesses is still relatively low compared to more traditional sectors, such as real estate and energy and resources.
A flourishing private tech market in SEA
Exit plans?
Swing for home run
It’s for sale!
Milking the cash cow
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