More VCs are vying for Southeast Asia. Here’s how they can compete

By some estimates on PitchBook, venture capital dry powder has increased up to 11x in the past six years in Southeast Asia.

The amount of competition has risen at all levels intensely as large internationally renowned investors (Naspers, Founders Fund, GGV Capital, Vulcan Capital, etc.) focus on the region, while prominent local firms and founders either set up (Tanglin Venture Partners, Asia Partners, Insignia, etc.) or double down with larger funds (Strive, Vickers, Golden Gate Ventures, Openspace, etc.).

I spent the last nine months traveling across Southeast Asia, Europe, and the Bay Area, talking to investors to understand where we are at and how venture funds themselves are transforming all over the world to cope with the increase in players.

How will venture fund strategies adapt to generate above-market returns?

Funds fundamentally aim to allocate capital to the best-performing companies. Investors have three options to outperform the competition: add value, source better, or build it.

I looked into what the different factors were and which funds were playing in each strategy, then broke them down below.

Community creation

The name of the VC game is information asymmetry: Who is building the best startups in stealth mode? Where are the best would-be entrepreneurs? How do funds become the first that founders think of when raising money?

Investment firms build communities that potential and current entrepreneurs turn to to find like-minded people and support. In exchange, these communities are used as avenues for generating potential investment leads, as well as to build the firm’s reputation as a thought leader in the field.

Spark Capital does this with Spark Sessions, and CRV uses its Accelerated Slack group – which is mainly composed of undergraduates – to get information on new consumer trends among Generation Z.

Venture building

If you can’t find it, build it. That has been the attitude of some VCs who hold a number of important factors for creating a highly successful company: access to talent, capital, and an understanding of what needs to be built.

Breaking down value add

Capital value add

Non-capital value add