Recession Run: Antler to double funding deals

The funding winter is here. News of layoffs and troubles in startups have been cropping up. In this Q&A series, we talk to Southeast Asia’s investors to suss out what opportunities they see, what strategies they’re implementing, and what areas of investment they’re looking at in the next few months.

As we enter the economic downturn, a key question on people’s minds is: Which businesses or sectors are resilient to the recession and are able to survive the headwinds? The answer to that lies in capital requirements of the sector and the time to reach profitability, according to Jussi Salovaara, co-founder and managing partner for Asia at Antler.

Antler co-founder and managing partner for Asia Jussi Salovaara / Photo credit: Antler

“Grab is of course a big example of how an IPO was supposed to be a fantastic event for the whole startup ecosystem in Southeast Asia, and it suddenly turned sour. It’s driving investors out of the region, as people see that as a very bad sign for the exit,” he tells Tech in Asia.

Besides this, a business model such as quick commerce is not going to be sustainable and is “going to crash and burn,” he says. On the other hand, Salovaara sees that businesses in the SaaS and B2B software infrastructure sectors can withstand the recession.

Here are more insights from Salovaara on the industries he believes are resilient to the macroeconomic headwinds, as well as Antler’s investment plans in Southeast Asia. He also offers his advice for founders facing challenges in the current market downturn.

Are there any particular tech startup sectors that will be the most or least affected by the current economic headwinds?

Salovaara: For the ones that are most affected, it’s any sector with heavy capital requirements. As seen in Grab’s case, the exit process has traditionally been a somewhat challenging part of Southeast Asia.

Anything where you need to raise a meaningful amount of capital down the line, it will drive investors away during a downturn. Investors are worried about a company’s ability to raise in a market environment like this. Rather than taking a sector-specific lens, it’s more the nature of the business model that is going to be the determining factor.

On the other hand, if you have businesses that can achieve profitability fast on a unit level, those are startups that are going to be the relative leaders. If you have a very healthy economics from the beginning, it’s going to give you more relevance in the eyes of an investor.

Six months ago, I was publicly criticizing the business model of quick commerce as something that is not going to be sustainable, especially in Southeast Asia. That is exactly the type of business that is absolutely going to crash and burn. Most of them have already started crashing and burning, because they have such insane capital requirements and the unit economics are not good.

Photo credit: Antler

Are SaaS or B2B infrastructure startups recession-proof?