‘Some founders will lose their pants, but that’s healthy’ – top VCs on funding slump

Photo credit: john6863373 / 123RF.

Tech in Asia data for Southeast Asia shows a four-year low in the number of deals from seed stage to series C in this year’s first quarter, continuing the reality check of 2016. Ecommerce deals have fallen off the most in the last three quarters, and the much-touted fintech is yet to take off in deal-making.

Top investors from the region weighed in on what this means for Southeast Asia’s startup scene yesterday, in a panel discussion with Tech in Asia managing editor Terence Lee at our Singapore conference. And the consensus is that the hard times are good for the ecosystem in many ways.

India today is almost wiped out, and Southeast Asia is going in the same direction.

“India today is almost wiped out, and Southeast Asia is going in the same direction,” says Vertex Ventures CEO Kee Lock Chua, referring to a series A funding crunch and drop in valuations. “Some people will lose their shirts or even pants.”

But he sees the bright side of it. Gone are the “crazy valuations” of a hot market and gold rush for short-term gains. It’s a time to remind founders they’re building a company over seven to ten years. And, “when times are bad, founders listen.”

Rakuten Ventures MD Saemin Ahn sees a maturing of the ecosystem as startups build their product before reaching out for funding. “Founders are getting more knowledgeable.”

From left – Kee Lock Chua of Vertex Ventures, Pieter Kemps of Sequoia Capital, Saemin Ahn of Rakuten Ventures, Hian Goh of NSI Ventures, and Terence Lee of Tech in Asia at the ongoing TIA Singapore conference. Photo credit: Tech in Asia.

See: What’s killing Indian startups – new study finds out

Deep tech

NSI Ventures partner Hian Goh points out from the Tech in Asia data that even though the number of deals is down, the average deal value is holding up. This tells him that better companies are getting funded now with a good runway. “When the noise goes down, the signal gets stronger.”

For a larger fund, a domestic business may not be sufficient because it’s hard to scale in any Southeast Asian market.

If ecommerce and fintech are getting saturated with big players, would investors want to see new opportunities to invest in deep tech? And is Southeast Asia ready to go there, asks Lee.

Sequoia Capital principal Pieter Kemps sees some evidence of it.

Fragmented market