SEA’s tech market value could grow to $1.2t in 10 years, predicts Asia Partners

In 2019, growth equity firm Asia Partners, in its yearly analysis of Southeast Asia’s tech potential, forecasted that the region’s market value of tech companies would soar by a mind-boggling US$425 billion – from a starting point of US$86 billion – within a decade.

It turns out that this prediction may not even be bold enough. Two years in, the region is already at the halfway mark of meeting that target.

Asia Partners is now revising its prediction and expects a growth of US$750 billion (or US$770 billion if you include figures from telcos) to US$1.2 trillion by 2031.

What accounts for this heightened optimism? To appreciate this fully, you can dive into Asia Partners’ 2022 report embedded below or watch Nick Nash, co-founder and managing partner of Asia Partners, break it down. You can also read this quick summary first.

A growing herd of giants

Sea Ltd. is the biggest contributor to the sharp rise, with its market value soaring from US$17.6 billion in December 2019 to US$160 billion today.

It’s not an isolated trend: A slate of IPOs, both completed and in the pipeline, are pushing valuations upward.

Southeast Asia’s stable of tech unicorns has multiplied as well, reflecting a global pattern. From 15 in 2019, the figure now stands at 39. The region reached this milestone eight years ahead of Asia Partners’ initial projections.

While overvalued equity markets across the globe may explain part of the trend, Asia Partners’ projections in fact show that Southeast Asia’s tech market value, as a percentage of gross domestic product, lags behind India, China, and the US. This indicates room for growth.

Macroeconomic trends aside, the firm observes that Southeast Asia’s tech firms have more ecosystem support than ever before.

Talent gap shrinks

Looking at Southeast Asia’s talent pool, Asia Partners revealed some interesting results.

The growth equity firm, in its analysis of LinkedIn profiles, found that 25% of people on the social network that have “Asia Pacific” (or equivalent keywords) in their job titles live in Singapore – more than in any other locale.

The percentage of Singapore’s workforce holding C-level roles and those with programming or big data skill sets is also well above average compared to the rest of Southeast Asia.

That said, Singapore’s neighbors also have a lot to boast about.

Across the region, the absolute number of LinkedIn profiles showing data science skill sets has grown by the thousands in just one year.

LinkedIn profiles showing Python or Javascript skills, meanwhile, grew by 72,000 in the same period, with Indonesia now exceeding Singapore in absolute numbers.

The quality of founders and angel investors has improved, too, judging by the well-documented rise of alumni networks from the region’s large tech firms that have gone on to launch, lead, or invest in startups.

Growth in series C and D deals

Another marker for ecosystem maturity is the rise in funding rounds worth between US$20 million to US$100 million, which is typical for series C and D stages.

For startups, these stages are crucial: It is during this time that they go from finding loyal customers to dominating their respective fields.

Southeast Asia has certainly grown in this area, with the total dollar value of series C and D deals as a percentage of GDP creeping up from 2019 to this year.

That said, the region continues to lag behind China by the same metric, indicating that startups at this stage can use more support in the form of capital.

Lessons across time and space

Predictions, by their nature, are sometimes bound to be off the mark. A new Covid-19 variant is threatening to break out, and a plan by the US to cut down on its bond purchases could cool public markets.

Still, the Asia Partners report offers lessons gleaned from several economic cycles.

For example, dozens of firms across Asia with over US$500 million in market value proved resilient in the 2008 global financial crisis, hitting above 30% in internal rate of return over three years.

A company’s ability to spend money efficiently remains a key survival skill: Almost 70% of the world’s most successful tech companies spent less than US$100 million to achieve a cash flow break-even point, the Asia Partners report contends.

In periods of capital abundance, the ability to suss out these companies is an important tool in any investor’s arsenal.

You also can download the full report and learn more about Asia Partners here.