Amid high volatility and uncertainty in global markets, Southeast Asian venture capital (VC) firms reported record fundraising performance in the first half of the year, finds the latest report by DealStreetAsia – DATA VANTAGE.
Local VCs closed 23 funds to raise an impressive $3.03 billion in the first six months of this year, surpassing the capital raised in the whole of 2021, according to SE Asia’s VC Funds: H1 2022 Review.
The report, which also tracked new capital raised within a specific period, excluding money secured previously within a fund’s lifetime, found that the region recorded 35 VC fundraising milestones, including 13 interim closes within the Jan-June period, making it the most active semester ever.
The first half of the year saw nine first-time funds hold their final close. This compares to seven debut funds closed in the whole of last year and five in 2020.
Delayed impact
The above metrics lend support to DATA VANTAGE‘s conviction at the start of the year that the global liquidity tightening, rising inflation and recessionary pressure would have a delayed impact on the region.
But Southeast Asia is not immune to global headwinds, and things are expected to get worse before they get better, according to fund managers.
“It’s a fundraising winter, so it’s harder to raise capital today for sure. From companies to funds to IPOs, there’s a lot more caution today,” said Finian Tan, founder and chairman of Vickers Venture Partners. He added that the environment is unlikely to get better during the rest of the year.
Vertex Ventures managing partner Joo Hock Chua said it is natural to see a “flight to quality” in a recessionary environment.
“The current concern is that VCs that had marked up their funds due to paper valuations may not be able to deliver cash returns at the same level,” Chua said. However, he added, funds that have demonstrated good performance, particularly cash-on-cash returns, will continue to attract interest from LPs.
Specialisation matters
Given the challenging macro environment, global LPs are sticking with regional VCs with proven performance, particularly those with a strong presence in markets that benefit from long-term megatrends such as favourable demographics, growing middle income, and rapid digitalisation.
This explains why prominent VCs in Indonesia and Vietnam—these include AC Ventures, Alpha JWC and East Ventures in Indonesia, and ThinkZone Ventures and Do Ventures in Vietnam—have had a good run in terms of fundraising in the last six to twelve months.
“I believe there continues to be consistency in what LPs are looking for across cycles, which includes a strong leadership team, demonstrated track record, ability to create value, strong governance, commitment to best practices, as well as access to attractive co-investment opportunities,” said East Ventures managing partner Roderick Purwana.
Pandju Sjahrir, the founding partner of AC Ventures, confirmed that LPs had been “doubling down” on major Indonesian VCs.
“Small players—those with $100 million and below need to specialise., It can be ESG, fintech or something else. If you don’t specialise, you cannot be in the game,” he advised.
SE Asia’s VC Funds: H1 2022 Review has extensive data on:
- Fundraising by Southeast Asian VCs, including first-time GPs
- Performance by VCs in different markets of SE Asia
- Fundraising by global VCs with SE Asia allocations
- Funds currently in the market
- Perspectives from leading SE Asian VCs