Fundraising by Southeast Asia’s privately held companies dipped to a seven-quarter low in the July-September period amid a worsening macroeconomic environment, finds the latest report by DealStreetAsia – DATA VANTAGE.
Startups in the region secured $3.72 billion in venture capital funding in the third quarter, down 22% from the previous quarter and 36.4% year on year. On the other hand, deal volume increased 11% quarter-on-quarter to 277 during the period, according to SE Asia Deal Review: Q3 2022.
Significant deals clocked in Q3 include Alibaba’s $912.5 million investment in Lazada and Thai food delivery startup LINE MAN Wongnai’s $265 million Series B round, which ushered it into the region’s unicorn club.
Capital raised in the first nine months of the year stood at $12.68 billion, a 16.4% drop year-on-year, while the deal count was up 19.6% at 837 transactions.
Fund managers we spoke to said they expect the slowdown in VC funding to persist for the remainder of the year.
Strong demand for credit
With valuations under pressure, startups are increasingly opting to secure financing from banks and private credit players to prevent down rounds.
Venture-backed startups inked at least 15 debt financing deals in the third quarter, raising $819 million in total. Prominent deals during the period include Traveloka’s $300 million financing from BlackRock and other investors, Atome’s $100 million debt facility, and Vietnamese ride-hailer Be Group’s $60 million loan from Deutsche Bank.
Overall, venture-backed companies clocked 42 debt financing deals with a total value of $1.54 billion in the first nine months. This compares to 22 deals worth $2.48 billion in the same period last year.
Valuation correction continues
Similar to what we saw in the second quarter, Series B and C deal sizes continued to remain under pressure in Q3. Median values for these rounds declined as a result of a tougher fundraising environment, a pullback by crossover funds, an ongoing valuation recalibration, and growing investor prudence.
Seed and Series A deals, on the other hand, continued their upward trajectory. However, early-stage deals could also come under pressure as wary investors may prefer backing winners in their existing portfolio over new, unfamiliar bets.
Singapore remains resilient, fintech sees dip
Singapore accounted for 64% of all venture funding raised in the third quarter, as homegrown startups clocked 147 deals – the second-highest quarterly volume in two years – during the period.
Fintech maintained its position as the most active business vertical in Q3 but saw total proceeds plunge sharply due to a lack of big-ticket deals. Capital raised by fintech startups nosedived to $717 million in July-Sept from $2.19 billion in Q2 this year and $2.35 billion in the third quarter of last year.
The SE Asia Deal Review: Q3 2022 report covers:
- Funding trends across quarters, sectors, and countries
- Deal volume and value across funding stages
- Median and average deal value across stages
- Investor perspectives, and more.
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