SINGAPORE — Southeast Asia's technology start-ups had a combined valuation of $340 billion last year and that figure may jump more than threefold by 2025, according to Jungle Ventures.
Over the next four years, Jungle expects the region's tech start-ups to be collectively valued at $1 trillion.
In its calculations, the Southeast Asian venture capital firm looked at publicly available information on 31 start-ups with a minimum valuation of $250 million. It also made provisions to account for issues like many venture capital transactions not being publicly disclosed.
"I was a little bit surprised, but then also not," said Amit Anand, founding partner at Jungle Ventures. He told CNBC that the actual number could potentially be much bigger than $340 billion.
"We have done such back of the envelope calculation that it's not hard to imagine there's a lot more data that we are not looking at, in terms of the rounds that are either not announced or companies that are still under the radar," he said.
"If you look at the growth rate of the last 3 to 5 years in Southeast Asia, if it continues, which by all means it will, you're going to head to a trillion dollars even before 2025," Anand added.
Southeast Asia's potential
Southeast Asia is home to some 400 million internet users and 10% of them went online for the first time in 2020.
The internet economy in Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand — the largest economies in the region — is predicted to cross $300 billion by 2025, according to a commonly cited industry report from Google, Temasek Holdings and Bain & Company.
There is no dearth of funding options available to the region's start-ups as investors, including private equity, write large checks. Southeast Asian start-ups reportedly raised a record $6 billion in the first three months of the year.
I think there's a lot of appetite in IPO market.Amit AnandJungle Ventures
Anand explained that investors are looking for "accelerated growth" in their investments compared with what they received from other bricks-and-mortar industries.
The region's start-up environment has what he described as a "last mover advantage" — companies have the benefit of learning from the successes and failures of their peers in the U.S., China and India.
Exit strategies
A number of the region's prominent start-ups are in the process of going public, and some of them have already announced blockbuster initial public offering plans.
Ride-hailing giant Grab announced in April that it would go public through a SPAC merger valued at $39.6 billion, one of the largest ever blank-check deals. The newly merged Indonesian tech giant, GoTo Group, is also planning to go public soon.
Singapore-based real estate firm PropertyGuru is also reportedly set to go public through a SPAC merger while Indonesian e-commerce company Bukalapak debuted on Friday.
Going public via blank-check companies would open the start-ups to greater scrutiny from investors — especially those in the U.S., according to Michael Lints, a partner at Golden Gate Ventures.
"I think they have been a bit disappointed by where the SPAC market has led them, so, they are just going to be more critical of the target companies that are going to list now," he told CNBC.
Founders typically either sell their start-up to a bigger company or take them public through an IPO, a process known as an "exit." Mega SPAC deals, like the one announced by Grab, are still comparatively uncommon.
Lints explained that the exit values of most start-ups in the region are still below $1 billion, and most of them are done through mergers and acquisitions.
Appetite for IPOs
Jungle's Anand, who is an ardent supporter of start-ups going public early, said that he is encouraging more of the firm's portfolio companies in the region to do IPOs.
"I think there's a lot of appetite in the IPO market," he said, adding that investors are looking for new companies, industries and technologies that can generate extra returns from the market.
Anand explained that local stock markets do not yet have the capacity to handle mega IPOs, most of which are expected to list in the U.S. But smaller floats under $5 billion could benefit from listing in domestic markets, he said, adding the region's ultimate aim should be to have dual-listing IPOs.
"Governments have a lot of work to do before we get there but that's going to unlock another level of global liquidity," he said.
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