In October 2023, venture capital firm 500 Global released a report on the global internet industry. It revealed notable information that included the prospect of the Southeast Asian (SEA) tech startup ecosystem in the near future.
According to the report, Singapore (31.82 per cent) is the only Rise Economy that has ranked higher than the US (12.79 per cent) in the total value of tech companies valued at US$1 billion and above by nominal GDP.
In fact, in 2022, Singapore (2.12 per cent) and Israel (1.95 per cent) were the only two Rise Economies with venture penetration higher than that in the US (0.99 per cent) by nominal GDP.
Responding to this information, 500 Global Partner Saemin Ahn revealed the potential challenges that the SEA startup ecosystem might face in the next years as it attempts to grow its startups further.
“On the startup side, you’ll need founders that can build more traditionally durable companies who understand how to lead their team to drive profitability and innovation,” Ahn said.
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“On the investor side, you’ll need more sophisticated investors, especially at the growth stage, that can guide companies that may have their internal mechanics worked out but require more pragmatic advice on successful business models.”
When asked about any unique opportunity in SEA, Ahn put emphasis on the rise of agritech. How can local and global investors tap into these opportunities?
“I think SEA has the great benefit of having industry-leading business models and management teams in the field of agritech. It is a vertical we are very bullish about, not only because of the macros but also from the business momentum our founders are gaining and observing.”
Business as usual for 500 Global
On the matter of funding winter that has “cast a shadow” in the global startup ecosystem for a while now, 500 Global believes that this is a time of opportunity that allows investors to identify undervalued startups with strong fundamentals.
As pressure for startups to build a sustainable business heightens, how will this funding winter change how the startup ecosystem operates?
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“It will make companies more resilient. The cycle is inevitable and leads to different vintages of startups growing and maturing with unique strengths and weaknesses,” Ahn said.
Another highlight of the report is the emphasis on the more globalised nature of startup ecosystems.
“While global startup activity is becoming more global, with more than 100 countries having active startup ecosystems, global unicorn activity is also becoming more global, with more than 50 countries having minted at least one unicorn,” the report stated.
“While the Rise 30 are nascent venture capital markets with an increasing venture funding gap, they are expected to surpass each of the US and China by GDP by 2027.”
As startup activity becomes more global, what policy can help support this development?
“I think policymakers can be more effective by looking regionally,” Ahn said.
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“For instance, improving the tax code in Indonesia for overseas and local talent while enabling more work passes across SEA will set the region at parity with great tech hubs around the world.”
For 500 Global itself, changes in global startup trends do not affect its strategy significantly, with Ahn stating that things will be “business as usual.”
“We will still continue to look for great founders and companies regardless of where they are based, then work tirelessly to support their growth.”
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