For many years, there has been countless discussions and reports about the massive potential that the Southeast Asian (SEA) startup ecosystem has. One of the most outstanding of such reports is the Google Temasek Bain report which stated that the region’s internet economy is set to hit US$240 billion by 2025.
The general outlook of the future of this region has always been promising. But 2020 is the year where we can finally see that potential manifest –even during a global health crisis.
In August, at the height of the COVID-19 pandemic in major markets in SEA, global SaaS platform Intuit announced that it has entered an agreement to acquire TradeGecko, the Singapore-based inventory and order management platform that aims to ease omnichannel commerce for small businesses.
Financial details of the acquisition were not announced, but it was expected to close in September. The deal was the first Intuit had made in SEA, and one of the few a US-based tech giant had made in the region.
There are many reasons why this acquisition is outstanding. Yes, there is the fact that it happens at a time where the ecosystem is struggling to continue surviving. But apart from that, the acquisition is a manifestation of the potential of the SEA tech ecosystem.
Or we can say, a promise that we manage to deliver.
Acknowledging our place in the world
To discuss the acquisition, e27 sits down with David Gowdey, Managing Partner at Jungle Ventures, the VC firm who invested in the company in its pre-Series A funding round.
He begins by noting the two different approaches that SaaS companies in SEA tend to take in developing and marketing their solutions. There are companies that build products in their local language, aiming for a very specific target audience. But then there are companies with “global ambitions”.
“So the software that they’re building could be used by companies all over the world … and those businesses are very challenging because you’re not just competing against local competitors. You’re competing against companies in the US or China or anywhere else in the world that could be building software in that same space,” Gowdey explains.
But with great challenge comes a great opportunity.
“If you look at the different emerging economies, there are already some great software that was developed in Europe or Australia, but we haven’t had a large software company here that’s been able to get on the radar of a global software giant [until this acquisition],” Gowdey says.
“I think it adds a huge amount of credibility to founders in this part of the world that they can build a software that is globally best in class, and that will attract global buyers into it,” he continues.
How the pandemic makes it easier
Recently, there has been more investment coming for companies that are enabling digital transformation for conventional businesses, from SMEs to state-owned enterprises. It seems like enabling digital transformation is the key to win a pandemic-ridden world –perhaps beyond.
Also Read: [Updated] Intuit acquires TradeGecko to further strengthen its accounting platform QuickBooks
This is something that Gowdey acknowledges.
“If you think about the pandemic, there were small businesses that had to shut down their retail locations and move a lot of their sales online. An inventory management system that can allow small businesses to manage their inventory and orders effectively, it helps them digitise their businesses. It also creates a lot of operational efficiency within those SMEs,” he elaborates.
“So, I think part of the rationale [of the acquisition] has to be the pandemic and the shifts that a lot of families were making … how they can make that transition much easier,” he concludes.
In fact, this urgency for digital transformation might just be the push that Intuit needed to seal the deal with TradeGecko.
What is next for SEA and SV
In a statement to e27, Intuit spokesperson wrote that the company does not comment on any possible future plans or considerations related to company acquisitions.
But when asked about the reason that has drawn them to acquire a SaaS platform in SEA, the company wrote: “Intuit’s mission is to power prosperity around the world. We are always looking for opportunities to help our customers succeed and grow in an effort to fulfil our mission.”
There are certainly many ways to interpret the statement. But my take is that this acquisition is set to help Intuit in manifesting its mission; so there is always the possibility that it will not be the last.
In a recent webinar episode with e27, leading startup investors such as Paul Meyers and Jussi Salovaara highlights the rise of M&A and strategic acquisitions during the pandemic.
There is a great likelihood that these acquisitions will be by US-based tech giants. Why?
In this contributed post, Kyle Kling pointed out why global tech investors should be looking to invest in SEA, even during a pandemic. He brought an example of Indonesia, the largest SEA market, and the fact that it now has six unicorns and tax policy to encourage startup investments.
Also Read: SaaS inventory management platform TradeGecko raises US$10M from TNB Aura, others
“For a country that is home to 267 million people, of which at least 50 million are in the growing middle-class with rising discretionary incomes, the hunt for the next Indonesian unicorn is on. American VCs can bring their expertise and best practices to play. In Europe, Africa, South Asia, South America and Asia Pacific, Indonesia’s story is repeated, with slight variations,” he writes.
We feel that these reasons could also be the consideration for US-based tech giants to get into the market.
So how does the year 2021 will look like for SEA startup ecosystem? It seems like we can get a visualisation of it already.
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Image Credit: Mario Gogh on Unsplash
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