While Southeast Asia might not have been a top investment destination in the early 2000s, its substantial youthful and industrious population, rapid internet adoption and burgeoning financial services sector have attracted global investors in recent years. Seeking to participate in a market poised for significant transformation and growth, the region saw a notable rise in global investors steadily deploying capital into its private markets.

Jean Salata, Asia chairperson of Swedish investment firm EQT, describes Southeast Asia today as an exciting market entering its “golden period” on robust fundamentals.

For one, from a geopolitical standpoint, Southeast Asia has benefitted from the shift of attention away from China towards other markets in Asia. On the back of improving economic growth as well as strong efforts to attract foreign direct investments, Southeast Asian markets are now gaining more traction as a supply chain de-risking hub.

Furthermore, the region is seeing a wealth expansion and growth in consumer spending power, which fuels the emergence of successful high-growth startups. These companies, such as tech giants Grab, GoTo and Sea, have become role models for many homegrown entrepreneurs — subsequently attracting more investor attention, says Salata.

“Having those role models that people can look up to also unleashes a huge amount of entrepreneurial activity. I think the momentum is very positive in Southeast Asia and hence we hope to become more active in the region,” says Salata.

Formed in 1994, EQT now has a total AUM of more than US$240 billion ($327 billion) and is ranked one of the top three global private equity firms according to Private Equity International.

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To tap into the space and work with the region’s entrepreneurs, EQT has unveiled the inaugural EQT Impact Challenge for this region, which follows more than a decade of having a similar annual event in its home market.

Geographical differences aside, this series of challenges sets out to celebrate entrepreneurship and innovation. The challenge was born out of the firm’s passion for developing companies and its fundamental strive to make a positive impact through its investments.

The firm seeks startups and entrepreneurs with breakthrough solutions or innovation, focusing its search on those operating in the spaces of the planet (climate and nature) and humanity (health and equity). Most importantly, EQT is looking for startups and entrepreneurs who have the potential to create a large positive impact in the future, says Salata.

Participants will be competing for a EUR100,000 ($146,447) investment, courtesy of the EQT Foundation which provides risk capital to entrepreneurs building a cleaner and more inclusive tomorrow. On top of having a fundamentally sound and attractive business, aspiring winners will also need to effectively showcase their passion for driving impact, Salata notes.

“We want to provide a platform for those with a well thought-out business plan that addresses a real issue with great solutions and ideas. To ensure long-term sustainability, we design the challenge in a way that encourages the startups to stand on their own and develop independently over time,” he explains.

Sharing expertise via EQT

The EQT Impact Challenge comes at a time of a slowdown in startup funding, amid the landscape of rising interest rates and a high inflationary environment.

Despite supportive macroeconomic tailwinds, the region’s entrepreneurs have faced a difficult funding environment over the past few years as the volatile financial backdrop eroded the confidence of investors. According to S&P Global Market Intelligence and data from Preqin, global dry powder stood at a whopping US$2.49 trillion as of early July, up 11% over last December, incurring a very considerable opportunity cost of capital.

However, Salata says this does not mean there is a lack of quality deals in Southeast Asia. He adds that the region still boasts many interesting companies with innovative ideas at reasonable valuations. That said, certain entrepreneurs might require additional support in managing their business operations and preparing for expansion beyond a single market.

“Oftentimes, what is required is not just money but also expertise and know-how and investors like ourselves can help position the business for further funding and future growth. By offering assistance in crafting investor-friendly pitches, outlining clear business trajectories, showcasing past milestones as well as outlining strategies for value creation, we can significantly enhance entrepreneurs’ success in securing the next stage of capital,” he adds.

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Therefore, the EQT Impact Challenge is not solely focusing on cash deployment awards. The winner would enjoy access to EQT’s knowledge and operational assistance, enabling them to leverage the group’s extensive network and wealth of experience, given how EQT operates in more than 20 countries across the world. They can also take advantage of EQT’s portfolio of about 300 firms at different stages of their growth and development.

Furthermore, the winner of the challenge will receive 300 consulting hours from a professional services firm, which will be particularly valuable for their strategic planning and business development endeavours.

Harnessing the synergistic power of collaboration, the EQT Impact Challenge is co-organised with The Edge Singapore and E27. “At EQT, we believe in the boundless potential of Asia’s entrepreneurial spirit, which is a vital building block in growing economies. EQT Impact Challenge, in collaboration with The Edge Singapore and E27, stands as a testament to our passion for developing companies and commitment to nurturing innovation,” says Salata.

The Edge Singapore, a partner to this challenge, has been following the regional startup scene and profiling entrepreneurs as part of its overall coverage of regional business and investment news since the publication started in 2002. Chan Chao Peh, editor of The Edge Singapore, believes that it is now the time for the paper to be more actively involved in this field and not be a mere “passive” chronicler of this space. “In these transformative times, it’s imperative to join forces with visionaries who are steering the future with innovation and resilience. Our collaboration with EQT and E27 in this competition hopes to support and shine some much-deserved spotlight on some of the brightest minds in the industry.”

Accelerating Southeast Asia investments

EQT remains positive about Southeast Asia, highlighting the promising growth momentum. Commenting on the region’s startup ecosystem growth outlook, Salata recounts that while many internet companies had collapsed and ceased to exist after the bursting of the dot-com bubble, many others emerged from the crash with a slew of businesses that would never have been created if not for the massive growth in internet adoption at the time.

“I can sort of see this cycle happening in Southeast Asia, with the tremendous amount of money raised over the past five years. There was a lot of venture activity in the region, resulting in new venture funds and a handful of great successes. Despite this, many of the current highly-valued startups in the region have yet to fully mature and prove their worth.”

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To this end, Salata says the stakeholders in the region will have to exercise patience while Southeast Asian startup champions consolidate, demonstrate their capabilities and eventually provide exit avenues.

“I do not see signs of people losing interest in investing in Southeast Asia. From our standpoint, we are increasing our level of activity. We have been building our team here and looking at different ways we can tap into the deal flow. To cater to the opportunities in Southeast Asia, we are also thinking of strategies that tap into smaller deals,” he concludes.

Interested entrepreneurs can now apply to compete in the EQT Impact Challenge. Ideally in the seed stage, pre-series A startups will also be considered.

For more information on the EQT Impact Challenge, visit https://e27.co/eqt-impact-challenge/

Application period: Sept 12 to Oct 15

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The article is produced by The Edge Singapore, published by e27, and sponsored by EQT

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