The exit landscape in Southeast Asia has seen a huge rise in the recent past and if you consider the current trends, it will grow higher with every year. A report by Golden Ventures suggests a huge rise in the startup exits in the region with a resounding 700 plus startup exits expected for the forecast period of 2023-2025.
Over the years there has been a number of tech startups encouraging the exit landscape scene in Southeast Asia. But, the recent outbreak of COVID-19 has changed the exit landscape with its restrictive access to business facilities and workforce.
Amongst the odds of supply chain restrictions and low workforce efficiency, the services sector is the worst hit with a 28.51 per cent impact due to COVID-19 hit provinces in China. The question again arises, that will the strong exit landscape of Southeast Asia backed up by the tech-based service sector sustain the momentum in a pandemic Corona hit economy?
Let us first understand the impact of three pillars of startup exits in Southeast Asia.
Acquisitions
As far as mergers and acquisitions are concerned, for Southeast Asia, local M&A over the global startups has been a resounding trend.
But, the terms of mergers and offers for acquisitions can rapidly change with the recent downfall of the global market following the outbreak.
With over 100,000 cases and 4,000 deaths, it has caused a panic situation, creating a huge downfall across global markets. M&A depends on largely market trends and a startup’s potential growth cap, which is constantly plunging due to uncertain supplies, restrictive demand, and limited workforce efficiency.
Also Read: Coronavirus is driving the world into an economic slump. How to cope up?
Currently, most of the intermediate product supplies are dependent on the Chinese supply for Southeast markets. So, the impact on the SEA markets due, to the Covid-19 outbreak is certainly impacting major M&A decisions.
IPO
IPO or Initial Public Offering is a way of issuing stock offerings to the public of any private corporation. IPOs are a way in which private organisations transition to public organisations through investments.
Last year, Southeast Asian markets saw 89 IPOs raised the proceeds up to US$4.8 billion with a one per cent spike over 2018. This was extremely remarkable given the fact that global IPOs took a hit last year.
Supply cut downs of the intermediate products from China can make a huge impact on private organisations going public with IPOs as the trust among the public investors can be dwindling in the outbreak scenario.
Secondaries
Secondaries or secondary buyouts have been surging in the private equity industry over the years. In recent years there are several venture firms that are increasingly investing in the secondary stocks. But, COVID-19 breakout can impact these secondary buyouts on a larger scale.
Let’s discuss how startups can thrive in these hard times!
What is the government doing?
Southeast Asian governments are cutting interest rates on their capital landing to the startups and businesses, who are incurring losses due to ongoing COVID-19 outbreak.
Recently, Thailand’s government reduced its rate to one per cent because of its trade exposure to Chinese goods for auto manufacturing and Chinese tourism. Other Southeast Asian countries such as Malaysia, Singapore, and Indonesia are cutting back their rates to boost local manufacturing and reduce reliance on Chinese goods.
Domestic boost
If you compare the dependency of Chinese markets for exports, the Southeast Asian market has seen a huge spike in the span of five years. As major manufacturing units, tech-based businesses and tourism dependency have been so reliant on the Chinese economy; the Corona outbreak should be seen as an opportunity to boost the local manufacturing landscape.
Also Read: Blessing in disguise: How coronavirus is helping China’s tech sector
Virtual workplaces
As much as we like it, work from home concept is now more than just an accessory in business. Tech startup CEOs and founders must consider virtual workplaces for their operational needs. Many businesses that are already in the process of developing mobile apps for their businesses can rely on freelancers or ask employees to work from home.
The need for virtual workplaces in the Southeast Asian markets needs a boost in their network intensities over several places.
Cross-discipline training
Beating the workforce deficit can also be tackled with cross-discipline training of employees. Startups can leverage this training for developing cross-discipline skills in their limited workforce. It can reduce the impact of lower employee attendance and keep the flow of work intact.
Revenue over growth
Whether you think of M&A, IPO or Secondary buyouts, like any other business decision, startup exits are driven through numbers. These numbers can be kept intact through short-term revenue-based projects that may be fruitful in the short run instead of trying to get the big fish.
For the time being, CEOs and startup entrepreneurs in Southeast Asia should focus on sustaining the pandemic outbreak than looking for a restructuring of the business model. As it may not be easy for ASEAN governments to tackle the cost behind containing the outbreak and at the same time provide a boost to the startups bearing heavy business losses.
Startups in the Southeast Asian markets need to gauge the situation that has been getting worse day by day. With the shortage of supplies, restricted flow of unfinished goods and raw materials, the sustainability of business poses a challenge.
Many startups in Malaysia and Indonesia are hopeful of foreign investments to boost their businesses, which is under pressure due to the impact of the COVID-19 outbreak.
Startup exits landscape in Southeast Asia is already stronghold and few steps taken by startups and governments in the region can ensure a harmless passage of the pandemic outbreak.
Despite its impact, COVID-19 poses an opportunity for Southeast Asian startups to become self-reliant and rise above the leading markets in Asia.
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