Fi­nan­cial In­sight

The tech­nol­ogy sec­tor ac­counted for 53% of deal vol­umes and 34% of deal val­ues in the re­gion amidst an en­vi­ron­ment marred by un­cer­tainty in the global mar­kets.

Singapore Business Review - - CONTENTS -

Ven­ture cap­i­tal in Sin­ga­pore has been ro­bust in 2016 de­spite global un­cer­tain­ties sur­round­ing the sec­tor, with fears that it would prompt in­vestors, se­ries fun­ders, and even star­tups them­selves to be more cau­tious, on top of other rea­sons. Valmiki Nair, se­nior as­so­ci­ate at Den­tons Rodyk & Davidson LLP, notes that the ini­tial mo­men­tum for Sin­ga­pore VCS last year slightly slowed down due to un­cer­tainty over global mar­kets and the lack of po­ten­tial “next big dis­rup­tive idea” from star­tups, with only one or two star­tups do­ing the heavy lift­ing both in Sin­ga­pore and the rest of the South­east Asian re­gion.

“Many of the star­tups that had po­ten­tial to be­come great had al­ready man­aged to close rel­a­tively large rounds of fundrais­ing and did not re­quire fur­ther fund­ing for ex­pan­sion in the year,” he adds. “Star­tups based in Sin­ga­pore have also been cau­tious about over­spend­ing to fund ex­pan­sion ef­forts given the un­cer­tainty over in­ter­est rates, mar­ket volatil­ity, and chang­ing politico-le­gal land­scapes in nearby na­tions.” But Lisa Theng, man­ag­ing part­ner at Colin NG & Part­ners LLP, says that num­bers re­main pos­i­tive with VC in­vest­ments in Sin­ga­pore achiev­ing his­toric fig­ures with 100 deals with an ag­gre­gate value of $3.5b recorded in 2016, com­pared to the 81 deals val­ued at $2.2b for 2015.

Ex­perts are in agree­ment that tech­nol­ogy re­mains the driver of ven­ture cap­i­tal growth in Sin­ga­pore and, in large part, the re­gion. Ac­cord­ing to a re­port by global val­u­a­tion firm Duff and Phelps, the tech­nol­ogy sec­tor ac­counted for the ma­jor­ity of deal vol­ume at 53% and deal value at 34%.

San­dra Seah, joint man­ag­ing part­ner at Bird & Bird ATMD, how­ever, notes that this strong per­for­mance in VC in Sin­ga­pore was mainly due to the two “mega” deals last year that saw Chi­nese on­line gi­ant Alibaba ac­quire Lazada, an e-com­merce plat­form in South­east Asia, for $1b as well as the $750m raised in ride-shar­ing/ride­hail­ing ap­pli­ca­tion Grab’s in­vest­ment round of fund­ing led by Ja­panese con­glom­er­ate Softbank.

“The [Alibaba-lazada] deal af­firms the po­ten­tial of South­east Asia as an emerg­ing mar­ket and may sig­nal a ten­dency to fund ma­ture busi­nesses to se­cure larger re­turns,” says Seah, adding that “the deal also serves as a re­minder to star­tups of the value of strik­ing part­ner­ships and scal­ing up be­yond their home mar­kets to at­tract VC in­ter­est” which is timely given the mo­men­tum to­wards the achieve­ment of the ASEAN Eco­nomic Com­mu­nity.

Seah, mean­while, says that the Grab deal re­vealed that VC in­vestors “still re­tain a healthy ap­petite for lat­estage tech­nol­ogy star­tups with a proven track record in mul­ti­ple ju­ris­dic­tions and good po­ten­tial for growth.” Apart from the block­buster Alibaba-lazada deal and Grab’s in­vest­ment rais­ing, other no­table VC ac­tiv­i­ties in Sin­ga­pore in­clude peer-to-peer mar­ket­place Carousell’s rais­ing of S$49.5m in a fund­ing round led by Rakuten

Num­bers re­main pos­i­tive with VC in­vest­ments in Sin­ga­pore achiev­ing his­toric fig­ures with 100 deals with an ag­gre­gate value of $3.5b recorded in 2016.

Deal #1: Chi­nese on­line gi­ant Alibaba ac­quired lazada, an e-com­merce plat­form in South­east Asia, for $1 bil­lion

Deal #2: Grab raised $750m in its in­vest­ment round of fund­ing led by Ja­panese con­glom­er­ate Softbank

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