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.
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