With the boom of technology in the region, Southeast Asia has become home to young startups, and investors hoping to help fuel its rapid growth.
Some examples of investment news surrounding the region only this year include Chinese ecommerce giant JD.com confirming a $500 million joint venture with Thai retailer Central to build up the ecommerce and fintech sector in Thailand; Malaysia Debt Ventures set aside a $238 million fund to target technology-based companies like AR, VR, etc; and 500 Startups has made its debut investment in Myanmar backing a social media monitoring and news discovery app.
A recent report commissioned by Google and AT Kearney also highlights just how much money has been funneled into the region, which market is the most attractive and where are the most deep-pocketed investors coming from.
Southeast Asia’s golden child
Although the investment for startup companies in Southeast Asia only contributed to 8% to the total $90 billion of investment into Asia, this value has grown 23 times from 2012 to 2016 from $0.3 billion to $6.8 billion.
Most of the money has been pumped into Singapore and Indonesia that captured 60% of the entire investment.
However, nothing shone brighter this year than the myriad of Indonesian startups that have been stealing the attention of global industry giants like Tencent, Expedia, and Tim Draper from Draper Associates who invested in the early days of Tesla, Baidu, and Skype.
The country has produced three startups that classify as a ‘unicorn’, a company valued at more than $1 billion. They are Traveloka, Tokopedia and Go-Jek.
Where’s all the money coming from?
Attracting the Chinese investors
In a short span of four years time from 2012 to 2016, Indonesia has seen 31 times growth of investment value from $44 million to $1.4 billion. During 8 months in this year alone, this value has grown more than two times to $3 billion driven by later-stage investments.
The staggering growth has AT Kearney predicting the ecosystem could attract more investment than the oil and gas industry — which contributed $23.7 billion or 3.3% of the country’s GDP last year.
“Due to the massive growth, the value of startup investments in Indonesia may surpass the nation’s oil and gas investment which was $5 billion in 2016,” said AT Kearney partner, Alessandro Gazzini.
From all of the investment raised by Indonesian startups since 2012, ecommerce received the biggest chunk of gold taking 58% of the total investment value.
Transport and fintech quickly follow behind with 38% and 2% respectively.
Indonesia has also become a hotbed for the expansion of Chinese companies as the country sees a growing interest from Chinese investors this year.
94% of the startups investment in the country during 2017 have involved Chinese investors, up from only 2% last year. Two of the infamous Chinese BAT, Alibaba and Tencent, are raising stake in Indonesia by investing in Tokopedia and Go-Jek respectively.
Meanwhile, JD.com diversified its portfolios with investment in Traveloka making Indonesia the official battleground for Chinese companies to fight their proxy war.
The involvement of Chinese investors in Indonesia is something that the government has encouraged across all sectors. Indonesia’s Investment Coordinating has even set up a special China desk to attract more investors.
With the country still at a nascent digital stage, there is no precise measurement to find out the country’s true potential until company’s try but as the famed venture capitalist Tim Draper said about Indonesia, “it is a great place to be”.