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Download The Venture Capital Opportunity in Asia - Tedx / Affin Hwang Capital (@adjblog)
- The Venture Capital Opportunity in South East Asia Affin Hwang Capital Conference Series 2015 Navigating Through Turbulent Times
- Hi! Iâm Alexander Jarvis
- â¢ Partner at Jungle responsible for SEA investments â¢ Helped build some $1bn+ companies â¢ Financial Institutions M&A (London) Some of my Previous Experience
- Thereâs a lot of money to be made in Venture Capital
- But the US has Given it a Bad Rap Around the Bubble of 1999
- âThe average VC fund barely returns investor capital after feesâ Source: Cambridge Associates, 2010 Benchmark Report, vintage year 1990â2009 funds
- All attributed to US investor Mark Suster from Upfront Ventures presentation âItâs morning in VC.â Read it!
- The .com Boom Attracted Too Much LP Capital Commitments from LPs to USA Tech VC funds ($b) 0 12.5 25 37.5 50 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 $13 $6 $8 $26 $50 $31 $12 $7 $5$3 Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close
- This Caused too Many VCs to Set up Shop # of VC funds raised by USA Tech VC firms 0 45 90 135 180 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 68 49 67 90 163 109 77 66 3833 Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close
- Resulting in Over-Capitalised Environment Backing Bad Ideas First institutional money raised by Internet companies ($m) 0 3000 6000 9000 12000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 $482$400$328 $1,150 $11,232 $7,465 $1,435 $628$550$250 Source: PWC/NVCA MoneyTree Report
- Over-Investment was Coupled with Proportionally Less Exits Exit values of VC backed companies ($b) 0 45 90 135 180 1997 1999 2001 2003 $92 $38$32 $40 $142 $178 $27 $42 M&A + IPO # VC backed company exits 0 175 350 525 700 1997 1999 2001 2003 503 369 392404 537 611 268273 M&A + IPO Source: Thomson Reuters
- â¢ More LP money to be invested â¢ More VCs competing for deals â¢ More # and $ investment â¢ Less exits by # and $ â¢ Under-performing asset class (1999-2007) The Obvious Consequence was Bad Returns =
- LPs ?
- Not Exactlyâ¦ So What Changed?
- 66x More Internet Users Today (41% of World Population) 2,908 2015 41% 66x World Internet Users 0 750 1500 2250 3000 1995 2000 2005 2010 2015 Sources: U.S. Bureau of the Census, World Bank, WeAreSocial
- Internet Speed is 180x FASTER 1995 2014 56 Kbps modems 10.5 Mbps average USA internet connection speed Source: Akamai âs State of the Internet Q1 2014 Tried shopping online with 10 second page load?!
- Everyone is Mobile on Smartphones â¢ Personal â¢ Location aware â¢ At point of purchase 164m â¢ USA smartphone users 119m â¢ USA tablet users Source: 2014 Statista forecasts
- Everyone is Connected Driving Viral Growth Rates â¢ 1.3b+ monthly active users â¢ 255m monthly active users â¢ 300m+ global registered members â¢ 6b+ hours of video watched each month by 1b+ users
- Credit Cards are Now on File with One Click Shopping 1 billion Digital shoppers worldwide $1.5 trillion Global ecom spend The Apple app ecosystem alone estimated to be $25b in 2014 (from $0 in 2008) Sources: eMarketer, WSJ
- Less VCs Competing Deals Commitments from LPs to USA Tech VC funds ($b) 0 12.5 25 37.5 50 1995 2000 2005 2010 2012 $16 $9 $16 $50 $3 # of funds raised by USA Tech VC firms 0 45 90 135 180 1995 2000 2005 2010 2012 $65 $50 $74 $163 $33 Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close
- â¢ 66x users, 180x internet speed, 6x time online â¢ Mobile and social â¢ Card ready to spend online â¢ Less LP money and VCs â¢ Time to make money again! (2010 - 2020) The Consequence is Simple, You Can Actually Make Money this Time =
- Thatâs America, but what About Here?
- The Same Dynamics are Already Evident in Asia, but we will Grow Faster
- SEA is Bigger Than the USA in Many Respects Source: Social, Digital & Mobile in APAC, WeAreSocial, 2014 SEA USA 2x 70% 90% 2x
- Social Media Penetration on Par Source: US Census Bureau, CNNIC, Tencent, Facebook USA: 56%
- In Fact, Internet Traffic in APAC Will be Double the USA in 2015 2012 2013 2014 2015 2016 2017 CAGR â12-17 By Geography (PB per Month) Asia Pacific 310 614 1,168 2,053 3,377 5,257 76% North America 222 380 632 993 1,466 2,087 56% Western Europe 181 276 426 655 976 1,384 50% Middle East and Africa 50 96 182 333 559 861 77% CEE 66 116 211 365 577 845 66% Latin America 55 97 179 304 481 723 67% Total (PB per Month) Mobile data and internet 884 1,579 2,798 4,703 7,436 11,157 65% Source: CISCO VNI, 2013
- APAC ecommerce is set to be 41% larger than USA in 2016 2.2%! Asia-Pacific! North America! Western Europe ! Eastern Europe! Latin America ! Middle East & Africa! 2.1%! 27.9%! 35.9%! 28%! 3.6%! 3.1%! 1.6%! 2011! 30.5%! 33.5%! 26.9%! 3.8%! 3.4%! 1.9%! 2012! 33.4%! 31.5%! 25.7%! 3.9%! 3.5%!2013! 36.2%! 29.7%! 24.3%! 3.9%! 3.6%!2014! 2015! 2016! 2.3%! 38.2%! 28.8%! 23.4%!3.8%! 3.6%! 2.3%! 39.7%! 28.2%! 22.6%!3.7%! 3.5%! Source: eMarketer, 2013 B2C Ecommerce Sales Share Worldwide, by Region, 2011-2016 - % of total
- China Has Proven You Can Build Bigger Than in America
- India is Making Progress too and has 4+ Consumer Unicorns
- So What Does SEA Have Going for it?
- The Early Signs are Encouraging There has Been a lot of Seed Stage Activity
- In 2012 NRF TIS Scheme in SG Created a Lot of VCs Which Drove Seed Funding
- â¢ Hired, trained and fired a lot of people â¢ Many former employees set up companies â¢ Invested incredible amounts of marketing money â¢ Educated customers (Very costly) â¢ Increase in ecommerce penetration % â¢ New and existing businesses are more viable Rocket Internet Entered Market
- Started to be More Corporate and Independent Accelerators
- Resulting in a Lot More Startups Source: TechList. Note: This chart includes Singapore, Malaysia, Indonesia, Thailand, Philippines, Myanmar, and Vietnam. Only disclosed fundings are included in our calculations. $0 $100 $200 $300 $400 $500 $600 $700 $800 0 5 10 15 20 25 30 35 40 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 Total # deals Total disclosed funding ($m)
- Hard Slog to Date has Rewarded the Diligent (But it took a long time to get big)
- $11.8 billion spent acquiring Asian startups in the last 6 years $2.6 billion was on SEA startups
- â¢ JobStreet / Seek - A$545 â¢ Viki / Rakuten - $200m â¢ ZipDial / Twitter - N/A â¢ Travelmob / HomeAway - $22m â¢ Zopim / ZenDesk - ~$30m â¢ SGCarMart / SPH - $48m â¢ JobCentral / CareerBuilder - N/A â¢ Detik / Para Group - $60m â¢ Tarad / Rakuten - N/A There Have Been Some Decent Acquisitions Lots of brand name foreign acquirers
- â¢ Australia â¢ Freelancer â¢ iSelect â¢ Xero â¢ 3P Learning â¢ OZForex â¢ SEEK â¢ Carsales And a Number of IPOs â¢ Malaysia â¢ Jobstreet â¢ iProperty â¢ MyEg â¢ iCar â¢ iBuy â¢ MolPay â¢ Singapore â¢ AsiaTravel â¢ PropertyGuru (Coming?) â¢ India â¢ Justdial â¢ MakeMyTrip â¢ InfoEdge
- That was before, things have changed in past 2 years
- A Key Structural Change is the Cost of Setup is Really Low Now! 1995 2005 2010 2015 $5m $500k $50k $5k Technology drivers Open Source Cloud + AWS Developers start companies 99% reduction Source: Itâs Morning in VC, Upfront Ventures Asian staff are cheaper too!! Setup Cost
- Startups are raising more money and getting bigger faster
- â¢ ~$500m raised â¢ 1m active customers â¢ 79m monthly visits â¢ Millions of Euro per month in revenue â¢ ~$300m raised â¢ 1.6m customers served â¢ 27m monthly visits â¢ Millions of Euro per month in revenue Rocket Have Shown you can Actually Build Companies of Scale Rapidly with Capital Source: http://www.kinnevik.se/en/Investor/Kinnevik-Rocket-capital-markeys-day-2014/, and estimates
- Local Companies are Following Suit
- â¢ Huge, growing online regional market â¢ Growing exit market â¢ Increasingly higher quality companies â¢ But limited capital available! â¢ Opportunity? (2015 - 2025) Logically, There is a Big Opportunity in SEA =
- So What Does the Future Hold?
- â¢ Increased volume of structures to pump out a volume of startups â¢ Reverse shifts in investment stage focus for early and late stage investors â¢ More Series-A funds in SEA â¢ Late stage VCs move to Seed stage in India to make âcall optionsâ â¢ Increased availability of early stage financing, but still limitations on investable companies Increased Early Stage Focus for Different Reasons
- â¢ More foreign investors enter the market â¢ Continued foreign investment from Japan, â¢ Chinese mobilising â¢ Nascent interest from US and EU â¢ Local large family conglomerates start committing more capital â¢ More later stage funding announcements More Foreign Money and Late Stage Investments
- Valuations and Exits
- â¢ Seed valuations for great companies will increase as will the investment sizes â¢ Continue to be small exits â¢ Messaging companies may make purchases to âfill inâ their ecosystems, global brands make niche acquisitions Valuations Increase Across the Board and More Small Exits
- Operating Environment
- â¢ Introduction of ASEAN but no obvious benefit â¢ Potential for more questionable regulation, particularly in ecommerce â¢ Thailand and Indonesia? â¢ Continued HR challenges resulting in wage inflation and importation of specialty talent Governments Get in the Way and Costs of Staff Rise
- â¢ Increased regionalization of local companies and category leader dominance â¢ Start to see more overseas expansion of well funded EU/US companies Bigger Regional Companies and Foreign Invasion
- â¢ More startups in âhotâ verticals â¢ Foreign entrepreneurs and Rocket grads will drive a lot of new startups â¢ Struggling startups will complain there is a Series- A crunch More of Everything- More Startups and More Failures
- Honestlyâ¦ You Missed China You Sort of Missed India. Now is a Great Time to Access South East Asia
- Want to know Leverage the Venture Capital Opportunity?
- Letâs Have a Chat â¢ www.AlexanderJarvis.com â¢ @ADJBlog â¢ sg.linkedin.com/in/alexanderdjarvis/