Southeast Asia and Malaysia Startup Ecosystem An Overview Dec 2016

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By Eric Tan

Agenda

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I) KEY POINTS

II) FUNDING LANDSCAPE IN SOUTHEAST ASIA

III) MALAYSIA ECOSYSTEM DEEP DIVE

IV) KEY NEXT THOUGHTS

CONTACT INFO

For more information, please contact Eric Tan <rictan0@gmail.com>

Key Points

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Number of Deals in SEA dropped significantly but the ecosystem held up with a few mega rounds from the likes of Grab and GO-JEK. In SEA, most active investors are non-SEA based.

Singapore houses 6 out of 8 most well-funded startups in SEA. 80% of the funding in 2016 went to only 8 startups.

Malaysia grew alongside SEA startup ecosystem in number of deals, but there is a lack of late stage funding, i.e. 83% of 2016 deals are seed stage, and very few active investors.

Since 2013: 154 investments (12.8% of SEA) in Malaysian startup ecosystem totaling $124m (2.7% of SEA). Median deal size has been stable over years.

Malaysia has been lagging in funding, but strong past M&A performance since 2013,2 Malaysian companies out of top 5 M&As in SEA by value

Malaysian Entrepreneurship Ecosystem – Long term strategic planning between Public and Private Sector is the key to success

For more information, please contact Eric Tan <rictan0@gmail.com>

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FUNDING LANDSCAPE IN SOUTHEAST ASIA

Number of Deals in SEA dropped significantly but the ecosystem held up with a few mega rounds from the likes of Grab and GO-JEK.

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$555.1m$848.5m

$1,085.6m

$2,175.2m223

325

393

266

2013 2014 2015 2016

Funding in SEA Startup Ecosystem (2013-2016)

Deal Size ($m) Deal Count

$0.50m $0.47m$0.59m

$1.00m

2013 2014 2015 2016

Median Deal Size (2013-2016)

Median Deal Size

Only startups that are backed by angels, seed fund, incubator/accelerators and venture capital are includedSource: Pitchbook; Figures are updated as at 7 Dec 2016

• With global economy slow down, funding activity in SEA shows sign of slowing down since its peak in 2015

• Investors are taking a step back and placing safer bets – number of deals fell after its peak at 2015 but total funding size increased staggeringly with CAGR of 41%

SEA

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129

63

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5443

1724 23

45

19 15 14 14 10 8 8

SEA Investors with 8+ deals in 2016

Number of Deals in the last 5 years

Number of Deals in 2016

Most investors in 2016 are mostly non-SEA based fund500 Startups was the most active investors in SEA with 45 seed and early Series A deals

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USA Indonesia China USA Singapore UK Singapore Malaysia

Seed, Series A Seed, Series A Seed, Series A Seed, Series A Seed, Series A, Series B

Seed Seed, Series A Seed, Series A

HQ

Preferred Verticals

Preferred Stage

Recent Investments

E-Commerce, EdTech, Fintech,

Mobile, SaaS

E-Commerce, Mobile, Fintech

AdTech, Big Data, E-Commerce, Fintech,

SaaS, Mobile

Mobile, SaaS FinTech, Mobile IoT, Big Data, E-Commerce, Fintech

IoT, Infrastructure, E-Commerce, Fintech,

Mobile, Big Data

E-Commerce, IoT

Source: Pitchbook; Only disclosed deals are included, Figures are updated as at 7 Dec 2016

SEA

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$1,440m

$550m

$172m $248m$55m $77m $43m $42m

$750m

$550m

$170m $147m$43m $40m $35m $35m

Most well-funded SEA-based startups with $30m+ funding in 2016

Total Funding Raised To-date

Funding Raised in 2016

Singapore houses 6 out of 8 SEA most well-funded startup.80% of the 2016 SEA funding went to 8 startups

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Singapore Indonesia Singapore Indonesia Singapore Singapore Singapore Singapore

2012 / 1,800+ 2010 / 1,205+ 2009 / 837+ 2009 / 632+ 2013 / 70+ 2010 / 180+ 2013 / 20+ 2012 / 90+

Transportation / Mobile

Transportation / Mobile

Gaming / SaaS Marketplace / E-Commerce

Social / Mobile Enterprise Solution / SaaS

Aerospace / Satellites Marketplace / E-Commerce

Sep 2016 Aug 2016 Mar 2016 Apr 2016 Oct 2016 Jun 2016 Mar 2016 Aug 2016

HQ

Founded / # Employees

Industry / Vertical

LatestRound Date

Recent Investors

undisclosed

SEA

Source: Pitchbook; Only disclosed deals are included, Figures are updated as at 7 Dec 2016

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MALAYSIA ECOSYSTEM DEEP DIVE

Since 2013: 154 investments (12.8% of SEA) in Malaysian startup ecosystem totaling $124m (2.7% of SEA). Median deal size has been stable over years.

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$0.15m

$0.11m$0.08m

$0.13m

2013 2014 2015 2016

Median Deal Size (2013-2016)

Median Deal Size

• With global economy slow down, funding activity in Malaysia shows sign of slowing down since its peak in 2015

• From 2015 to 2016, number of deals and total deal size fell by 43% and 37%respectively, however median deal size increased by 56%

$9.5m

$33.2m

$47.9m

$33.1m

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32

63

40

2013 2014 2015 2016

Funding in Malaysia Startup Ecosystem (2013-2016)

Deal Size ($m) Deal Count

Only startups that are backed by angels, seed fund, incubator/accelerators and venture capital are includedSource: Pitchbook; Figures are updated as at 7 Dec 2016

Malaysia

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Malaysia grew alongside SEA startup ecosystem in number of deals, but there is a lack of late stage funding, i.e. 83% of 2016 deals are seed stage

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9%10%

16%

14%

1.7% 2.6%4.4%

1.7%

2013 2014 2015 2016

% of Deal Count and Deal Size in Malaysia compared to the whole of SEA (2013-2016)

% of Deal Count % Deal Size

$0.50m $0.47m$0.59m

$1.00m

$0.15m $0.11m $0.08m $0.13m

2013 2014 2015 2016

Malaysia against SEA: Median Deal Size (2013-2016

Median Deal Size ($m) - SEA Median Deal Size ($m) - Malaysia

• Malaysia are still only more active in the smaller deals – only significant deal size are of the likes of KFit, which is the only Malaysia-based startup that raised more than $10m.

• From 2013 to 2016, the gap of median deal size grew from $0.35m to $0.87m – few Malaysian startups managed to scale at later stage

• Malaysia startup ecosystem is growing overall along with SEA, however the total funding in the ecosystem in Malaysia-based startups dropped in 2016 compared to the rest of SEA

• Mega rounds out of Indonesia and Singapore, such as Grab, GO-JEK and Tokopedia, dwarfed the rest of SEA startups in 2016

$0.87m

$0.35m

Source: Pitchbook; Only disclosed deals are included, Figures are updated as at 7 Dec 2016

Malaysia

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10 97

Most Active Investors in Malaysia in 2016

Number of Deals in the Past 5 Years

Number of Total Investments

In 2016, Two of most active investors in Malaysia are not SEA-based3 of the most active investors co-invested in many deals

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Malaysia

USA China Malaysia

Seed, Series A Seed, Series A Seed, Series A

HQ

Preferred Verticals

Preferred Stage

E-Commerce, EdTech, Fintech,

Mobile, SaaS

AdTech, Big Data, E-Commerce, Fintech,

SaaS, Mobile

IoT, Big Data, E-Commerce, Fintech

Source: Pitchbook; Only disclosed deals are included, Figures are updated as at 7 Dec 2016

Each involved in 2 deals

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$15.25m

$4.50m$3.45m

$2.27m $2.0m $2.35m

$12.0m

$3.0m $2.70m $2.0m $2.0m $2.0m

Most well-funded Malaysian startups with $2m+ funding in 2016

Total Funding To-Date

Funding Raised in 2016

Mar 2016 May 2016 Mar 2016 Jul 2016 Jan 2016 Mar 2016

2015 / 130+ 2012 / 30+ 2015 / 65+ 2013 / 6 2015 / 7 2015 / 25+

Lifestyle / Marketplace Finance / FinTech Solution Services / Marketplace E-commerce / Marketplace Healthcare / Marketplace E-commerce / Marketplace

Latest Round

Founded / # Employees

Industry / Vertical

Investors

5 Marketplace startups tops the funding charts in MalaysiaMajority of them are funded by foreign investors

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Malaysia

Source: Pitchbook; Only disclosed deals are included, Figures are updated as at 7 Dec 2016

Prince Abdul Qawi

Tuas Capital PartnersSteve Melhuish

Foreign Investor

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Lagging in funding, but strong past M&A performance in Malaysia2 Malaysian companies out of top 5 M&As in SEA by value

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Malaysia

Source: “Cheatsheet of startup Acquisitions in Southeast Asia”. Lee, T. December 24, 2015. Available on the Tech in Asia Website, “https://www.techinasia.com/cheatsheet-of-technology-startup-acquisitions-in-southeast-asia”

Company Amount ($m) Vertical HQ Acquisition Date Acquired By / Merged With

586Professional

ServicesMalaysia 21 Nov 2014

534 Classifieds Malaysia 2 Nov 2015

200 Entertainment Singapore 2 Sep 2013

100 Gaming Singapore 12 Aug 2014

66 Media Singapore 15 Apr 2013

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NEXT THOUGHTS

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Malaysian Entrepreneurship Ecosystem – Long term strategic planning between Public and Private Sector is the key to success

Public SectorMarket (Problem, Addressable Market, Solution, Customer Route to Market)

Startups

FunderAgencies

Regulators• Innovation will be faster than regulations, regulators need to facilitate

the process (BNM Fintech Sandbox was a great first step) Licensing, open data collection, startup-friendly legislation (10-

year tax free!) In-border open policy: UK opened up data for startup to disrupt

the public transportation market. Cross-border partnership: MAS of SG partnered with India and

South Korea to help SG Blockchain startup to tap into the market

• Great effort thus farfrom MDEC, MTDC, MaGIC, Cradle etc Domestic growth – A lot of great initiatives now! International Market Expansion – eg International

Enterprise Singapore helps SG startups to tap into foreign market with networking opportunities

• Academia Partnerships and Mindset Shifts: Universities and Research Institutes collaborate to educate students to be more entrepreneurial, more focus on solving problem with technology, (MDEC & Coursera partnerships is a great step!)

Scaling and Exits Opportunity• Now relies a lot on foreign VC – is it strategic in the long run?• What is the long term strategy to build a sustainable funding

ecosystem? How to foster local VC and build an ecosystems of LPs looking into VC?

• Acquihire/Firesale mindset shift to encourage more entrepreneurship? – failing is not the end of the world

• How to nurture next generation of Malaysian VC?• More venture builders now in the market, how to leverage on

this while we grow towards more VC funding ecosystem?

The Future of Malaysia• Use of technology and creative thinking to solve real inherent

Malaysian problems and add value – not trying to be cool• Support system - Open platform for knowledge sharing• Community - connecting successful to budding entrepreneurs,

founders lesson sharing etc• Play to strengths - Understanding the market and leverage on

competitive advantage

Private Sector

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Malaysia

Next thoughts

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“Things may finally be changing in Asean, though — in part because the giant tech companies of China are increasingly expanding beyond their own borders into the region … … big Chinese internet groups are investing in start-ups in Southeast Asia out of the belief that their experience is far more relevant to other emerging markets than the expertise of their US rivals” – Financial Times, Oct 2016 [Source]

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“…Today, who really owns Malaysia's new economy? Or the ASEAN new economy for that matter? Malaysia? Hardly. Malaysian corporations and agencies need to either get serious about the VC game, or sit at home, watching others take trophies on their home court, year after year to come...” – Khailee Ng, Oct 2016 [Source]

i) Are Malaysian startups ready to scale? When will we see later stage growth funding for Malaysia homegrown startups from local funds?

ii) SEA is a huge market and evidently attracted many foreign VC, but plagued with language and cultural barriers, how can we help Malaysian Startup to scale within SEA? If not, what will be the next go-to market expansion?

iii) How do we leverage on foreign VC but not ended up losing all of our startups to them?

• Many founders took foreign VC money at early stage without realising VC money comes with a lot of pressure as well – so founders need to consider founder-VC fit, what values does the VC bring to the table other than capital?

Malaysia

Contact – Eric Tan

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@rictan0@rictan0

/rictan0 /rictan0

Background:

Current Interest:Technology, Entrepreneurship, Venture Capital- Building great product, team culture and relationships- Continue to educate myself in technology ecosystem

For more information, please contact Eric Tan <rictan0@gmail.com>