Investors are doubling down on Southeast Asia’s digital economy

Amit Anand is a Jungle Ventures founding partner and an early leader in the advancement of Southeast Asia's equity capital market.

Southeast Asian technology companies are capturing the attention of investors all over the world. Start-ups in the area raised more than $8.2 billion in 2020, nearly four times what they did in 2015. This trend continued in 2021, with local M&A reaching a record high of $124.8 billion in the first half of 2021, an increase of 83% from the previous year.

This raises the question, "Who exactly is buying Southeast Asia?"

Let's take a look at the three key types of investors who are putting money into and driving the growth of Southeast Asia's tech environment.

Big Tech

Southeast Asia has become a desirable market for both American and Chinese technology firms. Internet penetration here is 70%, higher than the global average, and digital adoption in the region is still nascent — it wasn't until the pandemic that adoption of digital services such as e-wallets and online shopping was eliminated.

Tencent and Alibaba, China's tech behemoths, were among the first to support early e-commerce development in Southeast Asia with financial investments in Sea Limited and Lazada, and have since expanded their footprint into other web verticals. Alibaba has in fact backed Akulaku and M-Pay (eMonkey), DANA, Wave Money and Mynt (GCash), while Tencent has actually purchased Voyager Innovations (PayMaya), SHAREit, iflix, Ookbee and Sanook.

US tech firms have also only recently entered the scene. Gojek will close a $3 billion Series F round led by Google, Facebook, Tencent, and Visa in June 2020. In October, Google and Singapore's Temasek Holdings invested $350 million in Tokopedia. Meanwhile, Microsoft invested an undisclosed sum in Grab in 2018 and has also invested $100 million in the Indonesian e-commerce firm Bukalapak.

Venture capitalists

According to DealStreetAsia, Southeast Asian start-ups raised $6 billion in the first quarter of 2021, making 2021 yet another record year for VC financial investment in the region.

In comparison to the rest of Asia, the region is also gaining prominence as a destination for financial investment capital.

Image Credits: Jungle VC

Southeast Asia, in terms of market size, also has a plethora of opportunities for VC investment. From 2015 to 2020, China saw nearly $300 per individual in VC investment; for Southeast Asia, despite a current financial investment boom, this metric is just $47.50 per individual, or one-sixth of that in China. This indicates a significant opportunity for financial investments to establish the region's digital economy.

Because of China's population development obstacles, as well as the latter's greater digital economy market saturation and maturity, the area's increasing population and development potential customers are greater.