Early stage investing – the opportunity in South East Asia

By 2016-01-14Articles

by Jose Camacho

The early stage scene in South East Asia is booming, for those even remotely involved in the Singaporean ecosystem this is not news. In 2015 it has been challenging not to be overwhelmed by all the demo days, pitch events, open house, showcases, entrepreneurs’ drinks and other networking forums, reaching sometimes more than 20 events every week. The number of accelerators, incubators and early stage investment funds keeps increasing and bringing with them a myriad of service providers, accountants, intermediaries and experts of all sorts. We finally see the emergence of an ecosystem rich in diversity, talent and capital.

The ideal positioning of Singapore as a hub also for innovation is clear, and the emergence of South East Asia as a single large market driving regional growth are attractive arguments for international investors to seriously look at South East Asia. In 2015, several international Private Equity and Venture Capital funds have set foot in Singapore or allocated capital to South East Asia, some of them looking at very early stage companies. In parallel the activity of private investors or business angels is tangible and increasing, generally individuals with significant wealth (accredited investors), some capital available and willing to trust and support promising entrepreneurs directly. In BANSEA, for example, the requests for joining has more than tripled by the end of 2015 and the group has more doubled in size.

All these are positive news, and strong signs that early stage investing in South East Asia is a clear opportunity. However the long term success and existence of an early stage ecosystem, highly relies on the quality and diversity of capital available. While a substantial number of institutional funds is necessary to build world class companies, it is critical as well to make sure that private individuals and their capital continue to play their role, after all, even the most successful global companies (Uber or more closely GrabTaxi) were lucky enough to encounter, at some point in time, one or few trusted angel investor that saw the potential of the entrepreneur and their idea.

Many of today’s entrepreneurs have found their vocation only recently, leading them to quit their sometimes well paid corporate jobs to build a venture, the surge of fintech is a good example as many bankers have become fintech leaders. In parallel a new generation of investors is preparing – senior executives, successful traders or senior bankers among others, want to put their brain and capital at work and proactively engage with entrepreneurs.

While many of those new angel investors are still in the learning phase, building their network, sharpening appetite and experience, the competition for good investments is in place and will keep increasing. The blossoming ecosystem quickly becomes a jungle for those who do not know how to navigate.