South-east Asia venture capital, private equity deal value to hit US$70b by 2024: report

SOUTH-EAST Asia's booming venture capital and private equity investment market is set to see deal value hit US$70 billion by 2024, double the level of the previous five years, according to a Bain & Company report released on Monday.

The report also predicts that the region will produce at least 10 new unicorns - new companies that rapidly achieve market valuations of US$1 billion or more - by 2024.

Scores of new investors have been pouring into the region, with South-east Asia-dedicated funds’ dry powder more than double since 2012, attracted by the region’s strong macroeconomic fundamentals, the chance to invest in emerging regional champions and a deepening secondary market for deals of all sizes. The mix includes a combination of local venture capital funds and private equity funds, sovereign wealth funds and global funds.

Startups maturing, strong exit momentum and healthy returns have also been catalysts for investment activity.

Technology companies have attracted the bulk of new capital, rising to 40 per cent of deal count in 2017 from 20 per cent in 2014. Since 2012, 10 unicorns including Grab, Go-Jek and Traveloka have created a combined market value of US$34 billion, ranking South-east Asia No 3 in the Asia-Pacific region, behind only China and India.

Strong investor interest in the region’s developing technology sector and other consumption-based industries is likely to help sustain higher levels of investment. Bain & Company senior adviser Suvir Varma and principal Alex Boulton, authors of the report, expect the technology sector to contribute 20 to 40 per cent of deal value over the next five years, particularly the financial technology sector.

They added that investor interest in healthcare and education, "sectors with significant long-term growth potential, but traditionally fragmented", will also redouble.

Across the region, fast growing startup ecosystems may also knock Singapore off its perch as Southeast Asia’s investment hub. Another Bain & Company survey showed nearly 90 per cent of investors said the hottest South-east Asian market outside of Singapore in 2018–19 will be Indonesia and Vietnam.

For now, “investing in South-east Asia is taking off, but new challenges – notably intensifying competition and rising valuations, which are at their highest level in a decade – will require investors to tread carefully”, said Mr Boulton.

Therefore, "skilled investors must raise their game to continue producing strong returns in what is still an evolving market", concluded Mr Varma.