Pick-up in fundraising by SE Asian VCs in Q3 raise hopes of recovery

Amid a challenging market environment and a debilitating second wave of the COVID-19 pandemic, Southeast Asian venture capital firms recorded an unexpected pick-up in fundraising in the third quarter.

VCs in the region reported 18 fundraising milestones in the quarter – the highest on record – comprising four final closes and 14 interim closes, according to DealStreetAsia’s latest report.

Southeast Asian fund managers raised $1.25 billion in new capital — this excludes funding secured previously within a fund’s lifetime such as for an interim close — to ring in the highest quarterly tally since the pandemic hit the region early last year.

The Q3 performance pushed the total fundraising milestones in the first nine months of the year to 33, higher than 25 and 31 in the same period of 2020 and 2019, respectively. Meanwhile, total proceeds reached $2.14 billion, slightly higher than $2.09 billion in the first nine months of last year, but lower than $2.63 billion in the same period of 2019.

While final closes remain below pre-pandemic levels, a strong interim close tally should set the ground for robust performance in the coming months.

SE Asia back in favour among LPs 

The dramatic rise in fundraising in the third quarter, which coincided with a drop in the number of new COVID-19 cases in Southeast Asia, suggests that limited partners are beginning to return to this region.

“With somewhat resumption of business-as-usual and global travel, LPs are more willing to deploy capital, having lifted some of the pandemic-induced investment moratoriums. [The third quarter] coincides with this logistical shift,” said Eddy Chan, the founding partner of Intudo Ventures, whose third fund reached a $115 million final close in September.

Indonesia—and Southeast Asia, more broadly—remains a conviction-driven, niche play among global institutional investors, said Chan, adding that the consensus among LPs is that the market is still in its early stage of development.

Carmen Yuen, a partner at Vertex Ventures Southeast Asia & India, said the record creation of tech unicorns in the region had translated to liquidity for early investors.

“This ability to have liquidity is a strong signal to international LPs who had been hovering around the region, and in fact, it is likely the last hurdle for them,” Yuen said.

Southeast Asia minted 11 tech unicorns in the third quarter, bringing the total for the year to 23, more than the total number of unicorns created prior to 2021.

Our latest report, SE Asia’s VC Funds: Q3 2021 Review, is available exclusively to DealStreetAsia – DATA VANTAGE subscribers.

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