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500 Global & Prosus on venture capital funding for startups in Southeast Asia

Startups in Southeast Asia have huge potential to go far. That is why Sequoia, Prosus Ventures (Prosus) and 500 Global have been prime examples of successful global venture capital (VC) firms investing in the ASEAN region.

At Wild Digital SEA 2022, Rigel Capital’s Justin Patrick sat down for a panel discussion with Khailee Ng from 500 Global and Sachin Bhanot of Prosus to explore techniques global VCs employ in assessing their dynamics. a startup to find the big winners.

More importantly, what can founders do to become the next Grab or Carsome in achieving regional and global success?

Getting to know the VC

Joining Prosus in 2021, Malaysian-born Sachin joined to establish the company’s presence in Southeast Asia.

Prosus was once known as Naspers, an investment holding company and perpetual capital vehicle.

Its key verticals include a 30% stake in Tencent (the parent company of TikTok’s ByteDance), along with several food delivery, EdTech, and payments platforms. The amount of funding has started from small to 700 thousand US dollars, and the largest investment is 200 million US dollars.

Meanwhile, 500 Global was formerly known as 500 Startups. Some of the key VC accounts include unicorns like Grab, Carsome and Carousell, with the former two going public amid the pandemic.

Managing Partner Khailee shared that 500 Global had an early faith in these companies and had invested in them since 2010. As a result, 500 Global manages more than US$3 billion in assets under management and assets. Its VC has been entrusted to cut larger checks.

An exciting time for venture capitalists to shop for startups

There is now an opinion that the investment market is cooling off due to unstable economic conditions. Some argue that VCs are cutting down on fewer checks and slowing things down.

However, Khailee points out that there is a difference between public investment and private investment. One comes from investors in the stock market, while the other comes from private fund houses like VCs.

Expanding on the latter, Khailee notes that there are companies like Apple and Microsoft that have been funded in recession cycles since 1975 during the energy crisis.

“Right now, I don’t think things are that bad because there are so many entrepreneurs who are building great companies, and those who survived the pandemic are the best,” Khailee said.

“Builders keep building and investors who understand the public-private relationship will continue to support you.”

Backing this up was Sachin, who shared that Prosus was delighted by the rapid pace of SEA’s growth spurred by the pandemic, bolstered by significant market inefficiencies.

“If you look at the macro story, Southeast Asia is a region with a population of 600 million, a demographic dividend, an average age of less than 30, an expanding middle class over the next 10 years, and spending Consumption accounts for 60% of GDP,” Sachin said.

Speaking about the speed of technology development in SEA, he shared that the region has seen nearly 100 million internet users go online because of the pandemic. “You have the largest mobile-first economy in the world, and Southeast Asia’s digital economy has been greatly underestimated,” added Sachin.

Entrepreneurs in Southeast Asia also benefit from insight, because they have the opportunity [replicate] and localized solutions have been successful in the US, China and India. Finally, technology development in Southeast Asia is at least five years behind more mature markets.

Investors are realizing that the startups they invest in need to be backed by fundamentals and sustainable growth.

Niche issues, hyper-localization are also worth solving

In addition to replicating solutions that have been successful in other countries, Khailee and Sachin pushed founders to look at hyperlocalization issues that required addressing from a niche, region-specific lens. body.

Looking at e-commerce platforms like Indonesia’s Bukalapak, 500 Global comes at a time when its market penetration is only 2-3%.

Over time, the startup has grown to monopolize the entirety of Indonesia’s e-commerce, becoming a super app and now generating substantial profits.

Khailee has founded another Indonesian aquaculture startup, eFishery, which is tackling the issues of hyper-localization and focusing on local indigenous markets in a particular country.

“These startups can have a lot of trouble raising capital because the problem is very niche and only applies to people on the outskirts of the city,” Khailee emphasized.

“Today, they are generating hundreds of millions of dollars in revenue and they have been profitable for the past three years. No one talks about them, no one finds them attractive. That’s how you unlock all SEA”.

Strengthen your home base

At the end of the day, the most important essence of a successful startup is its team, led by a strong founder.

Sachin shares that Prosus tends to invest in founders who build and who can look at solving problems on a micro and macro scale.

“[We like founders who are] having the ability to execute, the founders are the deciders, but also the people who can respond, they know their strengths but also know their strengths can also be their weaknesses,” Sachin lists.

“Another trait we tend to look for in founders is are you willing to hire people smarter than you? Are you willing to hire people who are not your clones? Are you fostering a culture that values ​​the success of a team effort over individual success? “

Khailee finds that the founders who can take their startups far are those who know how to manage their energy.

Once founders reached the point of exhaustion and started blaming others for their mistakes, they gave power to others, he added.

“If you can’t turn the mindset, you can’t turn the company around,” he said.

Similarly, Khailee also urges entrepreneurs to consider building their base in Malaysia, which is filled with high-quality talent.

He shared that through 500 Global, he intentionally looks for companies in Southeast Asia to invest in and has accumulated at least 25% of them are Malaysian.

  • Learn more about Wild Digital here.
  • Read more articles about Wild Digital SEA here.

Featured image credit: Vulcan Post

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