1.
The Venture Capital Opportunity in
South East Asia
Affin Hwang Capital Conference Series 2015
Navigating Through Turbulent Times

2.
Hi!
I’m Alexander Jarvis

3.
• Partner at Jungle responsible for SEA
investments
• Helped build some $1bn+ companies
• Financial Institutions M&A (London)
Some of my Previous Experience

4.
There’s a lot of money to be
made in Venture Capital

5.
But the US has Given it a Bad Rap
Around the Bubble of 1999

6.
“The average VC fund barely returns investor
capital after fees”
Source: Cambridge Associates, 2010 Benchmark Report, vintage year 1990–2009 funds

7.
All attributed to US investor
Mark Suster from Upfront
Ventures presentation “It’s
morning in VC.” Read it!

8.
The .com Boom Attracted Too Much LP
Capital
Commitments from LPs to USA Tech VC funds ($b)
0
12.5
25
37.5
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$13
$6
$8
$26
$50
$31
$12
$7
$5$3
Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds
with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close

9.
This Caused too Many VCs to Set up
Shop
# of VC funds raised by USA Tech VC firms
0
45
90
135
180
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
68
49
67
90
163
109
77
66
3833
Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds
with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close

10.
Resulting in Over-Capitalised Environment
Backing Bad Ideas
First institutional money raised by Internet companies ($m)
0
3000
6000
9000
12000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$482$400$328
$1,150
$11,232
$7,465
$1,435
$628$550$250
Source: PWC/NVCA MoneyTree Report

11.
Over-Investment was Coupled with
Proportionally Less Exits
Exit values of VC backed
companies ($b)
0
45
90
135
180
1997 1999 2001 2003
$92
$38$32
$40
$142
$178
$27
$42
M&A + IPO
# VC backed company exits
0
175
350
525
700
1997 1999 2001 2003
503
369
392404
537
611
268273
M&A + IPO
Source: Thomson Reuters

12.
• More LP money to be invested
• More VCs competing for deals
• More # and $ investment
• Less exits by # and $
• Under-performing asset class (1999-2007)
The Obvious Consequence was Bad Returns
=

13.
LPs
?

14.
Not Exactly…
So What Changed?

15.
66x More Internet Users Today
(41% of World Population)
2,908
2015
41%
66x
World Internet Users
0
750
1500
2250
3000
1995 2000 2005 2010 2015
Sources: U.S. Bureau of the Census, World Bank, WeAreSocial

16.
Internet Speed is 180x FASTER
1995 2014
56 Kbps
modems
10.5 Mbps
average USA
internet
connection
speed
Source: Akamai ‘s State of the Internet Q1 2014
Tried shopping online with 10 second page load?!

17.
Everyone is Mobile on Smartphones
• Personal
• Location aware
• At point of
purchase
164m
• USA smartphone
users
119m
• USA tablet users
Source: 2014 Statista forecasts

18.
Everyone is Connected Driving Viral
Growth Rates
• 1.3b+ monthly active users
• 255m monthly active users
• 300m+ global registered members
• 6b+ hours of video watched each month
by 1b+ users

19.
Credit Cards are Now on File with One
Click Shopping
1 billion
Digital shoppers worldwide
$1.5 trillion
Global ecom spend
The Apple app ecosystem alone estimated
to be $25b in 2014 (from $0 in 2008)
Sources: eMarketer, WSJ

20.
Less VCs Competing Deals
Commitments from LPs to USA
Tech VC funds ($b)
0
12.5
25
37.5
50
1995 2000 2005 2010 2012
$16
$9
$16
$50
$3
# of funds raised by USA Tech
VC firms
0
45
90
135
180
1995 2000 2005 2010 2012
$65
$50
$74
$163
$33
Source: Prequin. Includes all LP investment into US VC funds with IT & Digital Media focus. Excludes funds
with hardware & nanotech focus, non-$USD funds, funds with undisclosed amounts, & funds without first close

21.
• 66x users, 180x internet speed, 6x time online
• Mobile and social
• Card ready to spend online
• Less LP money and VCs
• Time to make money again! (2010 - 2020)
The Consequence is Simple, You Can Actually Make
Money this Time
=

22.
That’s America, but what
About Here?

23.
The Same Dynamics are
Already Evident in Asia,
but we will Grow Faster

24.
SEA is Bigger Than the USA in Many
Respects
Source: Social, Digital & Mobile in APAC, WeAreSocial, 2014
SEA USA
2x
70%
90%
2x

25.
Social Media Penetration on Par
Source: US Census Bureau, CNNIC, Tencent, Facebook
USA:
56%

26.
In Fact, Internet Traffic in APAC Will be
Double the USA in 2015
2012 2013 2014 2015 2016 2017
CAGR
’12-17
By Geography (PB per Month)
Asia Pacific 310 614 1,168 2,053 3,377 5,257 76%
North America 222 380 632 993 1,466 2,087 56%
Western Europe 181 276 426 655 976 1,384 50%
Middle East and Africa 50 96 182 333 559 861 77%
CEE 66 116 211 365 577 845 66%
Latin America 55 97 179 304 481 723 67%
Total (PB per Month)
Mobile data and internet 884 1,579 2,798 4,703 7,436 11,157 65%
Source: CISCO VNI, 2013

27.
APAC ecommerce is set to be 41% larger
than USA in 2016
2.2%!
Asia-Pacific! North America! Western Europe!
Eastern Europe! Latin America! Middle East & Africa!
2.1%!
27.9%! 35.9%! 28%! 3.6%!
3.1%!
1.6%!
2011!
30.5%! 33.5%! 26.9%! 3.8%!
3.4%!
1.9%!
2012!
33.4%! 31.5%! 25.7%! 3.9%!
3.5%!2013!
36.2%! 29.7%! 24.3%! 3.9%!
3.6%!2014!
2015!
2016!
2.3%!
38.2%! 28.8%! 23.4%! 3.8%!
3.6%!
2.3%!
39.7%! 28.2%! 22.6%!3.7%!
3.5%!
Source: eMarketer, 2013
B2C Ecommerce Sales Share Worldwide, by Region, 2011-2016 - % of total

28.
China Has Proven You Can Build Bigger
Than in America

29.
India is Making Progress too and has 4+
Consumer Unicorns

30.
So What Does SEA Have
Going for it?

31.
The Early Signs are
Encouraging
There has Been a lot of
Seed Stage Activity

32.
In 2012 NRF TIS Scheme in SG Created a Lot
of VCs Which Drove Seed Funding

33.
• Hired, trained and fired a lot of people
• Many former employees set up companies
• Invested incredible amounts of marketing money
• Educated customers (Very costly)
• Increase in ecommerce penetration %
• New and existing businesses are more viable
Rocket Internet Entered Market

34.
Started to be More Corporate and Independent
Accelerators

35.
Resulting in a Lot More Startups
Source: TechList. Note: This chart includes Singapore, Malaysia, Indonesia, Thailand, Philippines, Myanmar, and
Vietnam. Only disclosed fundings are included in our calculations.
$0
$100
$200
$300
$400
$500
$600
$700
$800
0
5
10
15
20
25
30
35
40
2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4
Total # deals Total disclosed funding ($m)

36.
Hard Slog to Date has
Rewarded the Diligent
(But it took a long time
to get big)

37.
$11.8 billion spent
acquiring Asian startups
in the last 6 years
$2.6 billion was on SEA
startups

38.
• JobStreet / Seek - A$545
• Viki / Rakuten - $200m
• ZipDial / Twitter - N/A
• Travelmob / HomeAway - $22m
• Zopim / ZenDesk - ~$30m
• SGCarMart / SPH - $48m
• JobCentral / CareerBuilder - N/A
• Detik / Para Group - $60m
• Tarad / Rakuten - N/A
There Have Been Some Decent
Acquisitions
Lots of
brand name
foreign
acquirers

39.
• Australia
• Freelancer
• iSelect
• Xero
• 3P Learning
• OZForex
• SEEK
• Carsales
And a Number of IPOs
• Malaysia
• Jobstreet
• iProperty
• MyEg
• iCar
• iBuy
• MolPay
• Singapore
• AsiaTravel
• PropertyGuru
(Coming?)
• India
• Justdial
• MakeMyTrip
• InfoEdge

40.
That was before, things
have changed in past 2
years

41.
A Key Structural Change is the
Cost of Setup is Really Low Now!
1995 2005 2010 2015
$5m $500k $50k $5k
Technology
drivers
Open
Source
Cloud +
AWS
Developers
start companies
99% reduction
Source: It’s Morning in VC, Upfront Ventures
Asian staff are
cheaper too!!
Setup
Cost

42.
Startups are raising more
money and getting
bigger faster

43.
• ~$500m raised
• 1m active customers
• 79m monthly visits
• Millions of Euro per month in
revenue
• ~$300m raised
• 1.6m customers served
• 27m monthly visits
• Millions of Euro per month in
revenue
Rocket Have Shown you can Actually Build
Companies of Scale Rapidly with Capital
Source: http://www.kinnevik.se/en/Investor/Kinnevik-Rocket-capital-markeys-day-2014/, and estimates

44.
Local Companies are Following Suit

45.
• Huge, growing online regional market
• Growing exit market
• Increasingly higher quality companies
• But limited capital available!
• Opportunity? (2015 - 2025)
Logically, There is a Big Opportunity in
SEA
=

46.
So What Does the Future
Hold?

47.
Investments

48.
• Increased volume of structures to pump out a volume
of startups
• Reverse shifts in investment stage focus for early and
late stage investors
• More Series-A funds in SEA
• Late stage VCs move to Seed stage in India to
make ‘call options’
• Increased availability of early stage financing, but still
limitations on investable companies
Increased Early Stage Focus for Different
Reasons

49.
• More foreign investors enter the market
• Continued foreign investment from Japan,
• Chinese mobilising
• Nascent interest from US and EU
• Local large family conglomerates start committing
more capital
• More later stage funding announcements
More Foreign Money and Late Stage
Investments

50.
Valuations and Exits

51.
• Seed valuations for great companies will increase
as will the investment sizes
• Continue to be small exits
• Messaging companies may make purchases to ‘fill
in’ their ecosystems, global brands make niche
acquisitions
Valuations Increase Across the Board and
More Small Exits

52.
Operating Environment

53.
• Introduction of ASEAN but no obvious benefit
• Potential for more questionable regulation,
particularly in ecommerce
• Thailand and Indonesia?
• Continued HR challenges resulting in wage
inflation and importation of specialty talent
Governments Get in the Way and Costs
of Staff Rise

54.
Startups

55.
• Increased regionalization of local companies and
category leader dominance
• Start to see more overseas expansion of well
funded EU/US companies
Bigger Regional Companies and Foreign
Invasion

56.
• More startups in ‘hot’ verticals
• Foreign entrepreneurs and Rocket grads will drive
a lot of new startups
• Struggling startups will complain there is a Series-
A crunch
More of Everything- More Startups and
More Failures

57.
Honestly…
You Missed China
You Sort of Missed India.
Now is a Great Time to
Access South East Asia

58.
Want to know
Leverage the Venture Capital
Opportunity?

59.
Let’s Have a Chat
• www.AlexanderJarvis.com
• @ADJBlog
• sg.linkedin.com/in/alexanderdjarvis/