China and India dominate venture capitalists’ radar

• China has continued its dominance in the region, with US VCs following suit
• Southeast Asia still a mystery area to venture capitalists

THERE has been a lot of buzz about Southeast Asia being the next big thing for investments and economic growth. However, is this the case in the entrepreneurial ecosystem? Are venture capitalists zeroing in on Southeast Asia for real, or is the region still off their radar?

Digital News Asia recently interviewed Preqin Ltd head of venture capital products Felice Egidio (pic) for his insights on where the deals are really coming from in Asia and how Southeast Asia fits in the overall investment picture. Edigio was also a speaker at the recent Global Ventures Summit 2017 (GVS).

According to Egidio, China and India continue to be the two biggest countries for venture capital (VC) investment activity.

“VC firms that are focusing on the region have raised twice as much capital for strategic investing in these two countries alone, so there is a lot of dry powder left to deploy from those funds.” (Investopedia defines dry powder as the amount of cash reserves or liquid assets available to deploy, when needed.)

“China has continued its dominance in the region, with US VCs following suit.  The amount of economic growth in the region has been tremendous over the last decade.  China for example has been an extremely secluded marketplace; most Chinese companies tend to focus solely on China, and foreign VCs are looking to take advantage of technological innovations that have potential to penetrate that market,” he explains.

When asked how Southeast Asia fits in the overall Asian picture, Egidio replies: “Southeast Asia is in a fairly unique situation at the moment; it’s still a bit of a mystery area to be honest.  I think events like GVS do a great job of bringing recognition to the region; it’s just a question of the government’s role in encouraging these entrepreneurs, and implementing a plan to encourage foreign investment into this region. 

“Industry leaders from other parts of the world have potential to expand to the area, be it by acquisition of locally grown companies, or developing groups focused solely on the region that can take advantage of the continued growth.”

To a question of which industries from Southeast Asia are attracting the most funding, Egidio names Internet and telecommunications as two industries attracting the most interest.

“These two sectors are finally seeing an accelerated infrastructure amongst a large, and continuously growing population who are now beginning to get more access to these technologies.”

Going forward, what kind of venture investment trends does he see happening in Asia? “The development of the venture capital industry in Asia has undoubtedly been one of the major success stories of recent years. Robust fundraising and healthy deal flow have established the region as a key player in the global industry, and with domestic and international investors increasingly targeting Asia-based start-ups, as well as the tremendous amount of dry powder that fund managers are currently sitting on, we’re expecting the deal market to continue its dominance.”

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