Category: Insights

What’s Happening Here?

The real estate industry has long defied innovation, spending less than 1% on information technology. However, the past few years have seen many start-ups disrupt this market by implementing technology to make the process of buying and selling properties much easier and quicker.

 

What Does This Mean?

There is a clear need to simplify the complex value chain in real estate and reduce the high amount of information asymmetry by either removing middlemen or increasing their efficiency by augmenting them with technological tools. There is significant opportunity for start-ups and investors to capture value especially in Southeast Asia where property transactions can be opaque and expensive due to the layers of middlemen

 

Why Should You and I Care?

Real estate is the largest asset class in Southeast Asia, seeing over US$200 billion in transactions annually. It is a matter of time before Proptech players capture a significant slice of this pie as they facilitate greater transparency, lower costs and provide more efficient turnover compared to traditional brokers.

We have seen platforms like PropertyGuru and 99.co establish themselves as market leaders in the listings category. Such platforms provide online discovery of property listings, facilitating a greater number of interactions between property agents who post the listings and potential home buyers who browse the listings.

However, to properly tackle the Southeast Asia market, offline channels have to be mined as property transactions are large-value transactions which require some level of personal interaction to engender trust between both buyers and sellers. Proptech platforms like Ohmyhome in Singapore and Malaysia, as well as Rever in Vietnam, are bridging this gap by supplementing their services with a trained team of in-house real estate agents to close the deal.

Property is also closely linked to the financial sector, as credit is a major requirement in real estate transactions. This gives rise to opportunities for Proptech companies to offer financing options to buyers, on their own, if they are licensed, or in partnership with financial institutions like banks. There is a whole new value chain to be unlocked by Proptech companies who can leverage the data they have on existing customers to offer value-added services. One thing is for sure, we are only at the beginning of the Proptech revolution.

 

The general economic climate today is one that consists of rising trade tensions between the U.S. and China, European political uncertainties and ongoing Brexit discussions, as well as rising interest rates and slowing global growth.

In fact, a poll of top managers (chairmen, chief executives and managing directors) by Citibank and Singapore’s Business Times indicated that 86.5% of respondents placed U.S.-China trade tensions as the top geopolitical challenge this year. Most also believed that global political stability and the international trade situation would worsen in the first six months of 2019.

Indeed, the belief in a worsening political climate and trade situation tends to have negative implications for economic growth and consumption, as well as investor confidence and overall investments. This is because political instability tends to be linked to uncertainty in the social and regulatory environment which negatively impacts investor confidence, including that of venture capital (VC) investors.

Against the backdrop of this volatility and waning investor confidence, we spoke to VC investors to get their views on where the bright spots in their industry are:

 

South Korea

The Korean VC market has been on a growth path since 2015 when new investment in domestic venture companies exceeded two trillion won (US$1.8 billion).

In 2018, South Korea’s total amount of investment in startups reached a record high of 3.43 trillion won (US$3.04 billion), up from 2.38 trillion won (US$1.2 billion) in 2017.

This continued growth is attributable to the increasing awareness that VC plays a key role in nurturing innovative enterprises and creating jobs. Furthermore, such growth means that VC companies investing in South Korea have been successful in fostering startups that can grow into unicorns and decacorns with an enterprise value of at least US$1 billion and US$10 billion respectively.

The South Korean government has also played a key role in fostering startups, having made an initial investment of US$3 billion in 2015. In 2017, the government made a further pledge to establish a US$9 billion venture fund with public and private finances. These investments have already seen dividends, with Google and SparkLabs – amongst other big names – setting up offices in the country.

With these large investment flows, the South Korean government plays an important role in the VC investment scene through: a) direct capital investment as Limited Partners (LPs) to funds; b) indirectly via a variety of preferential tax incentives for VC activities.

Despite South Korean government support, the amount of capital provided by VCs and angel investors are still small compared to South Korea’s market size. In fact, whilst South Korea has the highest government backing per capita for startups, only 0.1% of venture startups raised funds by way of VC and angel investment, therefore reinforcing South Korea as a prime contender for more venture capital and angel investments.

 

Southeast Asia

In contrast with the protectionist sentiment prevalent in western countries today, ASEAN (the Association of Southeast Asian Nations) seems to be opening its doors now more than ever before.

ASEAN’s five largest emerging economies – Indonesia, Malaysia, Philippines, Thailand and Vietnam – have a combined population of 548 million, or 87% of the total ASEAN population. These countries have also maintained an average GDP growth rate of 4-5% per year since the formation of ASEAN in 1967.

Factors that have contributed to this growth – and will continue to do so in the future – include a large population comprised of millennials who are willing to spend in order to keep up with consumer trends; an existing internet user base of 260 million, which will grow to approximately 480 million users by 2020; and as a consequence, an internet economy that is expected to grow to approximately S$200 billion by 2025.

Leading this phenomenal growth are the e-commerce, as well as online media, travel and transportation industries. Unicorns in these markets include the likes of Lazada, Tokopedia, Traveloka, Grab and Go-Jek, as well as Sea (previously Garena), VNG and Razer.

On the horizon, the Southeast Asian investment ecosystem is entering a new phase of growth with expected deal values over the next five years (2019 – 2023) totalling US$70 billion – double the level of the previous five years. It is also expected that the region will produce at least 10 new unicorns by 2024, making the region a prime VC investment destination.

 

Singapore as a Base for VC Investments

Singapore’s position as an international financial centre makes the country a vital hub that connects global investors to Asia, as well as one that brings Asian opportunities to global investors. The country also represents a world class financial centre that possesses a sound regulatory framework and a business-friendly environment.

To make Singapore even more attractive, the Monetary Authority of Singapore (MAS) has simplified regulations to facilitate the activities of Venture Capital and Private Equity managers, and is working to strengthen the ecosystem for family offices.

These factors make Singapore an ideal base from which investors can take advantage of opportunities in Asia.

 

Bringing the Best of Asia Together

One fund combines both South Korea and Singapore’s advantages to bring the most promising venture capital opportunities of Asia to investors. One way investors can take advantage of these opportunities is the GEC-KIP Technology and Innovation Fund* – a $120 million venture fund for Southeast Asian tech companies jointly launched by Golden Equator Capital (GEC) and Korea Investment Partners (KIP).

The fund focuses on identifying exceptional Asian companies and accelerating their expansion across Southeast Asia and North Asia (South Korea, Japan) with the overarching objective of generating outsized returns and improving the quality of life in emerging markets. Specifically, the fund invests in Series A and B high-growth startups based in Southeast Asia and South Korea that are looking to expand into the region via Singapore.

Currently, the GEC-KIP Fund has invested into two companies: a US$27 million Series B+ round in Indonesian fashion e-commerce startup Sorabel (previously Sale Stock) and a S$4 million Series A investment in Singapore proptech startup Ohmyhome.

 

What This Means for Investors

The deepening ASEAN financial integration offers significant potential for investors to take advantage of the strengths of the Singaporean economy as a conduit for international capital, and as a provider of specialist expertise.

Hence, both investors as well as companies seeking investments can use Singapore’s advantageous geographical and financial position as a base for venture investments in the region.

One example of such a company is GEC’s portfolio company M17 Entertainment which was formed through the merger of Taiwan-based livestreaming firm 17 Media, and Singapore-based Paktor which operates a dating app. According to Daren Tan, Managing Partner at GEC, “M17 has scaled Southeast Asia, but they truly started to find the strengths and big developments when they scaled into markets like Taiwan, Korea and Japan.”

*For more information on the GEC-KIP Fund, please email us.

 

Landscape: Interview with Emmanuelle Norchet

The Venture Capital (VC) industry is one that has seen considerable growth in the last decade and experienced gradual increase in deal sizes. More importantly, this growth was also contributed by the more nascent Southeast Asian region. For example, of the five major deals above US$1 billion globally in Q1’2018, two are Southeast Asian i.e., Singapore-based Grab and Indonesia-based Go-Jek.

With this growth in the industry, one trend that seems to be gaining worldwide attention is the rise of “Mega Funds” – or so they’re called – due to its never-seen-before fund sizes for venture funds. We’ll explore what some of the potential implications this rise may have on the overall VC and tech investment industry, specifically in Southeast Asia (SEA).

 

The Mega Fund that started the trend

A name comes to mind when discussing the advent of Mega Funds – Softbank’s world’s first US$100 billion Vision Fund that invests in late-stage growth companies. Known for its mammoth US$9.3 billion investment in Uber, the fund has also invested into US$4.4 billion into WeWork with potential follow-on investment up to US$20 billion in exchange for a majority stake in the co-working industry giant.

We have since also seen the launch of other similar funds globally including Sequoia Capital’s US$12 billion Global Growth Fund and China Merchant Group’s US$15 billion China New Era Technology Fund (targeted at growth stage companies in Mainland China and Hong Kong), in addition to the typically larger fund sizes of the Private Equity players such as Carlyle (US$18.5 billion US Buyout Fund) and KKR (US$ 7.4 billion Global Infrastructure Fund focused on North America and Europe).

 

Does the Southeast Asian market need one?

The overall VC market in SEA, albeit a relatively nascent one in comparison to other mature markets, seems to be finding its own successful niche when it comes to the funding space. SEA is also a unique market in that it is made up of 11 starkly-different countries with different cultures, languages while the more mature markets have been (often) more homogeneous as they are made up on each country e.g., the US, China, and India.

It should be noted that the region’s VC industry caters to a very different crowd of startups as compared to the Vision Fund that invests in later-stage companies, which are more prevalent in mature tech investment markets. In this region, the number of startups that reaches unicorn status is just slightly more than what you can count on two hands. Hence, at present, there does not seem to be a need for funds to exceed the billion-dollar mark, given the lack of diversity in late-stage growth companies, though that would be a different case a decade from now.

For the small pool of companies that require higher funding levels in this region, they – more often than not – already have an international presence. This provides them with the option of raising funds from more mature markets that may be better positioned to cater to their funding needs. An example of this was Southeast Asian e-commerce giant Lazada’s receiving a total of US$4 billion funding from Alibaba.

 

The exponential growth of Southeast Asia’s startup ecosystem

According to Bain & Co’s report in late November this year, SEA’s booming VC and PE market is poised to see deal value soar to US$70 billion in 2024, doubling that of the previous five years. The report also predicts that the region will also produce at least 10 new unicorns in the next five years.

According to another report released on the same day by Google and Temasek, the SEA’s internet economy is expected to exceed US$240 billion by 2025, beating the previous estimate of US$200 billion. This is because the costs of mobile internet access have been decreasing and that enables consumers to go online using their mobile phones.

Given the current rate of growth for the startup and venture investing scene in Southeast Asia, it is likely that will see more Mega Funds arising in this region to cater to a flourishing ecosystem of founders and startups that progress into later stages of growth. This will be a form of natural progression for the VC industry that is already seeing startups maturing, strong exit momentum and promising returns.

 

The Venture Capital (VC) industry is one that has seen considerable growth in the last decade and experienced gradual increase in deal sizes. More importantly, this growth was also contributed by the more nascent Southeast Asian region. For example, of the five major deals above US$1 billion globally in Q1’2018, two are Southeast Asian i.e., Singapore-based Grab and Indonesia-based Go-Jek.

With this growth in the industry, one trend that seems to be gaining worldwide attention is the rise of “Mega Funds” – or so they’re called – due to its never-seen-before fund sizes for venture funds. We’ll explore what some of the potential implications this rise may have on the overall VC and tech investment industry, specifically in Southeast Asia (SEA).

 

The Mega Fund that started the trend

A name comes to mind when discussing the advent of Mega Funds – Softbank’s world’s first US$100 billion Vision Fund that invests in late-stage growth companies. Known for its mammoth US$9.3 billion investment in Uber, the fund has also invested into US$4.4 billion into WeWork with potential follow-on investment up to US$20 billion in exchange for a majority stake in the co-working industry giant.

We have since also seen the launch of other similar funds globally including Sequoia Capital’s US$12 billion Global Growth Fund and China Merchant Group’s US$15 billion China New Era Technology Fund (targeted at growth stage companies in Mainland China and Hong Kong), in addition to the typically larger fund sizes of the Private Equity players such as Carlyle (US$18.5 billion US Buyout Fund) and KKR (US$ 7.4 billion Global Infrastructure Fund focused on North America and Europe).

Does the Southeast Asian market need one?

The overall VC market in SEA, albeit a relatively nascent one in comparison to other mature markets, seems to be finding its own successful niche when it comes to the funding space. SEA is also a unique market in that it is made up of 11 starkly-different countries with different cultures, languages while the more mature markets have been (often) more homogeneous as they are made up on each country e.g., the US, China, and India.

It should be noted that the region’s VC industry caters to a very different crowd of startups as compared to the Vision Fund that invests in later-stage companies, which are more prevalent in mature tech investment markets. In this region, the number of startups that reaches unicorn status is just slightly more than what you can count on two hands. Hence, at present, there does not seem to be a need for funds to exceed the billion-dollar mark, given the lack of diversity in late-stage growth companies, though that would be a different case a decade from now.

For the small pool of companies that require higher funding levels in this region, they – more often than not – already have an international presence. This provides them with the option of raising funds from more mature markets that may be better positioned to cater to their funding needs. An example of this was Southeast Asian e-commerce giant Lazada’s receiving a total of US$4 billion funding from Alibaba.

 

The exponential growth of Southeast Asia’s startup ecosystem

According to Bain & Co’s report in late November this year, SEA’s booming VC and PE market is poised to see deal value soar to US$70 billion in 2024, doubling that of the previous five years. The report also predicts that the region will also produce at least 10 new unicorns in the next five years.

According to another report released on the same day by Google and Temasek, the SEA’s internet economy is expected to exceed US$240 billion by 2025, beating the previous estimate of US$200 billion. This is because the costs of mobile internet access have been decreasing and that enables consumers to go online using their mobile phones.

Given the current rate of growth for the startup and venture investing scene in Southeast Asia, it is likely that will see more Mega Funds arising in this region to cater to a flourishing ecosystem of founders and startups that progress into later stages of growth. This will be a form of natural progression for the VC industry that is already seeing startups maturing, strong exit momentum and promising returns.

 

ICO Market Sees Sharp Pivot among Uncertain Times

It’s been quite a journey for the crypto world. Promises of swings that mirror Bitcoin’s meteoric rise to success seem to have fizzled out as markets become cautious and regulators of many developed countries take a stand.

We look at Initial Coin Offerings (ICO) and how they have emerged as an alternative to traditional methods of fundraising.

 

Market takes a considerable hit

The cryptocurrency market has been a roller coaster ride for investors and industry enthusiasts in 2018, experiencing major swings not commonly seen in traditional markets, from the euphoric highs of December 2017, when the price of Bitcoin almost broke US$20,000, to falling to a low of less than US$6,000 in February 2018.

This is seen in this graph from Cryptocurrencychart which highlights the year-to-date performance of the biggest three cryptocurrencies (by market capitalisation) i.e., Bitcoin, Ethereum, and Ripple.

 

The changing ICO landscape

The ICO market, cryptocurrency’s equivalent of a mainstream IPO, has also undergone its fair share of changes and stabilisation, partly thanks to pundits and bad-behaving investors engaging in “pump and dump” strategies. In essence, “pumpers” artificially inflate the price of a less popular token with false positive news to hype it, and then “dump” it when the prices have increased, often causing the tokens to plummet.

Pump and dump scams are strictly illegal in traditional securities markets, but the largely unregulated nature of the cryptocurrency market has made it an attractive environment to unscrupulous individuals seeking to exploit the hype around everything blockchain.

But the ICO industry has now taken more structure with blockchain companies introducing lock-up periods, reserving more shareholding, and seeking funding from more credible – often institutional – investors, that will hopefully provide more stability to the current ICO landscape.

 

A changing investor profile

According to PwC, close to US$14 billion was raised in the first five months of this year in ICOs, while according to Bitcoin.com in February 2018, 84% of fund flows into ICOs have come from private and pre-sales i.e., before the tokens were made available to the general public.

Among this list of private investors are a growing number of Venture Capital firms (VCs), looking to get in on the action in an industry that holds considerable promise.

A landmark ICO that mirrors this new shift in investor profiles was seen in Telegram’s fundraising efforts, targeting VCs and top figures in the investment community in the private sale, which left no tokens available for public investors in the primary market, and private sale investors selling their tokens at considerable profits in the secondary market.

The private sale originally targeted a raise of US$1.2 billion, but was oversubscribed and eventually closed at US$1.7 billion.

 

The VC advantage

Despite making the whole ICO process less “decentralised” (which refers to tokens being dispersedly owned by a large number of retail investors), VCs do bring several advantages to the overall ICO process.

VCs have better access to networks, capital (and hence helping to shorten the pre-sales fundraising), and often get involved in strategic processes to ensure that the company reaches its goals post-funding. VCs’ considerable experience in assessing founding teams in the entrepreneurial sphere gives added confidence to the external community that companies funded by them have gone through strict due diligence and have higher likelihood of succeeding.

From the VC perspectives, they see promise in ICOs for a number of reasons including the potential for exponential growth in an unprecedentedly short amount of time. Another key advantage is the fact that this secondary market is highly liquid. This means that they can realise gains more quickly in this rapidly growing market given the clear exit strategies i.e., ,as compared to tying up vast amounts of funds in a unicorn startup and waiting for either an IPO or an acquisition in the typical venture investment’s model. For ICOs, this is also after taking into consideration the lock-up period i.e., the predetermined amount of time that large investors are not allowed to sell their tokens/shares.

The future should see the industry finding a happy medium in terms of stability with the pre-sale and private sale stages taking as much, if not more, importance than the public one. In the end, it’s all about profitability and sustainability of a business model that benefits the startup sphere in the long run. The attention gained from VCs during this process will also act as strong validation that segregates viable businesses from those that are joining the ICO process merely to gain traction or a quick profit.

 

With its startup ecosystem stabilising over the span of the last year, India is quickly emerging as a dark horse that the region can hardly afford to ignore. Singapore has joined the list of nations that has begun to pay attention to its entrepreneurial sector, recently signing a Memorandum of Understanding (MOU) to foster collaborations and share ideas between both countries:

The agreement in a nutshell

The MOU was signed between Enterprise Singapore (Enterprise SG) and The Indus Entrepreneurs (TiE) Singapore at what many would call an opportune moment, a day before Indian Prime Minister Modi’s visit to Singapore. TiE is one of the largest Indian global entrepreneurship organisations that began in Silicon Valley, backed by an equally impressive funding pool. The inked MOU will kick-start an incubation programme that aims to foster collaboration between Singapore and Indian start-ups through jointly organised networking events, workshops and sessions with in-market mentors.

With the launch of the new agreement, the TiE will get the ball rolling by running a startup initiative in July 2018, with 10 Singapore startups to meet with a strategic list of Indian startups, corporates, mentors and investors while partnering and co-innovating solutions in the fintech, e-services and deep-tech arenas.

The Prime Minister’s visit also witnessed a separate MOU between Enterprise Singapore and National Skills Development Corporation (NSDC) India. The agreement will facilitate Singapore vocational training companies to expand into India, providing the skills needed across the beauty and wellness, F&B, construction and facilities management sectors.

Why India: Startup ecosystem’s meteoric rise

With a population of over 1.3 billion, India offers startups with a large target customer base and an equally expansive talent pool. These factors, together with access to a host of incentives that promote entrepreneurial growth, have contributed to the nation emerging into the third largest technology startup hub in the world.

Global giants have also boosted overall confidence in India’s startup scene, with companies such as Softbank showing confidence in the country through its second Vision Fund, aimed at providing capital to startups across the nation. In August last year, SoftBank signed its largest cheque in India to date, investing US$2.5 billion in country’s biggest e-commerce platform, Flipkart.

Prime Minister Modi’s government has taken on a pro-entrepreneur approach to promote the startup scene in the country. As part of the Startup India Action plan, new enterprises will be provided with regulatory and tax benefits as well as access to funding if they meet certain criteria.

The fact that there are over 300 million smartphones in the country also provides startups with a ready base of consumers to cater to. Experts predict the figure to rise over the next several years, with the over 1 billion Indians yet to own such devices. This provides promise for a new generation of consumers in the foreseeable future.

 

The Singapore-India startup relationship

Several Singapore startups have already acknowledged the potential that India has to offer in the startup sphere.

An example of this is ViSenze, an Artificial Intelligence company that develops breakthrough visual technology for e-commerce and digital businesses. The company cemented their foray into India’s online marketplace in 2015 via a strategic partnership with industry giant Flipkart, enabling customers to search across the fashion category by uploading photos instead of guessing keywords. ViSenze is also working with Indian based fashion e-retailer Myntra to assist its over seven million users to navigate the store via image recognition.

One of Singapore’s sovereign wealth funds Temasek has also been said to be in talks with Indian ride hailing company Ola to be part of a funding round totalling US$1 billion.

With Singapore fully aware of the fact that India offers a ready and growing platform of customers, more startups will begin to expand their reach by scaling the rapidly emerging country over the next several years.

Aside from its sheer population and inviting business environment, the world’s largest democracy provides startups a stable environment, bolstered by a government that seems to be on-board to create a community that will compete with leading global hubs.

 

It was seemingly done and dusted even before the official announcement. The grapevine encompassing reliable driver-rider conversations had already been filled with chatter of Uber gracefully bowing out of several Southeast Asian regions for ‘strategic’ reasons, much akin to their exit from China’s ride hailing market:

 

Overall sentiment towards the deal

The deal – that was announced at the end of February – will see Uber selling its entire regional business, which includes both its ride sharing and food delivery businesses, in exchange for the acquisition of between a 25 and 30 percent share of Grab. All this amongst the news of Grab being the highest venture capital funded business in the first quarter of this year, raising a more than impressive USD 2.5 billion.

The agreement between the two companies has started new threads of concern in both the consumer and driver camps. All for good reason. A seeming monopoly of the action will allow Grab to wind down on all promotions, as the competition will currently only feature local taxi companies. Drivers may also be at the brunt of fewer incentives handed out to win them over from the competition. Comfort Delgro, for example, is not a direct competitor, with terms of employment starkly different across both the ride hailing and taxi industries. Licensing. Rentals of vehicles. Payment terms. Two very different playing fields.

The deal thus far has been anything but smooth sailing. The country’s competition watchdog, the Competition and Consumer Commission of Singapore (“CCCS”), has been hot on the heels of the acquisition to ensure that both companies are abiding by competition guidelines – with rallying support from the community at large.

Uber’s seeming folly in the region

It was pretty much a story of who could bleed more money.

With promotions aplenty and the metaphorical wining and dining of customers and drivers to accumulate their respective databases to reap profits in the long run, Uber certainly wasn’t in the market for quick profits. It was all about gaining as much traction as possible from the get-go.

That being said, the company didn’t necessarily approach their target markets well. Among an uphill battle of management issues on the global front pronounced exponentially by an over-active media, Uber was clearly on the back foot when it came to scaling the Southeast Asian landscape. They clearly did not know what they were in for. Chief Executive Dara Khosrowshahi put it well, stating “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors”.

All perhaps part of a bigger plan

If one takes a closer look at what the acquisition actually means for Uber, their situation in not as bleak as it would seem to be.

Uber exits the Southeast Asian market at an opportune time in its growth strategy moving forward. Yes, it did bleed considerable amounts of money but that seems to have been the plan from the start. An almost 30 percent stake in a company with great potential is not shoddy by any means. This would mirror their deal in China, where they appropriated almost 18 percent of the highly successful Didi Chuxing.

The deal will also allow the company to divert its attentions towards key markets such as India, doubling down to compete with other big players such as Softbank funded Ola. News of Didi planning to conquer the Mexican market – where Uber has enjoyed a monopoly – will require the company’s undivided attention. Uber needs to focus, and focus it will on North America and Europe where it enjoys unrivalled success levels. All this will culminate in progress that will add to its planned IPO in 2019.

The landscape has been a two-horse race since both companies joined the local ride hailing arena. With Ryde’s recent announcement to join the party, it would seem that Uber’s exit is even more opportune at the moment. There has even been talk about Indonesian giant Go-Jek entering the local playing field. All this will increase competition and would have presumably chipped away at Uber’s profits.

Only time will tell whether the Grab victory was a blessing in disguise or an Uber that scaled all too quickly while letting its eye on the prize slip. One thing for certain is that the global giant needs to relinquish its place as frontrunner where it can. Then it can enjoy a share in profits across regions where it was perhaps never meant to dominate such as Southeast Asia and China.

 

South Korea has created a fertile environment for its entrepreneurial ecosystem, bolstered largely by factors such as sound governmental support, relative economic stability, and advanced tech infrastructure. These invaluable attributes have been further strengthened by healthy support from South Korean giants such as Hyundai and Samsung, facilitating and accelerating growth of startups with their programmes. As the country’s startup ecosystem develops, it is given that it starts to look abroad for cross-border expansion.

 

South Korean startups gaining global attention

The country has made particular advancements across the fintech and medtech (particularly in bioscience) arenas, with companies already starting to spread their wings and create a global presence.

An example in the fintech sphere is Lendit, a peer-to-peer (p2p) lending service launched in 2015, which has now become the country’s top p2p lending marketplace for consumer financing in Korea. The startup made headlines in 2017, after securing funding from a group of international and local venture capital investors. Lendit CEO and Founder Kim Sung-joon shared that one of the main reasons for his startup’s success and investor interest was its sophisticated big data architecture used for risk management and mitigation.

In the medtech arena, Korean government-linked healthcare incubator C&R Healthcare Global has also made great strides in overseas expansion, setting up their office in Singapore’s business club SPECTRUM in 2017. Appointed by the Korean Healthcare Industry Development Institute, C&R will identify and financially support fast-growing Korean companies operating across the areas of medical devices, medical technology, cosmetics and cosmeceuticals.

Its Singapore office aims to leverage the country’s fertile business landscape and reach out to neighbouring markets from its base. It will also stand to benefit from access to funding and new technologies in the region, including the strategic incorporation of such advancements as artificial intelligence and data analytics to drive the healthcare industry forward.

 

National giants expanding exponentially

One of the benchmarks in Korea – when it comes to businesses that have scaled to great heights – is Kakao, a company that spawned the ever-popular KakaoTalk, a free instant messaging application for smartphones, incorporating text and call features.

The parent company’s keen focus on the realm of Artificial Intelligence has paved the way for a partnership with Samsung to sync their respective AI platforms, Kakao I and Bixby.

A similar partnership with Hyundai-Kia, the world’s fifth largest car-maker, is also in the process of being inked where voice recognition will be installed in cars. These affiliations with iconic brands will only propel the business into global markets. Such expansion will provide the in-roads for local startups to innovate, incorporating with Kakao’s technology to create apps across various industries.

With government and corporate support from the likes of Kia, Hyundai, Samsung and LG behind the Korean start-up and business ecosystem, we will likely see more startups and fast-growing businesses venturing overseas, specifically in Southeast Asia. This is especially so given the New Southern Policy announced by President Moon Jae-in at the end of 2017 aimed at deepening ties with Southeast Asia and curbing reliance on traditional trading partners.

We are excited to see how the next few years will unfold for South Korea’s start-up ecosystem, and what this means for the Southeast Asian region in terms of collaboration.

 

The latest spate of regulations implemented by Facebook will change the way businesses, in particular startups as well as SMEs, reach their target audiences:

Gone are the days where bootstrapping entrepreneurs were required to set aside a considerable sum of capital towards traditional advertising channels. With the advent of social media and the propensity for these mediums to reach audiences from around the globe, the process has taken a more cost-effective shape. Due to the nature of these platforms, marketing has also become more targeted, tailored to audiences that have shown past interest or propensity to be vested in the content being shared.

That being said, platforms like Facebook have to constantly pivot their guidelines, rules and regulations in order to maintain credibility and order – which in turn changes the social marketing playing field.

EdgeRank is the name commonly given to the algorithm that Facebook uses to determine what content should be displayed in their users’ News Feed. Its constantly changing algorithm considers such factors as how connected the user is to a particular topic, how much engagement that particular user creates as well as how current a particular piece of content is.

Changing algorithms and new regulations

Facebook has come out with certain regulations over the span of the last month or so, in part to quell a growing number of irate users who have shown dissent at the number of irrelevant posts on their News Feeds:

• Early January of 2018, Facebook announced the prioritisation of posts from friends/family/groups over those from general Facebook pages.
• End of January 2018, Facebook makes clear intention to battle fake news, an issue the company has had to battle for the last few years.
• At about the same time, Facebook bans all advertisements that cover the Cryptocurrency industry.

What this means for social marketers

It’s not all doom and gloom for those who are looking to leverage Facebook for marketing purposes. When it comes to Facebook changing its algorithm, there is probably no area that is more affected by these changes than the startup world, often relying heavily on Facebook marketing due to its wide reach and cost-friendly structure.

Those using the platform for marketing purposes are advised to produce organic and original content that encourages meaningful one-to-many discussions. Posting of content with a link to one’s blog or website, for example, is seen as an attempt to use the site for free traffic without providing value to the community.

Businesses can look into producing live videos over pre-recorded ones, something Facebook looks at favourably. Live videos have been reported to reach up to 6 times the number of regulations as pre-recorded ones.

Startups should also take a detailed look at their target audience and discover which platforms they are attracted to. Reddit, for example, draws a large blockchain/cryptocurrency crowd and is a great medium for the industry. The cosmetics and retail industry is highly drawn to Instagram, making this platform great for marketing products in this category.

What should always be considered is that Facebook is in the business of providing a platform for interaction. To effectively carry this out, the company will have to protect its user-base from irrelevant information. It is still a great tool for startups as well as small and medium enterprise marketers looking for an inexpensive and wide-reaching advertising platform; they just need to understand that what should come first is the value of the content they are producing.

 

We take a look at two areas that the local Venture Capital (VC) industry will be paying particular attention to in 2018.

2017 has been a big year for our local VC landscape. The second quarter, in particular, witnessed USD 725.3 million in funding. This figure was boosted considerably by the gaming industry, with locally based Internet platform company Sea Ltd.’s USD 550 million funding round in May this year.

Deep Tech

The subset of the sector can be defined as one that leverages technology based on tangible engineering innovation or scientific advances and discoveries. Simply put, it refers to innovation that is brought about by unique, differentiated, protected or hard to reproduce developments. An example of a deep tech startups is one that rides on its proprietary mathematical algorithms to carry out data analytics.

2017 saw this area achieve considerable momentum, partly through the announcement of several government initiatives to propel the industry forward. July saw SPRING Singapore rally interest through seeking co-investment partners for its USD $72.8 million venture capital fund. Set up by its investment arm Spring Seeds Capital, the initiative was set up predominantly to assist companies looking for assistance in an area that is typically mired by high barriers to entry and longer (up to three years) commercialisation periods.

The arena seems to be picking up speed, seen by SGInnovate’s echoing of SPRING’s initiatives at the end of November, announcing an initiative to further strengthen Singapore’s deep-tech start-up ecosystem in 2018. The government-owned innovation platform will contribute up to SGD 100,000 in a pre-seed startup and SGD 100,000 to SGD 1 million in a seed startup. In series A startups, it will contribute in excess of SGD 1 million. Priority will be given to startups that specialise in the areas of Artificial Intelligence, blockchain and medtech.

 

Initial Coin Offerings

The Cryptocurrency arena is hardly one that needs introduction, both local and international publications being constantly engulfed with stories on digital currencies over the last few years.

Although blockchain technology has been around for a while and would fall under the abovementioned area of deep tech, Initial Coin Offerings (ICOs) have become a popular means of raising funds in recent times. They essentially involve the accrual of crypocurrencies, allowing investors ownership of digital tokens that may or may not be tied to a product or service being rolled-out.

Although VCs do not traditionally participate in ICO funding rounds, they have been known to invest in companies pre-ICO in exchange for equity share. Reasons for this revolve around the fact that fund raising through these means have been knows to come with their own set of risks – if for no other reason than the industry being relatively new, with our local regulator still allowing activities to take their course, within measure.

That being said, the landscape looks to be changing rapidly, and for good reason. Investors (and VCs) are more and more cognisant of the fact that ICOs have seen returns on investments that have reached many-fold in recent times. 2018 will probably see more VCs start their own cryptocurrency funds and investments pouring into these firms as seen earlier this year with U.S based Boost VC. More VCs may also look to ICOs as a means for their existing portfolio companies to raise further funds at specific stages of their growth. The fact that both China and South Korea have placed bans on ICOs will further strengthen Singapore as a regional base moving forward.

With our country’s medium-term goal to make us a global fintech hub, it’s clear that VC funding will only increase through 2018, strengthening the startup scene considerably. While deep tech will continue to be a main driver for advancements moving forward, the world of cryptocurrencies and ICOs in particular can hardly be ignored, one that the VC sector will begin to pay more and more attention to during the course of the next year.