According to a recent report by T&I Financial Research, Asia private transaction volumes in the venture capital, private equity, and corporate M&A spaces had a big year in 2014 lead by China and India but also with a strong showing from the ASEAN Tigers otherwise known as Singapore, Malaysia, Philippines, Vietnam, Indonesia, and Thailand. In other words, Asia venture capital is very much on the rise fuelled in large part by the Southeast Asia Tigers.
Overall 2014 was a strong uptrend growth year driven in part by the growth venture capital in Asia. Transaction totals in Asia have recovered strongly since the Asian Financial Crisis to hit the highest in the last 10 years, increasing by close to six times their levels from 2005.
By no surprise, China and India continue to dominate the market, but recent years are seeing a shifting of weighting between the old guard and the new emerging markets of Southeast Asia including Thailand, Vietnam, Singapore, Malaysia, Philippines, and Indonesia. Two years ago, China and India contributed 80% of the transactional market share, but the latest figures for 2014 show a sea change in the contributions made by ASEAN markets which have pushed the two largest players in the region down to 60% of total volume.
Over the past two years, Asia’s second tier markets led by Australia, Japan, New Zealand and Korea, and Asia’s third tier of markets, dominated by the ASEAN or Southeast Asian countries of Thailand, Vietnam, Singapore, Malaysia, Philippines, and Indonesia have increased their percentage of alternative transactions for Asia. Indeed, given the population growth rates, one can make the case that projecting out the continued growth of ASEAN economies for 5 to 10 years’ time, ASEAN holds greater near term potential for foreign investment than either China or India.
Another growth driver is the emergence of a new category of dealflow from Asia venture builders. These venture builders in Asia are venture capitalists, entrepreneurs, and sometimes corporates who are funding the creation, building, and development of start-up companies.
2014 also saw the return of IPOs, with the Japanese market leading venture capital in Asia. Japan produced a record-topping 40 IPO deals; and unlike China’s internet-based offering, Japan’s IPOs were made up of a strong mix of asia venture builders from the IT, Biotech, internet, retail and manufacturing industries.
Data collected on venture capital in Asia also shows that more than 55% of all Asian transactions were made by firms with only one investment in the region. Out of the total 626 Asia venture capital transactions, only 20% made four or more deals. While this means that no one group dominates Asia’s venture capital transaction markets, it can also mean that the market is immature and/or that investors from outside the region are still struggling to find their feet in Asia.
But there remains a wildcard. The market is still defining what is a venture builder in Asia and more specifically what is a venture builder in Southeast Asia or ASEAN. A substantial amount of the investment by these venture builders in Asia continue to be unrecorded and may meaningfully understate the overall venture capital figures reported for Asia and more specifically Southeast Asia or ASEAN.
T & I Financial Venture Capital Asia 2014