Ingredients for successful VC investing in Southeast Asia: Insights from the AVCF Forum in Hong Kong

I recently attended the Asia Venture Capital Forum (AVCF) 2024 in Hong Kong, where a panel discussed successful venture capital / growth investing in Southeast Asia. Here are some of my key takeaways from the conversation:

• Southeast Asia's diversity presents both challenges and opportunities for investors. The region consists of 11 countries with different languages, cultures, and drivers of innovation.
• The socioeconomics of the region, particularly the presence of approximately 500 million millennials, offers long-term investment opportunities. However, variations in per capita income across countries mean that certain countries may have more attractive demographics than others.
• Achieving scale in Southeast Asia requires navigating multiple regulatory frameworks and local business practices due to the region's diversity.

The panelists highlighted the following ingredients for successful investments:

• Focus on specific sectors and business models that exhibit consistency and scalability. For example, businesses targeting the consistent experiences of the younger population or utilizing proven approaches on attracting tenants in the region (supply of engineers and other professionals).
• Seek value-add partnerships with complementary expertise. For example, investors that have the resources to navigate regulatory matters and cross-border issues could allow entrepreneurs to focus on execution and scaling their business. For investors, partnering with entrepreneurs (including those from PRC) with on-the-ground connections and networks in local markets can be beneficial for the VC/ growth investing within the region.
• Recognize the power of virtuous circles, such as successful real estate investments which attract more tenants and capital, reinforcing further success.

Exiting investments in Southeast Asia has been challenging, with IPOs remaining a popular option for VC and growth investors. However, multinational corporations also show substantial interest in acquiring companies that have demonstrated successful business execution across multiple Southeast Asian countries.

If you need assistance to navigate legal and regulatory issues in the region, please get in touch.

Subscribe to Ropes & Gray Viewpoints by topic here.