The startup scene is China, Japan, and Southeast Asian countries is flourishing because of changing attitudes, untapped local markets, huge human resources, fierce competition, and foreign investment. As Beenext founder, Teruhide Sato, said, “Asia has an abundance of issues like underdeveloped infrastructure and logistics, and they present great opportunities for startups to come in and solve real problems on the ground.”
Investors gave about US$58.8 billion to Chinese tech startups in 2017, whereas SE Asian startups got US$7.86 billion last year! Although mature startups did better, the younger firms looked toward coin offerings (ICO).
Let’s look at a few funds (VC, angel investors, government) giving life to the region’s exciting and lucrative startups, which are bringing about innovation at an accelerated pace.
The Beijing-based arm of Sequoia Capital focuses on firms in the seed, middle, or late stages, and growth investments. It was established in 2005 has funded over 300 companies (such as Alibaba, Didi, Meituan, and JD.com) with innovative business models or engaged in cutting-edge technologies. It usually caters to entrepreneurs in the fintech, alternative energy, healthcare, internet, mobile, tech, and consumer services sectors.
The venture capital firm is currently trying to attract Chinese investors to raise money for its proposed global fund ($8 billion). Private equity and VC continue to be primary sources for funding in China; most firms see an IPO as the exit strategy in the long term.
“With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector. We will further accelerate the Information Revolution by contributing to its development,” said Masayoshi Son, Chairman & CEO of the Japanese SoftBank Group Corp., about the fund established in 2016.
The $100 billion fund is the largest tech investment fund till date, and it is backed by Saudi Arabia, Apple, Sharp, and Qualcomm among others. (Check out its recent investments here.) The company plans to make investments of about $100 million in later stage startups, especially those in e-commerce, robotics, ride-sharing, and machine learning.
China State Funds
In 2017, the Chinese government set up a US$14.5 billion Internet Investment Fund to help early-stage Internet companies. In 2015, China set up a $6.5 billion fund for seed stage startups to boost innovation in the private sector. Other government guidance funds (about 780) include one with over $350 billion for startups and another with $30 billion to fund tech innovation. These funds will boost homegrown companies working on emerging technologies to find their place in the global market. According to a Deloitte report, close to 40% of the unicorn startups are based in China.
Engages with early-stage startups (and external researchers) with much potential in new, exciting technologies such as artificial intelligence and robotics. In Asia, the focus is on Japan, and has funded over 10 companies such as WAmazing, Infostellar, H2L, and Hacobu. Established in July 2016, it has incubators and advisors to ensure success. SONY does more than offer financial support— the corporate venture capital fund tries to “holistically looks at tactical and strategic ways to bring relevant value” for these companies.
Tech startups and local companies with innovative offerings or business models have much to cheer in Hong Kong. In September 2017, Hong Kong launched a $256 million fund to spur innovation with the help of venture capital funds (co-investment partners). An independent advisory committee will advise on the choice of VC partners and ops of ITVF. This initiative to encourage private investment is focused on startups in the Series A or B stages, and not on those looking for seed funding or in the pre-seed stage. For the latter, various other schemes exist such as the Technology Start-up Support Scheme for Universities of the Innovation and Technology Fund (ITF), HKSTPC’s Corporate Venture Fund, and the Cyberport Creative Micro Fund.
To guarantee Singapore’s success with the help of a vibrant IP-based innovation ecosystem, the Intellectual Property Office of Singapore (IPOS has entered a strategic alliance with Makara Capital. Over the next eight years, the fund will invest about $23 million to $120 million in companies working on advanced technologies. The number of patent applications have increased significantly in the last couple of years according to Bloomberg. Another exciting source of capital in Singapore is the Innovation & Enterprise Cluster Fund. For SMEs, the government has set up Productivity Solutions Grant (PSG) to “foster pervasive innovation.”