SINGAPORE -- This year is shaping up to be a bumper year for startups in the Association of Southeast Asia Nations looking to raise funds, as deal values skyrocket to a high not seen even in 2019, before the COVID-19 pandemic hit, defying a health crisis that has dragged the world into a slump.
Despite the pandemic largely sealing off borders in the 10-country bloc, which keeps investors and young companies from meeting face to face easily, deal values hit $11.7 billion in the first half of this year alone.
According to a report by DealStreetAsia, a Singapore-based media company in the Nikkei group, the six-month figure topped the $8.5 billion seen in the whole of last year and the $8.8 billion recorded in 2019.
"Fund managers and startups have had time to adapt to this new normal and are now better equipped to deal with the fallout of the pandemic than a year ago," Andi Haswidi, head of ASEAN research at the financial news outlet, wrote.
Year on year, deal values in the first six months of 2021 more than doubled the $5.1 billion logged in the first half of last year and the $4.6 billion recorded in the first six months of 2019.
"Sectors that have prospered during the pandemic, such as fintech, e-commerce, health tech and logistics, are expected to continue attracting more funds for expansion," Haswidi wrote.
Top deals in the second quarter included Singapore-based retail analytics startup Trax, retail chain VinCommerce and consumer retail platform CrownX, the latter two based in Vietnam.
Trax raised $640 million in a Series E round, with backers such as BlackRock and SoftBank Vision Fund. In the area of private equity, VinCommerce's deal was worth $410 million, with SK South East Asia Investment as an investor, while CrownX's deal was worth $400 million. CrownX's list of investors included Alibaba Group and Baring Private Equity Asia.
These deals highlight the extent to which digital retail is driving interest from the likes of venture capital and private equity players, with the sector scoring $1.45 billion in deals, according to DealStreetAsia's data, the most among the industries it surveyed.
Telemedicine showed strong growth as well, noted the news outlet's report. Led by Indonesia's Halodoc and Singapore's WhiteCoat, telemedicine startups accounted for nine out of 16 deals closed by health tech startups in the second quarter.
Health tech, in general, was among the best performing sectors in Southeast Asia in terms of deal count, outperforming retail, the data showed. In the second quarter, health tech startups raised $324 million, up from $73.7 million in the first three months of the year.
Deal volume in the second quarter of this year soared to a new high of 231, outstripping all previous quarters going back to the first three months of 2019, during pre-COVID times, DealStreetAsia's report highlighted.
Total deal volume in the first half of 2021 stood at 442, a third more than the same period last year, which saw 330 deals. That figure, in turn, exceeded the 254 deals seen in the first half of 2019.
Southeast Asia's upward trend in deal activity is reflected in the wider Asia-Pacific region. According to data and analytics company GlobalData, the region saw month-on-month growth of 56.6% in deals in June. A total of 1,190 transactions -- mergers and acquisitions, private equity, and venture financing -- were announced in the Asia-Pacific in June, compared with 760 transactions announced the previous month, the company said.
"Deal activity appears to be on the path to recovery, with investor sentiment gaining confidence due to the progress in vaccination in most of the key APAC markets," Aurojyoti Bose, lead analyst at GlobalData said. Deal activity grew month on month in June across key markets, including China at 142.3%, India at 30.2%, Japan at 11.8%, South Korea at 43.7% and Hong Kong at 29.4%.
Compared with the previous month, June saw venture financing deal volume grow by 91.3%, mergers and acquisitions by 24.9% and private equity by 15.6%, GlobalData noted.
ASEAN has seen a flurry of interest in the bloc's tech startups, as unicorns in the region -- young companies valued at over $1 billion -- ride the wave of digitization spurred by COVID to solidify their dominance.
Upcoming initial public offerings of ASEAN's unicorns, such as Bukalapak, Grab and GoTo this year, are expected to spawn more tech IPOs and generate more interest in Southeast Asian assets among global investors, DealStreetAsia said in its report.
Within the bloc, it noted that the Philippines recorded the biggest pickup in activity in the second quarter this year, recording 14 deals, more than double the six each seen in the previous two quarters. "Homegrown startups raised $227 million, led by Voyager Innovations' $167 million round," DealStreetAsia's Haswidi said of the fundraising activity in the country.
Singapore took out the lion's share of deal making, accounting for half the total by value in ASEAN in the second quarter. It attracted $2.85 billion for 113 deals, little changed from the first quarter's $2.97 billion and 111 deals.
Swarup Gupta, industry manager at the Economist Intelligence Unit, noted that Singapore is highly rated for its foreign investment policy, foreign trade and exchange controls.
"The city-state presents an attractive market for foreign investors, owing to its liberal investment climate, stable and transparent political and business regime, world-class infrastructure, highly educated workforce, competitive economy, and favorable tax system," he told Nikkei Asia.
Gupta pointed out that Singapore passed the Variable Capital Companies Act in January 2020, which has been a major catalyst for investment activity in the country. He observed that the VCC structure has lower capital requirements, while also granting tax exemptions and flexibility when it comes to disbursing capital to shareholders, an attractive feature for venture capitalists.
"Setting up a VCC also does away with the need to create several stand-alone companies, offers a safeguard against liabilities, as well as the degree of flexibility fund managers desire," Gupta added. "As a result of these factors, Singapore will consolidate its position as a wealth-management center and retain its place as one of the most affluent countries in Asia," he predicted.