Weathering the COVID-19 Stress Test
Genesis continues to believe strongly in the impact of technology and innovation across Southeast Asia. We believe entrepreneurs and the ecosystem at large will weather its first “stress test” brought about by COVID-19. And here are some of the structural reasons why we believe so:
Ample Venture Dry Powder in SEA. The Southeast Asia VC market is flush with fresh capital. In addition to the $20 billion deployed across Southeast Asia tech companies in 2018 & 2019, a further $4.2 billion of capital will be made available by 35 VC funds for deployment from the likes of Eduardo Saverin’s B Capital ($406m), Vertex Venture 4th SEA/India fund ($402m), Monk’s Hill Ventures Fund II ($100m), Vickers Venture Fund VI ($500m), Jungle Ventures Fund III ($240m), Golden Gate Ventures Fund III ($100m), Insignia Ventures Partners Fund II ($200m).
As China VC investment slows down, US VCs have increased their SE Asia exposure with funds like Paul Allen-backed Vulcan Capital Fund I $100m, Mass Mutual Ventures Fund II $100m and this month saw Lightspeed Ventures establish a Singapore office. These funds will deploy into deserving SE Asia companies in the next few years across Series A-D companies, boding well for the ecosystem.
Turn Profitable. An influx of venture capital dollars in recent years has encouraged many equity-sponsored companies to grow at all costs with an implicit promise of subsequent funding without having to demonstrate positive unit economics. Market consensus is that this has begun to moderate which is undoubtedly a positive development for the venture capital market at large, heralding more defensible business model economics. This will open up a new segment of companies that are primed for venture debt; a key part of Genesis’ investment approach is to seek out solid equity-sponsored companies with strong positive unit economics and without heavy leakage into buying “topline” growth.
In times of crisis, there are always opportunities. Chinese e-commerce pioneers Alibaba and JD.com emerged during the SARS crisis. Alibaba’s B2B e-commerce business thrived after foreign business professionals cancelled trips to China and began registering on its platform. The experience partly led to the birth of Taobao, which quickly surpassed eBay to become the largest C2C marketplace in China. Genesis continues to look out for emerging winners who cater to changing business needs and new-normal consumer patterns.
