Friday Letter: Why more LPs are paying attention to South-East Asia

VCs in South-East Asia are telling me that LPs are eyeing the region and 2021 could be watershed year for investors.

In late 2019, which now feels like several years ago, I wrote about the bustling investment scene in South-East Asia as seen through the eyes of Indonesia-focused early-stage investor Intudo Ventures.

It’s time to update that story.

I’ve chatted with several investors from South-East Asia over the last several weeks, and they all agree that the region is doing well, all things considered, in the midst of a pandemic.

As one venture capital investor pointed out, the initial boom of VC in South-East Asia began after the Great Recession a decade ago. Now, the pandemic is fueling more consumer spending online and a host of e-commerce activities across the region, which has added 40 million new users this year to a total internet population of 400 million. That’s according to the latest e-Conomy SEA report, which was released last month by Google, Temasek Holdings and Bain & Company.

“South-East Asia is equipped to weather the pandemic, and we expect to see rising investment during and after the coronavirus,” a VC told me.

Meanwhile, more US firms are setting up satellite locations in South-East Asia. GGV Capital, which has offices in Menlo Park and San Francisco and has been active in China for two decades, opened an office in Singapore last year, its first in the region.

This year, Lightspeed Venture Partners followed suit. The firm, which had already made a handful of investments, including a growth investment in the super app Grab, has opened an office in Singapore. Although the physical office is not being used, Lightspeed partner Akshay Bhushan said the team had been set up and he expects to invest in two to three deals in the area.

The question now is whether the LPs will follow.

Another GP in the region told me LPs are certainly showing interest: “The European LPs  are seeing an opportunity to take part in South-East Asia after having no skin in the game in China and India early on.”

That notion was borne out by Amit Anand of Singapore-based Jungle Ventures, who told Venture Capital Journal last month that he was seeing increased interest from European LPs, particularly banks and family offices.

Another VC told me this week: “LPs from all over are getting comfortable with the region and the country-specific funds in South-East Asia. As we see more exits, more US investors will come here. 2021 could become a huge year for VCs and LPs in South-East Asia.”

Tell me what you think. Is interest in South-East Asia justified? And what’s your strategy for the region?

Drop me a line at agoldfisher@buyoutsinsider.com and let me what you think. I’d also be happy to set up a call on Zoom or the phone if you’d prefer.