Web3 offers, software and health technologies in SEA attract the likes of Temasek | Alternatives

According to a new report, more than 80% of venture capital (VC) firms plan to focus more on health technologies, software as a service (SaaS) and Web3 in Southeast Asia.

“There is a lot of dry powder in the area; we remain excited about some of the new sectors we have articulated… New sectors such as web3, software, and certainly health tech, continue to grow. [draw] a lot of investor interest, which we are very pleased with,” said Fook Wai Hoong, Managing Director for Southeast Asia at Temasek, at an event to launch the e-Conomy SEA 2022 report on Thursday (October 27).

The report was produced by Google, Temasek and Bain & Company, and covered six Southeast Asian countries, namely Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

While VCs expected an increase in deal activity in health tech, software and Web3 from 2025 to 2030 compared to today, less than half expect an increase in activity in edtech transactions.

“Edtech has certainly seen an increase in adoption during the pandemic, from young students to adults coming for advanced courses. [But] the reopening of economies in schools should lead to the normalization of demand for online learning,” said Fook.

Source: e-Conomy SEA 2022

VCs remain vested in the region, the report writes, with $15 billion in dry powder in 2021. Although this is a slight drop from $16 billion in 2020, it marks an increase from compared to previous years.

“VCs are likely to reinvest in their own portfolio companies and weather the funding winter,” he writes, adding that “some VCs are ‘buying the dip’ at lower valuations, in an effort to seek opportunities higher return on investment from 2022 / 2023 vintages.”

The study also found that most venture capitalists (75%) expect valuations to continue to fall and most think it will take a few years for them to recover, less than one in four believe valuations will return to 2021 highs in 2023-24.

While total deal activity remained relatively constant at around 1,200,000 from the first half of 2021 to the first half of 2022,

Already, this year’s transaction value has exceeded last year’s by around 15%, mainly due to higher average ticket sizes. The number of transactions, however, remained relatively constant at around 1,200 from the first half of 2021 to the first half of 2022.

“The recent increase in long-term U.S. Treasury rates has made investing in high-growth tech companies less financially attractive, leading to a gradual slowdown in the second half of 2022, similar to trends in venture capital in the US. United States,” the report said. said.

Source: e-Conomy SEA 2022

Investors have also started to show more interest in early-stage rather than late-stage investments. Southeast Asia has been relatively insulated from macro headwinds, with ticket sizes increasing by 40-60%, the report writes.

Growth-stage investments hit an all-time high from the first half of 2021 to the first half of 2022. “Larger funds are active in the region and willing to follow previous investments, especially in sectors and companies that have accelerated during the pandemic,” he said.

By contrast, late-stage investments are on a downtrend as E+ megarounds have seen funding dry up amid global headwinds and a recent spate of inflated late-stage valuations.

Source: e-Conomy SEA 2022

Indeed, investors such as family offices have begun to pay more attention to start-up investments, Asian investor reported earlier in October. Some also lamented inflated ratings especially at the end of last year.

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