Venture capitalists’ long-running efforts towards launching massive funds for emerging startup segments are paying off as rounds grow larger. By the time native venture capital (VC) firm Jungle Ventures launched its newest fund (and its third in Southeast Asia), it had already pumped up its targets to $200m—significantly larger than the targets it had for its first fund in 2012: $10m. In April 2019, it successfully breached this target and closed the round with a whopping $240m.
Jungle Ventures’ latest round is one of Singapore’s largest for 2019 and highlights how VC firms are pushing their funding goals further than ever. But a question remains: where does the money from these big rounds go?
According to Valmiki Nair, partner at Dentons Rodyk, startups in fintech, payment services, B2B, and digital tech are getting the most attention from these funds. This is reflected in the data aggregated by Enterprise Singapore (ESG) which showed that for the first three quarters of 2019, digital tech startups clinched 93.2% of the $13.4b deployed towards startups, accounting for 278 deals, up from 145 deals in the same period last year.
Notably, by the time Jungle Ventures III closed, it had already invested in Indonesian beauty e-commerce and social platform Sociolla (US$40m, series D), Vietnamese point-of-sale software provider KiotViet (US$6m, series A), Jakarta-based logistics platform Waresix (US$14.5m, series A), and AI startup Engineer.ai.
But the capital does not only flow to these popular segments, as other investment areas have emerged as well. Nair noted that logistics and healthcare are the two sectors that have attracted more interest in the same year.
Notably, Reefknot Investments’ new $69m fund for logistics and supply chain startups is especially interested in companies that are using AI or deep mind tech, digital logistics, and trade finance to solve problems that range from analysing supply chain data to managing the risk of financing trade transactions.
Mark Suckling, partner at Cento Ventures, thinks that this is just the beginning for supply chain-related funds in Southeast Asia as institutional flows are still intensifying. "We expect to see a trend towards the emergence of value-chain specific funds and fund managers. Digitalisation is reaching ever further into numerous industry sectors and Southeast Asia hosts an increasing portion of many global supply chains. New venture firms and vehicles will emerge with clear sector-led investment theses for tech in the fashion industry, agriculture and food, labour, healthcare services, manufacturing, construction tech and so on,” he said.
Biotech boot up
Biotech is also taking a share of the capital, with healthcare and biomedical science startups receiving $148.3m in funding and digital health startups clinching $126.9m, according to ESG data. Investments in biopharma and medtech startups for the year were also sizeable at $21.4m. Experts see a lot of investment potential across these sub-sectors.
Vishal Harnal, partner at 500 Startups, is most excited about the biopharma space. “We will see a number of companies in the cell and gene therapies space as well as small molecules,” he said. Related startups include Lucence, which raised US$20m in a series A round in November 2019 for its product involving less invasive liquid biopsy to help clinicians analyse tumors and make treatment decisions.
Nair, on the other hand, sees interest in new medical devices, such as diagnostic devices, companion diagnostics, health software, and alternatives to drugs as innovations get traction. For instance, EndoMaster which raised $20.5m in 2017, will soon launch a robotic-assisted system that can remove tumours from the intestines and stomach without making incisions.
Hsien-Hui Tong, head of venture investing at SGInnovate, concurred with Nair but added, “Medtech products or services that focus on the users—be it healthcare professionals or patients—instead of only on the technology, which is just the enabler, will continue to win big.”
Tong said that biotech startups’ innovations can be difficult to get off the ground due to challenges unique to the sector, and these are not limited to financial metrics. “Besides the need for ‘patient’ capital, there are various unique technical, structural and cultural barriers that these startups have to overcome. It takes years, not just a few deals, to go through the cycle to get the real experience and make the right judgement calls. This is especially so for the biomedical sector as there are safety and regulatory approvals required at different stages of development as well as rounds of clinical trials to conclude,” he said.
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