Growth stocks like leading Southeast Asia ride-hailing and food delivery company Grab, eCommerce giant Sea Limited, and Indian companies Paytm, Zomato and Freshworks are players in the market that recently went public but performed poorly. Nevertheless, venture capitalists (VC) firms continue to back Indian and Southeast Asian startups.
Both listed in the United States (US), Grab and Sea Limited are down 65% year-to-date. India recorded delivery firm Zomato is down 49% while fintech company Paytm is down 53%.
Meanwhile, Nasdaq-listed software house Freshworks is down 40%.
Southeast Asia’s most significant companies like Grab, Sea Limited, Paytm, Zomato and Freshwork shared that they’re underperforming against the rest of the market due to the rising interest rates. Startups are also having a difficult time as the market and economy are not doing well today; loans are getting harder to acquire due to the growing interest and inflation, hindering firms from expanding.
Ukraine- Russian war has also severely affected the stock market that companies with a higher share of international sales are underperforming. The war also has a persistent effect on global supply chains.
Market and economic doubts are the problems that startups and other companies face today.
According to the Co-founder of Singapore-based venture capital fund Jungle Ventures Amit Anand, three of its companies deferred their IPO plans, but still, the companies will go public in the mid to long term.
On the other hand, Sequoia Capital postponed the closing date of its $2.8 billion India and Southeast Asian fund, saying there are alleged financial irregularities and corporate governance issues at some of its portfolio firms.
Softbank Group also reported a loss of $13 billion in 2021 with a backdrop of a $26.2 billion loss at its two Vision Funds with over $150 billion of funds under management. SoftBank’s Vision Fund is a VC fund based on high-risk technology startups like Grab, Didi Global, Coupang, and Alibaba.
Despite the market and economic downturn that businesses and VCs face nowadays, VCs are still willing to invest in India and Southeast Asia.
Data from London-based firm Preqin showed that India and Southeast Asia-focused VC funds are now at $3.1 billion in 2022, while China-centered VCs fell to $2.1 billion from $27.2 billion.
“Fifty percent of investors we spoke to are trying to diversify out of China,” Anand said.
Nikkei Asia reported that VCs backed away from China last year because of the technology crackdown.
Singapore-based East Ventures also said they raised 500 million in May to invest in startups in Southeast Asia, while India’s Elevation Capital said it raised $670 million last April, its largest fund to date.
VC funds are still backing up startups in India and Southeast Asia because of the fast growth of startups and favorable demographics that encourage a rapid rise in the middle class, young population, and growing digital adoption.
According to Anand, he believes that India and Southeast Asia are only getting started and have not “scratched the surface” yet.