Venture capital firms based in Southeast Asia anticipate that fundraising will increase in 2024, yet tech organizations must provide "obvious" and "feasible" routes to becoming profitable.Yinglan Tan of Insignia Ventures Partners commented: "If 2023 was a year of transition, 2024 will be the year of taking a turn. It will be a precise turn."KPMG reported that venture capital in the Asia-Pacific region diminished to $20.3 billion in the third quarter of 2023 - its lowest point since the first quarter of 2017.
Venture capital firms in Southeast Asia anticipate that fundraising activity will become more prevalent in 2024, however tech companies must be able to prove they have a "clear" and "viable" way of becoming profitable. According to a report jointly published by Google, Temasek and Bain & Company, macroeconomic issues such as inflation and the exorbitance of capital have caused investment in private funding to be at its lowest level in six years. KPMG noted that venture capital funding in the Asia-Pacific region declined to $20.3 billion in the third quarter of 2023, which is the least since the initial quarter of 2017. Comparatively, the VC investment worldwide was at its most reduced amount since the third quarter of 2016, with deal volume likewise attaining their least value since the second quarter of 2019. Peng T. Ong, co-founder and managing partner at Monk's Hill Ventures stated his belief that deployment of venture capital within Southeast Asia will be freed up soon. Jussi Salovaara, co-founder and managing partner of Asia at Antler, expects VC backing to rise during the latter half of 2024, saying “We believe it's going up, especially towards the second half of the year. There's definitely a shock driven by the rising interest rates, crash in venture funding, which then led to a crash in limited-partner capital coming into funds and funds being pickier. So it takes a bit of time to recover.”
Venture capitalists interviewed by CNBC a year ago predicted that they would be more discerning in 2023 than they were in 2022. Salovaara from Antler reported that while many VCs grew more selective, his firm continued to invest. As a Google, Temasek, and Bain & Company report revealed, the amount of "dry powder," or funds available with VCs, increased to $15.7 billion at the end of 2022, up from $12.4 billion in 2021, signaling that investors have become more cautious in their choices.
The report stated that sufficient fuel exists to drive the digital economy of Southeast Asia to the next level. However, in this current economic situation, tech enterprises must demonstrate to investors that they have realistic and attainable routes to profit. Yinglan Tan, founding managing partner of Insignia Ventures Partners, said "If 2023 was a gear shift year, 2024 will be the year of turning a corner - a navigation which will involve challenges from geopolitics, interest rates, public markets, and a maturing competitive landscape which will affect monetization and capital allocation for tech companies." Tech corporations generally prioritize expansion over profitability initially, which often means extensive expenditures. Nonetheless, with economic headwinds reducing growth, they have been compelled to shift their attention to profit and become more frugal with costs. According to Tan, "The chance lies in discovering entrepreneurs and businesses that are perfecting what is inside their control, such as growth strategy and expenses, to resist pressures and become cost-efficient in growth."
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