Inflation, high-interest rates, and war. With recessions across major markets, where are the deals to be made for the 2020s bear market?

Amid this backdrop, Datasite and CapConnect hosted three major VCs that have deployed, raised, or managed US$500m each over the past year.

Olivia Poh, a business reporter at Bloomberg who has been writing about tech in Southeast Asia, focusing on startups and VCs, led the discussion at this Dealmakers Dialogue in Singapore with the following panelists:

• David Gowdey, Managing Partner, Jungle Ventures
• Tan Yinglan, Founding Managing Partner, Insignia Ventures Partners
• Helen Wong, Managing Partner, AC Ventures

A warm winter for Southeast Asian startups

Southeast Asia has come into its own over the past few years. With a good crop of startups worth US$500 million and above, plus a fair number of unicorns (approximately 30 or more), the region has seen huge amounts of funding. No doubt the region has grown exponentially.

Looking at cycles that define the startup world, the current one is not yet the worst VCs in the region have seen. Yet, they feel it may be a warm winter for Southeast Asian startups. Except for India, which is showing good GDP growth and a lot more liquidity over the last 3 years. Southeast Asian markets seem to have some insulation, which other markets don't have, and experience different market dynamics compared to the US or Europe.

The startup ecosystem is also evolving. Fifteen years ago, institutional capital was not readily available in Southeast Asia. There was less focus on good governance among startups. Flash forward to today, and the region is maturing in both aspects.

For investors looking for target companies to acquire, Southeast Asia is the place to build that balance sheet and a good market to buy into.

PE firms eye companies in Southeast Asia

For investors looking for target companies to acquire, Southeast Asia is the place to build that balance sheet and a good market to buy into. Liquidity in this part of the world is going to be a big driver of M&A, with the region serving as a really good secondary market for many early-stage investors.

One of the major issues in Southeast Asia is the lack of public exchanges, like the NASDAQ, which is conducive to raising capital for tech startups. For example, the SGX has a lot of value-based investors and most of the stocks are dividend return stocks and there's depth in the market. However, it does not value tech companies the way other exchanges in the world would value them.

Also, VCs have raised the question of whether Southeast Asia is going to be like China or more like India. The good news is that India is turned quite a bit over the last three years and now there is a lot more liquidity and the BSE has removed its profits test. There is still going to be Chinese expansion into the region because Southeast Asia is an easier market compared to the US and Europe in terms of building a US dollar-denominated balance sheet outside of China as there's a lot more liquidity in the region that can drive dealmaking in the future.

Some VCs predict that a new wave of global companies could be created in the next six to twelve months led by ambitious Chinese entrepreneurs. Focused on deep tech, healthcare, and the B2B segment, Chinese startups are looking to establish bases in the Southeast Asian region. This increasing competition could present new dealmaking opportunities for the region’s M&A markets in the foreseeable future.