Global investors looking East to fund growing start-up ecosystem

Our Bureau Mumbai | Updated on January 15, 2018 Published on November 04, 2016

Increased investor confidence in Asia is piggy-back riding on the growth of start-ups in the region

VCs zero in on Asia with its strong economic growth, large middle class, fast-growing online market

Asia appears to be the new hotbed of activity for the start-up sector with successful investors, executives and entrepreneurs right from Russia to Israel eager to identify and support seed and early-stage businesses in the region. The immediate aim of these firms is the multi-billion dollar opportunity that banks and traditional fund houses have been slow to grasp, says start-up founders who have been at the receiving end of the funding pipe.

OurCrowd, a Jerusalem-based crowd-funding venture-capital platform, has set up a $50-million fund exclusively for investing in health technologies — a market valued globally last year at $70 billion, and projected to cross $230 billion by 2020 — the company said in a statement. The fund is to invest in digital health start-ups at seed and series A stages in Israel, the US and the Asia-Pacific region.

US-headquartered venture-capital firm 500 Startups is set to deepen its exposure to South-East Asia’s start-up ecosystem with the launch of its second fund, 500 Durians II, investing between $50,000-150,000 in seed-stage firms, and have follow-on investments of up to $500,000 for those showing great progress.

Russian companies have also evinced interest in investing specifically in the Indian start-up ecosystem. Russian crowd-sourced courier service Dostavista has raised $800,000, and is set to launch its services across major metros of Mumbai, Delhi and Bengaluru.

Another Russian conglomerate, Sistema JSFC, aims to invest in 2-3 Indian start-ups every quarter, and is looking to scale up its presence in the country beyond telecom. The company has already launched a $50-million Asia Fund, to invest in start-ups in India and Asia. Mumbai-based start-up Seclore, which offers digital-rights management solution to organisations, was the recent entity to secure $12 million in Series B round of funding from Sistema Asia Fund.

Emerging frontier

Hemant Kanakia of Indian Angel Network, which invests in early-stage ventures with potential for growth, insists South-East Asia is an emerging frontier, not just for reasons of technology, but for its strong economic growth propelled by its large middle class as well as its fast-growing online market, which has many investors zeroing in and turning bullish on the region.

Concurring with this view is Rajeev Banduni, CEO, GrowthEnabler, who adds that the younger population in the Asia-Pacific region holds the key, as it has many youngsters coming online at a rapid pace. “This region is the fastest-growing internet market in the world. Why wouldn’t investors and VC funds want to be here?,” he adds.

Banduni said that earlier investors looked only at China or India, but are now increasingly turning to South-East Asia, given its collective population of some 600 million people, many of whom are entering the internet economy for the first time.

A venture-capital fund dedicated to disruptive innovation and headquartered in Shenzhen, China, Kuang-Chi Group, has launched its second Global Community of Innovation fund, which will invest up to $250 million in companies across Asia developing technology in industries including digital health, Internet of Things, robotics, and telecommunications. The fund focuses on start-ups and follows a previous investment of $50 million in similar fields.

Irish-led fintech start-up First Circle has also announced it is gearing up to roll out its SME-financing platform in South-East Asia — a market believed to be worth $50 billion — for which it recently completed a $1.2-million seed investment round. The round was led by Dublin- and London-based Key Capital, and supported by San Francisco-based 500 Startups and Singapore-based IMJ Investment Partners.

Investor confidence

Neerav Parekh, founder and CEO, vPhrase Analytics, which helps companies communicate insights from their data, pointed out that though funding is what gives entrepreneurs wings to fulfil their dreams, increased investor confidence in Asia is piggy-back riding on the growth of start-ups in the region. Governments too are keen to create funds to invest in local start-ups in the hope of fostering the development of new tech hubs, he said.

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Published on November 04, 2016
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