Investors Shift From China To Southeast Asia, India Amid Crackdown On Big Tech
Tokyo: Beijing's regulatory crackdown on tech companies has prompted start-up investors to look for new markets in Southeast Asia including India.
Wataru Suzuki, writing in Nikkei Asia said that venture capital (VC) firms that back start-ups in Southeast Asia and India are raising record sums for new funds.
Southeast Asia- and India-focused VC funds have raised USD 3.1 billion so far in 2022, already nearing the USD 3.5 billion they raised in all of last year, according to data from research company Preqin.
In comparison, fundraising by China-focused VCs fell sharply from USD 27.2 billion in 2021 to just USD 2.1 billion, said Wataru.
"Fifty per cent of the investors we spoke to are trying to diversify out of China," said Amit Anand, co-founder of Singapore-based Jungle Ventures, which recently raised USD 600 million for new funds to invest in Southeast Asian and Indian start-ups.
Jungle Ventures plans to make "concentrated" investments in 15 to 18 companies with an even split between the two regions, Anand said.
Earlier this month, Singapore-based East Ventures said it raised USD 550 million to invest in start-ups in Southeast Asia, bringing assets under management to more than USD 1 billion. In April, India's Elevation Capital said it raised its largest-ever fund with USD670 million, reported Nikkei Asia.
VC funds raise money from investors that range from pension funds and university endowment funds to wealthy tycoons. Southeast Asia and India have emerged as attractive markets due to the fast growth of start-ups in both regions in recent years, culminating in a series of blockbuster listings last year from the likes of Indian food delivery company Zomato and Singaporean Superapp Grab, added Wataru.
At the same time, there has been what observers call a dramatic change in policy by the Chinese government. Beijing banned for-profit tutoring last year, crippling the business models of online education companies, many of which were backed by foreign venture capital firms.
That led to large paper losses: SoftBank Group wrote down its USD 700 million investment in Zuoyebang, the developer of an app that helped students with their homework, to USD 100 million by March.
China also introduced tougher rules on large tech platforms, including measures to promote competition and regulations on how they must handle user data.
The moves caused shares of large publicly listed companies like Alibaba Group Holding and Tencent Holdings to fall sharply, Nikkei Asia reported.
The executive added that funds focused on India and Southeast Asia are quickly oversubscribed because the size of the venture capital market is still much smaller than China.
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