It has been a short week in most of the markets in Asia with the Lunar New Year holiday.
But amid the preparations, tech markets were roiled by revelations that a hitherto under-the-radar Chinese startup DeepSeek could rival the performance of OpenAI. And crucially, that it can be done with much fewer, and even less-advanced, chips, and thus at a fraction of the expense that has gone into AI development in Western markets thus far.
DeepSeek has reportedly garnered rave reviews for its AI models from Silicon Valley investors, though its American tech rivals are reportedly scrutinising whether it is using their work to develop its technology. Regardless, DeepSeek’s breakthrough throws the spotlight onto AI innovation, and its investment needs.
It remains to be seen how AI-focused startups and funds across Asia will be impacted. DealStreetAsia’s DATA VANTAGE noted that there has been a rise in AI-focused ventures, and deal volume in 2024 in the data analytics and AI and machine learning categories grew nearly 30%.
OpenAI itself has other problems. News organisations, writers, and musicians are taking it to court with claims that the system improperly used copyrighted content to train AI services.
Startup woes
Overall fundraising for startups in Southeast Asia in 2024 continued to be dismal, as the year ended at a historic new low, according to our research team. Startups in the region raised a dismal $1.2 billion in equity funding, although debt financing picked up.
Bucking the trend are fintech businesses, which accounted for more than a third of total fundraising value in 2024 in the region, up from a fifth in 2023. The sector led in deal volume and value for the year, at 154 deals worth some $1.68 billion, DealStreetAsia data research found.
Meanwhile, questions about the viability for Indonesian aquatech startup eFishery are now swirling, as its investors grapple with the fallout of fraud allegations, and the labour union presents its own demands. Even as the company, which just raised $200 million 18 months ago, may have enough cash to sustain operations, not everyone is convinced that operations, or could, continue, our Indonesian team reports.
In Vietnam, ecommerce enabler Telio is believed to have closed shop. The startup had raised new funding less than two years ago and counts top VCs as investors.
The fraud allegations surrounding eFishery have now flowed over India, where the company had launched in March 2023 and was in the process of an ambitious expansion plan. The issues with eFishery have raised the alarm among Indian stakeholders, and triggered fresh concerns about governance in an ecosystem that has already gone through a number of startup failures, as our reporter in India writes.
Indeed, in a DealStreetAsia’s analysis, the Indian PE-VC sector is already bracing itself for a tough fundraising season, amid a booming equities market, a glut of dry powder, and still-limited distribution track record.
As LPs rein in their allocations, with some bypassing funds to invest directly, some managers have been driven to trim fund sizes; the overall amount raised and fund closures in 2024 are already significantly lower than in the year before.
It is not only the fund managers feeling the bite. IPO-bound Indian e-commerce platform Meesho has closed a $550 million funding round at a valuation 20% lower than in its 2021 fundraising.
As part of its Budget wishlist, the PE-VC industry has urged the government to address tax ambiguities surrounding Alternative Investment Fund operations, including the characterisation of gains, tax treatment upon fund closure, and parity in taxation between foreign and domestic funds. Currently, there are multiple regulations that treat PE-VC firms differently based on whether they are incorporated as a trust, an LLP, or as a company.
Education and healthcare themes
KKR and other shareholders may be exiting from Vietnamese education group EQuest, in which the global PE giant holds more than a 54% stake, according to regulatory filings. KKR first invested in EQuest in 2021 from its 2018-vintage Global Impact Fund.
There are believed to be some eight parties interested in the sale of stakes, including a potential strategic partner Nord Anglia, which is in turn backed by TPG and CPP Investments.
Elsewhere, EQT is said to have initiated a sale process for another Vietnamese asset – English language training centre and kindergarten operator ILA. EQT invested in ILA in 2017.
Meanwhile, Warburg Pincus, CVC Capital Partners, and TPG are reportedly among multiple bidders for a stake in Metro Pacific Hospital Holdings, the largest private hospital group in the Philippines. The sale, which was initiated last year by a KKR-led consortium, could value the business at about $3 billion.
And, Singapore-based medical aesthetic devices supplier Neoasia has reportedly progressed to the binding round of its sale process that could fetch around $100 million.
As our PE team reports, education and healthcare assets in Southeast Asia are in demand, with recent deals including Tower Capital’s acquisition of Kiztopia.
Fundraisings
A cleantech fund focused on decarbonising transport has raised $230 million, a respectable corpus for a first-time fund in what has been a challenging fundraising environment. Shift4Good roped in institutional and corporate LPs to invest in clean-energy startups that are revolutionising the road and maritime transportation industries.
Plus, the fund manager itself is committed to the cause: half of its carry is tied to portfolio companies including electric vessels developer Pyxis; battery recycler Neu; and maritime wind-propulsion systems bound4blue hitting their impact targets.
Meanwhile, Vietnam-based Mekong Capital is looking to complete fundraising for its inaugural climate fund this year. The firm, which has backed consumer-focused business in Vietnam across the last two decades, is targeting a corpus of $200 million for its latest vehicle, launched in 2023.
Singapore-based venture capital firm Elev8.vc has raised $80 million for investing in early-stage deep tech. In 2020, the firm raised $15 million in its debut fund, and invested in PreAct, a vehicle safety app; Medo, a technology that simplifies ultrasound applications using AI; US-based smart electric scooter-maker Scooterson; and AI platform for social commerce Jumper.ai, among others.
CDIB Capital Group, the PE arm of Taiwan’s KGI Financial, announced the final close of its Greater China-focused mid-market buyout continuation vehicle. The fund secured commitments from institutional investors, and is likely to hold the CDIB’s portfolio companies PT MedTech, a medical devices manufacturer, and POYUN, an acoustics devices maker.
Southeast Asian VC Alpha JWC Ventures is preparing to raise its fourth fund, and sources say it could be smaller than its predecessor at about $300 million.
Trifecta Capital, a backer of Indian unicorns including quick commerce startup Zepto and fintech firm BharatPe, is expecting to close its fourth debt fund at about $230 million by the end of the year. The vehicle is the firm’s largest yet, as founders increasingly turn to venture debt to avoid equity dilution.
In other developments in the Greater China area, we are running a two-part series on the crisis the once-booming Chinese venture capital industry is finding itself in, as government guidance funds press GPs to drive local industrial policy and maximise returns.
