Trends in India and South-East Asia start-up ecosystems

India and SEA follow similar tracks in the startup ecosystem with India providing a catalyst for the development of certain segments in SEA.

However the key trend grabbing headlines in both regions is - exits. The more mature start-ups in both India and South-East Asia are increasingly looking at options to exit, whether through a public listing via a SPAC demerger or the traditional IPO route. A number of companies in SE Asia, such as Grab, Traveloka, Bukalapak, and Tiket.com all appear to be looking at SPAC options, according to media reports. Others are looking for a more traditional route, with Goto apparently opting for a dual listing in Jakarta and the US, most likely through a traditional IPO.

India also has a significant line-up of potential listings this year with Flipkart as the largest touted to be valued at US$40bn, which is considering a SPAC listing but others such as Zomato, Delhivery, and UI Path are more intent on listing in the local market, which signals interest in those segments. E-commerce, fintech, logistics, and ride-hailing are the dominant segments in terms of potential new listings planned for 2021. Paytm, India's largest digital payments facilitator is also looking to list locally raising US$3bn, with a valuation of US$25-30bn and may consider a US listing later.

The trend towards online groceries continues to grow, with some clear examples of online to offline taking shape in Indonesia and Vietnam, and large players in India focusing on this space. This category and its surrounding ecosystem is also seeing more interest, with Alibaba-backed Bigbasket and Tata-backed Growfast both vying for market position in India. Flipkart and Amazon are looking to enter this space in India. Alibaba through Lazada recently invested US$400m Vietnamese retail leader Masan Corp's online grocery business, the CrownX, valuing that company at US$5.6bn. In Indonesia, Gojek has quietly taken a 4% stake in Matahari Putra Prima, which operates 208 Hypermart stores in Indonesia, and Tokopedia already has 95 of these as virtual stores on the platform.

Fintech continues to develop into different areas of the ecosystem such as digitalisation of MSMEs, earned wage access, buy-now-pay-later products and more. P2P lending is also seeing growth given the large numbers of unbanked MSMEs and individuals in both geographies. Neo banking is also an emerging category with several large players acquiring licenses and building businesses to serve the digital economies of the future.

With the pandemic driving ecommerce adoption at a faster rate, logistics companies have benefited from this increased digital consumption growth. We are seeing increasing solutions focusing on trucking apps, which generate more opportunities for the truck owners on its platform, as well as providing ancillary services such as truck financing and invoice financing plus providing logistics for FMCG companies. This segment has huge potential given the fragmented state of the trucking and logistics market in both India and Indonesia.

Moreover, Edtech is also seeing rapid development fuelled by the success of the largest global player in India. Another interesting trend is in Social Commerce, which is growing quickly (a US$25bn market by 2022 according to Mckinsey) with the huge number of users on Facebook and Instagram.

In order to develop a strong and sustainable digital ecosystem, the capital which is invested needs to recirculate back to the investors, so the increased exits provides those paths to liquidity. The large public tech companies will also no doubt leverage their balance sheets and stock to further diversify via m&a, as we have seen in other markets, like the US and China. This will certainly create very interesting market dynamics in both India and SE Asia over the coming five plus years. The move towards digital by both consumers and businesses will only increase the potential to build very large businesses in this part of the world. Key trends suggest a long runway for growth ahead, with a number of new areas feeding off the larger existing players, with huge potential for growth for many sectors.

(The Author is Managing Partner, Jungle Ventures)