Venture capitalists in Southeast Asia turn to offline businesses

Risk capitalists generally have a strong appetite for risk, but some investors in Southeast Asia are becoming more cautious.

“I think there is a great flight to security,” Aaron Tan, co -founder and CEO of used car marketplace car told CNBC.

He added that some VC investors in the region are now opting for “safe bets” that demonstrate profitability, instead of new typical high growth technological companies.

“I see many investments these days, which worries me a bit, [into] What I [think] They are not supportable companies for adventures, because … they are really out of line of nature, “he said.

This change has become more evident in the last two years, since some risk capital investors have moved their focus on new more risky companies in early stages to subsequent stages that are more established, according to experts.

“At this time, risk funds are becoming physical education funds,” said cars so. Instead of aiming 100x yields, which is traditional for risk capital companies, some risk capital investors have been obtaining 3x or 4x yields, which is more typical in private capital, he added.

“You are seeing many more investments of traditional risk capital funds in what I call brick and mortar businesses,” said Jeremy Tan, co -founder and partner of Tin Men Capital, to CNBC.

“In the best case, they are business enabled for technology, right? With that, I mean you have an application, you have an interface of fidelity, but beyond that, [you’re] Continue, essentially, physical stores … And can they offer the same return profile? I think it is an interrogation sign, “added the tan of Tin Men Capital.

From logistics companies, restaurant chains, convenience stores and even farms, some risk capital investors have been assigning more than their capital to traditional sectors and businesses, but without the war chest or the typical operational invention of private capital companies.

In Southeast Asia, risk capital investments have been declared since 2022. Financing by risk capital investors in technology -based companies has decreased by approximately 79% between 2022 and 2024, from about $ 10.1 billion to the EIGENYGENCENCE ESTEGENCENCE OF THE DIGENCY OF THE DATA ESTENCE

Meanwhile, the funds of risk capital investors in companies without technology not based on the sector also fell less in 61% in the same period, of approximately $ 1.3 billion to approximately $ 527.7 million, according to Tracxn.

All this comes in the backdrop of an ecosystem that has bones through the drainer.

Industry experts say that many new companies in the region remain non -profitable. At the same time, many funds in Southeast Asia have raised too much money and housed clean yields to their investors, also known as limited partners.

“Many of the VCs have raised too much money, right? Then you run out of places to deploy, and I think they are just trying to discover how to return their investor, for the LPS,” said Tin Men Capital’s Tan.

In addition to that, “the macro economy is very weak, either in Indonesia, either in Thailand, either in Singapore … [and] There is a clear lack of exits in this part of the world, “said cars so.

The exits, which sacrifice in investors a way of withdrawing their money and benefits from their investments, have been Carce in the region. Notable, many of the Southeast Asia Companies listed only tested “mediocre” outings for investors in the best, said such cars.

“There are not so many good [tech] Agreements must be made in this part of the world, “said such

“[Many] The funds here have raided their hopes in an opi, “said Tin Men Capital’s Tan. However, recently the market turbulence has led many new companies to delay their public lists.

The new companies that serve Southeast Asia also face unique challenges, since the economy is an aggregation of different countries with different languages, cultures, regulatory environment and more. “So, the probability of building large companies [in the region] It is much lower than the United States, “said Tin Men Capital’s Tan.

“So, as results, investors ask:” Where is the money? “… that, at the end of the day, the problem we have available is that LPS (limited partners) is not interested in investing at this time,” said cars.

Meanwhile, some investors say that companies that operate both out of line and online, or atoms and bits, respectively, are better positioned to compete.

“We believe that companies in Southeast Asia that have real carpets (sustainable competitive advantages) are atoms,” said Yinglan Tan, founding managing partner of Insignia Ventures Partners.

“If you are a pure bits business, I think there is not much pit against the main software classmates such as Microsoft and Facebook, but you have … Logistics, local licenses, you have out -of -line local mats, it is usually more competition for external competition.

In other words, companies that have online and offline assets can be more resistant compared to companies that only depend on ours.

One way to do it is to find what can be “seen as a traditional business, but [injecting] AI, to make it more efficient, increase margins, optimize income, open new products and have an offline experience, “said Insignia’s Tan.

“I maintain that the era of just finding and investing passively has gone. You need to cook.”