Are venture capital funds making money by investing in Indian and Southeast Asian startups?

Singapore, March 7 (ANI): Last week, Accel (formerly Accel Partners) announced the launch of a USD650 million fund which will invest in Indian and Southeast Asian startups. It represents the seventh time the venture capital fund is sinking money into the region and its largest to date.

Headquartered in Palo Alto, California, the American firm specialises in working with startups in seed and early growth stage. It also has offices in San Francisco, London and India. Among its marque investments are Facebook, Dropbox, Slack and Spotify.

In India, Flipkart, Freshworks and Swiggy are some of the more famous companies that it has invested in. India has seen a spectacular expansion of its startup scene in the last few years. Over 52,000 entities are officially recognised as startups by the Department for Promotion of Industry and Internal Trade (DPIIT) as of July 2021. DealStreetAsia estimates that 30 firms in India reached USD1 billion in valuation last year, making the total number of such “unicorn” firms touch 50 in the country.

While it is important and indeed takes a lot of skill, experience, and foresight to correctly pick a company at an early stage, it is equally important to be able to “exit” with a profit. The most common way for a startup to exit is via an Initial Public Offering (IPO). However, being able to list publicly on the stock market doesn’t guarantee success.

One of the largest venture capital funds in the world, Japan Soft Bank’s Vision Fund reported a quarterly loss of 825.1 billion yen (USD7.3 billion) in the three-months which ended September 2021. This was due to the plunging value of recent listings such as South Korean ecommerce firm Coupang Inc. and Chinese ride-hailing app Didi Global Inc.

Softbank’s 2019 failed attempt to list U.S. shared workspace services company WeWork is still fresh on many people’s mind.

Investors were concerned over issues of corporate governance, valuation and future profitability. Although it did eventually manage to IPO after merging with a SPAC (special purpose acquisition company) in October 2021, with a valuation of about USD9 billion, it was still way off the USD 47 billion valuation touted to investors during the 2019 IPO attempt. It’s closing price last Friday was USD4.77, some 68 per cent off its October high.

Another of Softbank’s bets which is not turning out too well is Singapore’s Grab. Southeast Asia’s largest ride-hailing and food delivery company listed on the U.S. market December 2021 through a SPAC. Its host SPAC, Altimeter’s share price was USD 11, the day before it listed but on the first day after listing, it closed at USD 8.75. Currently, as of last Friday, it was trading almost62 percent lower at USD 3.36.

Last week, Grab posted disappointing results – its first since listing – with revenue falling 44 percent to USD 122 million in the fourth quarter, well below the average analysts’ estimate of USD 167 million. Its quarter-on-quarter loss expanded USD 465 million to USD 1.1 billion, including expenses related to Grab’s listing.

The firm cited higher driver incentives and promotional offers as the reason for the heavy loss. Its share price has now lost nearly three-quarters of its value since listing, valuing it at USD12.6 billion, down from its USD40 billion value at IPO.

Another ubiquitous Singapore new economy company and regional ecommerce giant Shopee which trades under the name of Sea Limited has also seen its value plummet in recent weeks.

Its share price closed the week at a post-pandemic low of USD97.44, valuing it at USD 54.35 billion. Last October, Sea Limited which is listed on the NYSE, was deemed by investors to be worth USD 208 billion when its share price hit an all-time high of USD372.70. This made it Singapore’s most valuable company and worth almost three times higher than Singapore’s next most valuable company, DBS Bank which had a market value of USD 71 billion at its peak.

Last week, the Tencent-backed company reported a wider net loss of USD0.88 per share than expected by the market which estimated that it would lose USD 0.59. The quarterly loss per share is similar to that achieved in the same quarter last year.

Although total revenues rose 105.7 per cent to USD 3.2 billion year-over-year surpassing analysts’ expectations of USD 2.91 billion, the market focused on its poor earnings, causing the share price to fall 31 per cent for the week.

Sea’s problems were not limited to poorer earnings. In January, Tencent offloaded USD 3 billion worth of its shares to reduce its holding in the company from […]

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