Southeast Asian Startups’ ‘Valley of Death’

For Southeast Asian fintech startups, securing a second round of funding can be deadly.

Speaking to DealStreetAsia, FinAccel CEO Akshay Garg detailed what it was it was like to secure the “largest ever” Series B round for a Southeast Asian fintech company. The picture he drew, however, wasn’t pretty.

The dearth of local funds in the $200-300 million range apparently forced the company to seek overseas funding for its subsidiary, Kredivo. Only one regional firm – Telcom Indonesia’s MDI Ventures – managed to invest in the digital credit card service startup, compelling FinAccel to wrap up the round later than expected.

Five years ago there was a huge Series A crunch, that’s when funds like Jungle and Openspace and Vertex and all these guys came in, but these are $100 – $150 million funds, they write Series A checks, they don’t do Series B. Right now there are no Series B investors in Southeast Asia.

Typically those that come in at the Series C are the private equity firms. They would write a check size of $20-$25 million at a minimum, so that would be the private equity players like Temasek, General Atlantic and KKR. But at Series B, people have to write $5-10 million checks. Who’s there? Noone. So Series C is very well covered. But for Series B, there is a huge gap in the market.

The Series B gap in Southeast Asia is apparently now called the “valley of death” because of how difficult it is. Garg even considers his company an outlier, saying that not only are they “lucky,” but also fortunate to be one of the “highest quality companies out there.” According to DealStreetAsia, other startups have not been as lucky.

At any rate, Kredivo went on to secure $30 million for its Series B. Australia’s Square Peg Capital led the round, with the U.K.’s Atami Capital joining MDI Ventures.

Photo: Georgi Kovachev