What do VCs in SE Asia expect from 2021?

02 Feb 2021

Rhino Ventures Asia Careers Details

2020 was an unusually eventful, unpredictable and difficult year for both startups and venture capitalists, filled with some of the toughest social, economic, and political challenges in recent history. With the introduction of the new COVID-19 vaccines, markets are expected to stabilise, but this medical breakthrough is no silver bullet - investors should expect the process to be slow, gradual and long. The structural changes caused by the pandemic, if not already permanent, will take time to reverse.

COVID-19 hit China first, and therefore the Asia Pacific region is also expected to be the first to emerge from the crisis in 2021. The Swiss bank Credit Suisse has forecast a 19% return in USD for the region by the end of 2021, compared to just 15% globally. Half of Asia's population is expected to be vaccinated by mid-2021, which means that travel restrictions will be lifted, borders will reopen, and economic growth within Asia will continue to normalise. While this is good news for development overall, some trends may have changed permanently.

Welcome to the new normal: more and more jobs have shifted to a permanent work-from-home model, and countless businesses and factories have been closed or permanently relocated. In the face of these changes and the greater uncertainty of the global COVID-19 recession, venture capitalists need to take proactive steps to protect their assets and to help them succeed in their endeavours and projects. Even as the vaccines become more accessible, markets may still be hit hard by restrictions and consumers will be extra cautious. 2021 could bring a strong possibility of economic recovery, but to take advantage of this upswing investors must adapt to new needs, strategies, constraints, and products.

After a record-breaking 2020, pharmaceutical and biotech venture capital activity in Asia will once again top $20 billion this year with increased investment in healthcare initiatives across the region. Healthcare spending in Singapore, for example, is expected to increase significantly due to higher subsidies to public hospitals and health institutions.

We believe startups working with automation, autonomous vehicles, core technologies, healthcare, hybrid work and infrastructure will likely be of specific interest to VC's, especially those located in Asia. For example, Rhino Ventures Asia will focus on impactful and self-sustainable ventures in pet tech, health & wellness, travel tech, clean tech, e-commerce & marketplaces, financial tech, and hard tech industries. Sectors that have been critical during the pandemic, such as manufacturing and technology, will continue to grow, while those most driven by supply and demand dynamics, such as retail and services, may continue on a downward slope. Investors may need to take more risk and take advantage of previously property-less, higher-yielding instruments, such as infrastructure and agriculture, to generate the ROI they seek. This means founders will have to be cautious with their own due-dilligence in choosing the perfect financial partner to help them scale.

The services sector of the economy was disproportionately affected by COVID-19 as compared to manufacturing. In light of this, Ronald Chan of Manulife Investment Management believes that the sectors of “technology such as artificial intelligence, automation, 5G and biotechnology will continue to function as a result of the pandemic and the need for companies to adopt some of these technologies to maintain growth". As countries around the world put more emphasis on climate change and environmental, social and governance (ESG) investing enters the mainstream, industries related to sustainability, such as electric vehicles and battery storage, and the supply chain will receive more attention.

The relative resilience of Asian economies, moderate inflation, and the attractive yield differential between Asian sovereigns and US Treasuries all help increase the attractiveness of Asian bonds. The outlook offers attractive sustainable opportunities with evidence to suggest that sustainable investing can achieve the same, if not better, returns than traditional bonds. Indonesian bonds, for example, have already led a recovery amid prospects for an economic rebound thanks to vaccines, according to a Bloomberg report.

Thanks to this culmination of factors, regardless of the industry, companies focused on values are set to generate higher profits than those focused solely on profits. This generation of customers makes a vote of confidence with their money, and are far more inclined to buy from companies that reflect their principles and values. Rhino Ventures Asia’s goal is to create compelling products and services that shape the future through disruptive technology, market-void fillers, platform plays and semi-synthetic ventures; progress society through relentless creative thinking and technology. The private sector must help to solve complex economic, environmental, and social challenges that impact us all, and they must do so competently and transparently to earn the trust and loyalty of these conscientious consumers in tough times.

If you’re an early-stage startup working on something impactful and you’re looking to raise funds in 2021, send us your deck! We’d love to hear from you. Whether you are helping people, animals, or nature, we actively support good incentives that make a difference. Please visit our partners page and feel free to make an introduction. Our team will be delighted to speak with you to see if we can help support you.

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