Since day one of our partnership, we’ve embraced a global mindset. By that, we mean being deeply connected, engaged, and present in the global startup communities and ecosystems around the world where we've decided to invest in. While the U.S. has been the traditional anchor for innovative creations, increasingly we have seen many exciting ideas originating from places like India, China, Israel, Ireland, and Southeast Asia. Therefore, we’ve established our base in Silicon Valley, Los Angeles, and Singapore – searching for the best teams and innovations that we believe could positively impact our global communities.
Knowledge exchange is happening at massive scale in real time, allowing us to continuously build leading global perspectives while maintaining a strong presence in local markets. We view ourselves as hyperlocal venture capitalists who can provide companies with both trusted local expertise/advice and a truly global network for vertical and horizontal business acceleration. While experienced VC advice is more readily available in developed markets, such value add is still largely missing and much needed in emerging markets. We have heard this on a constant basis from the many entrepreneurs we meet and work with in Asia.
Much has been discussed about the U.S. startup ecosystem. In this blog post, we would like to focus on India and Southeast Asia. These are regions that we think that are still facing many gaps today. Whether it is funding availability, stage, talent, institutions, or exits, the presence of such whitespaces in the ecosystem makes it equally challenging and rewarding for investors. We are very excited and bullish in the long run because we see the opportunity to bridge that gap and make a positive impact in a community of two billion people.
Asia Whitespace through the Data Lenses
According to the IMF, India’s GDP stood at roughly US$2.1 trillion, with a 1.3 billion population. Southeast Asia as a region has 628 million people and commands a GDP of roughly US$2.4 trillion. To put things in perspective, the U.S. population is roughly 320 million people but has an enormous $18 trillion economy. Still, both India and Southeast Asia represent vast market potential. India is projected to grow at 5.9% between 2014 - 2018 and Southeast Asia at 5.4%. That is double the average U.S. growth rate of 2.5%.
Yet, many investors traditionally bet on the U.S. market. In 2015, the U.S. alone saw a total of $58.8 billion in venture investments. Contrast that number with Asia, which has a population 10 times the size of the U.S., but only saw $55.3 billion in venture investments in 2015. Most were skewed disproportionally towards China, with the Asian giant taking the lion’s share of investments, totaling $41.8 billion. India came in second at $8 billion and all of Southeast Asia received only about $1.6 billion in venture investments. When comparing against the U.S. and even India, Southeast Asia as an ecosystem is very early in its level of funding development. Roughly speaking, while China has been rapidly catching up with the U.S., India is still half a generation behind the U.S., and Southeast Asia is trailing behind by at least one generation.
From an aggregate funding perspective, it’s clear to us that the funding gap has existed for a while. From our experience and analysis of India and Southeast Asia, funding pace improved around 2005/06 in India when there was a sharp increase in new VC funds and private investments almost tripled. For Southeast Asia, the inflexion point came in 2013, when technology investments jumped from about US$200 million in 2012 to US$800 million in 2013, effectively quadrupling. While such recent growth has been encouraging for both India and Southeast Asia, current levels of funding still pale in comparison to the U.S. and China.
In terms of the maturity of startups, it is also noteworthy to highlight that many investments across India and Southeast Asia have been focused around early stage. This is especially true for Southeast Asia, where 90% of investments made in 2015 still revolved around seed and early stage (i.e. Pre-A and Series A), compared to the U.S. where 57% of 2015 venture investments were made in early stage companies. From our experience operating on the ground, we observe companies with fewer options and a potential gap in growth stage funding, especially Series B and C, which are crucial in taking a company from proving product-market fit to achieving scale successfully.
Post-2013 witnessed the start of the e-commerce boom in Southeast Asia, with many companies launching and experimenting with business models such as Consumer-to-Consumer (C2C), flash sales, and online retail. In India, the same segment has entered a more advanced phase, reaching stratospheric valuation through multi-million dollar funding rounds and seeing the emergence of unicorns such as Flipkart, Snapdeal, Quikr, Ola Cabs, and Shopclues.
There’s been a lot of excitement in e-commerce, but we think it’s part of a larger emerging trend in Asian markets. The rapid rise and adoption of e-commerce means existing infrastructure and processes will require an upgrade. We’re already seeing how traditional logistics is broken when it comes to e-commerce in Southeast Asia. Savvy tech-enabled startups such as Ninja Van are disrupting and uplifting that space. The same goes for many others – from demand generation to customer acquisition to inventory management to order and subscriptions management and payments. And with that, we will also see innovation in the underlying core technologies that power business processes such as big data, AI, robotics, blockchain, and AR/VR. We envision a future where broader based innovation takes place across the value chain in India and Southeast Asia, and isn’t just concentrated around e-commerce.
How We Bridge the Gap
When we founded B Capital, we believed in investing in the potential and growth of the best minds globally. This includes entrepreneurs located in traditional hotspots such as Silicon Valley and also new innovation centers like Singapore, Bangalore, and Jakarta, just to name a few. We believe there are many invaluable lessons and experience that can be shared from both sides. For instance, a startup based in the valley might have insights that can help companies in emerging markets leapfrog the technology ladder. At the same time, entrepreneurs from developed markets can learn a thing or two on the complexity of cracking on-demand hyperlocal challenges from their counterparts in say, India.
B Capital, being located in both established and new innovation centers of the world, is uniquely positioned to cultivate such exchanges and learnings. And through our exclusive partnership with the Boston Consulting Group, we bring both our venture DNA and a true global network to help startups overcome their inflexion points and accelerate their growth curve.
 World Bank 2013 estimate
 IMF 2015 estimate
 OECD report on Economic Outlook for SEA, China and India 2014
 OECD data 2014 to 2017 forecast
 NVCA US
 Tech In Asia
 An Analysis Of Trends of Venture Capital and Private Equity Investments in India, Indian Journal of Economics & Business, V. R. Jyotsna Kumari
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