In March this year, Singapore-based growth equity investment firm Asia Partners closed its inaugural fund at US$384 million in commitments. During the WiT Travel Roadshow, Episode 2, we sat down with Oliver Rippel, Founding Partner at Asia Partners to hear what trends he foresees for travel tech companies in the region, and why he still believes that this is the Golden Age for technology in South-east Asia.
While emphasising the great human tragedy brought on by the pandemic, and the impacts on disposable income from a subdued economy, Singapore-based Oliver Rippel notes that for tech in the region, the impacts were actually neutral to positive.
“We have seen great acceleration of offline to online migration [in] areas like e-commerce, health tech, etc. And also on the business side we have seen acceleration of digitisation efforts within companies, all of those are very positive for the ecosystem”.
Asked whether Covid had necessitated a re-evaluation of the bullish predictions that Asia Partners made in 2019, Rippel thinks not. Asia Partners recently publicly assessed themselves against those predictions, and in half of the eight predictions, he believes that they have been “about right”, referring to the other four as a “work in progress”.
In its predictions, Asia Partners said the region would produce more than 20 additional billion-dollar value tech companies 2029. Of these, it believes the next decade will see at least half of them pursuing an IPO, while new and existing tech companies will create an additional US$400 billion dollars of incremental equity value. Citing youthful demographics, and improvements both in corporate governance and ease of doing business, Asia Partners further predicted that 70% of the winners will be regional platforms, and 30% of them will be Indonesia focused.
One positive takeaway from the assessment, is that the fundamentals are right. Asia Partners’ bet on the ability of local and regional companies to get to sustainable scale in the region continues to be as sound as before, maybe even more so because of a push towards localisation.
Rippel sees travel as an area where big global firms will struggle to meet the localisation and regionalisation capabilities of smaller firms. Citing Indonesia, he notes that local flights have returned to their pre-pandemic levels while global demand is still 90% down. This increased demand for domestic travel also favours local players.
As these players scale, they will need to raise capital, and the region offers no shortage of models to follow. From the US$45 million acquisition of Fave by Pine Labs to the much-talked-about pending Gojek-Tokopedia merger to Grab’s planned listing via a SPAC merger (Special Purpose Acquisition Company), it is an exciting moment for South-east Asian e-commerce and tech investment, with SPACs buzzing on everyone’s lips.
Rippel however, stresses that getting listed is not a one-size-fits-all journey, and that SPACs are “just another way to transition” from being privately to publicly held. Traditionally, this transition might have featured more IPOs and direct listings, while more recently SPACs are receiving greater attention.
Caught between increased generalisation and deeper specialisation
As to who will emerge from the pandemic as major competitors to OTAs, Rippel identifies two major trends emerging.
First, he points to the further generalisation of service offerings, where travel services become just one offering among many, essentially the trend towards lifestyle super apps. The challenge is that this is easy to do for highly standardised products like flights, but less straightforward for other products.
This in turn gives rise to the second trend, which will be greater specialisation in services which are not standardised and not easy to aggregate.
The lesson for OTAs is that they must continue to reinvent themselves to stay relevant, or they risk being squeezed by both increased generalisation and deeper specialisation.
For Asia Partners’ own future focus, Rippel is not choosing a winner between enterprise tech and consumer tech, sharing that “in SEA [we expected] mainly consumer tech to be of relevance, but actually more and more enterprise software [is] coming through the ranks.”
Here too, an interesting global-local dichotomy emerges. Rippel describes the enterprise tech as belonging to two buckets, mainly Singapore headquartered companies that sell to big enterprises that have a global print, and localised or regionalized companies that mainly focus on SMEs offering bespoke specialised services for this group.
Investing with purpose – sustainability “dear to our collective hearts”
As to whether Asia Partners has plans to look further afield, Rippel does not discount it. Though he thinks that this is the right moment for South-east Asia, while other regions are in different stages of their life cycle. Naturally, he says, they will also follow their companies, sharing that there is already increased focus on India and North Asia.
One thing they have been doing and will continue to do is invest with purpose.
For Rippel, sustainability is something “very dear to our collective hearts at Asia Partners. One of the founding and design principles was [that] we need to bring purpose. Not when we are successful over a long period of time, [but] as part of the founding story of Asia Partners. So both from a policy perspective, assessing investments, helping companies on their own ESG and purpose journey, we are quite involved, taking a very active stance there, also we have terrific support on our advisory board etc., with regards to helping us on that purpose journey.”
It is heartening that among entrepreneurs in SEA, Rippel observes tremendous desire to do good and a desire to do the right thing.
Nor does he think that this means choosing between profitability and purpose. While acknowledging that while not every sustainable company will pass the business filter, he believes sustainable businesses in general will outperform in terms of ROI.
There are also opportunities to help the underdog. As global tech gets bigger and richer, these tech solutions are not localised enough. It is hard for global players to get into the heartlands, and to tier two and tier three cities, which creates an opening for smaller local firms. Rippel sees one of his responsibilities as an investor being to find and support these firms, building truly wining partnerships.
With strategic business opportunities (some even accelerated by the pandemic) in the region, and the potential for genuinely purposeful partnerships, perhaps it is not inaccurate to think of this as SEA’s golden age for investing in tech.
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