Tech startups from Southeast Asia tend to head to Australia when it comes time to cash out and list on a stock exchange.
The ASX is preferred against the Singapore Exchange and Hong Kong because of access to investors used to putting a proportion of their cash in tech stocks.
And more are on the way, according to Singapore-based Golden Gate Ventures which says Southeast Asian stock exchanges are not known for their track record of listing tech startups.
“Many turn to the Australian Stock Exchange (ASX) instead,” says the venture capital firm in its Bamboo Report on Asia VC investment.
Out of eleven ASEAN (Association of Southeast Asian Nations) tech IPOs in the last fifteen years, five listed on ASX.
Justin Hall, principal at Golden Gate Ventures, told Business Insider that startups around the region see the ASX as the easiest way to publicly list their company.
And the region appears to be on the cusp of an explosion of IPO exits.
In 2015, firms including Golden Gate Ventures, Northstar Group, Venturra Capital, Sequoia, and KKR launched or backed Southeast Asia-focused funds with a total capitalisation of about $US2 billion.
That funding is feeding into the tech startup community, helping to build businesses and get them closer to a startup of a trade sale.
“Listing in Southeast Asia is very different from listing in the United States, east Asia, or Europe; there, publicly listing is usually the last stop in a company’s fundraising journey,” Hall says
“In Southeast Asia, publicly listing is considered just another step along the way. As new funds emerge, especially growth-stage funds, this is likely to change the dynamic of a company’s fundraising strategy.”
And Australia won’t get all the flow from tech companies looking for a listing.
“Singapore’s stock exchange has been aggressively courting technology companies, and they’ve made successful inroads with some of the region’s best institutional investors, especially on the later-stage side,” Hall says.
“I believe the thinking there is that as new (venture capital) funds emerge, the propensity for startups to go public to raise a (relatively) small amount of funding will decrease and they will become more reliant on these new funds to raise Series B and growth-stage rounds.
“The trade-off will be that as these companies continue to grow and scale, they will be more inclined to list locally (on SGX) and view going public here as the last stop. That would be the ideal scenario.”
Southeast Asia, like China a decade ago, is an emerging market on the brink of something big.
Five of the ten member countries of ASEAN are among the top 25 countries globally in terms of GDP growth. The ASEAN Economic Community had a nominal GDP of $2.4 trillion in 2013, placing it seventh overall in the world and is predicted to rise to the fourth spot by 2050.
Despite the expected increased IPO activity in the region, the mergers and acquisitions market in Asia is much bigger for tech startups as an exit strategy than listing on an exchange.
Golden Gate Ventures says a restrictive regulatory climate makes M&A the smarter, and often more lucrative, choice for tech companies in Southeast Asia.
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