Southeast Asian countries highly value private startups valued at over $1 billion, referred to as “unicorns”, for his or her significant contributions to economic development. Unicorns drive job creation, innovation, productivity and the expansion of international trade. Investors are also attracted by their potential for rapid growth and lucrative profits. That’s why many Southeast Asian countries, including Indonesia, Malaysia and Vietnam, are wanting to breed unicorns inside their borders, setting ambitious goals for the creation of unicorns. For example, Indonesia goals to create 20 latest unicorns by 2025, in step with the unique goal of three within the Medium-Term National Development Plan (2020-2024). Malaysia plans to create five tech unicorns by 2025, while Vietnam plans to have five tech unicorns by 2025 and one other five by 2030.
A powerful startup ecosystem is crucial to generating unicorns. Singapore ranks eighth on this planet by way of the strength of its startup ecosystem, leading ASEAN in creating unicorns. It is a number one financial center, attracting enterprise capital and entrepreneurs. In 2022, Singapore had 4,000 tech startups, over 400 enterprise capital firms and 700 family offices. However, in 2022, the expansion of unicorns slowed, with only three latest ones emerging, for a complete of 26. Unicorns in Singapore span finance and e-commerce, serving global markets unlike most ASEAN countries.
Indonesia is emerging as a unicorn hotspot in ASEAN. In 2022, it had the second-highest variety of unicorns after Singapore, boasting 15, including two unicorns akin to GoTo and J&T Express, created by the merger of Gojek and Tokopedia. Indonesia’s large domestic market, growing middle class and tech-savvy youth are attracting investment, enabling local startups to resonate with consumers and achieve unicorn status. The fintech sector is important as a result of the massive variety of unbanked and underbanked residents. Indonesia is a pacesetter within the digital economy, accounting for 40% of the regional market. The Covid-19 pandemic has accelerated technology adoption to the advantage of e-commerce, with Tokopedia playing a key role. Vietnam may follow Indonesia in unicorn growth with its 4 unicorns. Meanwhile, the Philippines, Malaysia and Thailand recently entered the unicorn arena in 2021 and 2022.
ASEAN saw a unicorn boom in 2021, driven by aspects including increased smartphone use, accelerated digitalization as a result of the COVID-19 pandemic, a growing middle class, and government efforts to advertise the digital economy. Investments within the private equity market played a key role – the private equity market in Southeast Asia reached a record amount of USD 25 billion in 2021. However, this figure dropped to $13 billion in 2022 as a result of global uncertainty, rising rates of interest and difficult exit conditions.
Once firms achieve unicorn status, they’ve several options. They can remain private to keep up control or go public in an initial public offering (IPO). Alternatively, they could engage in mergers and acquisitions (M&A). For example, in 2022, Malaysia-based Carsome postponed its dual listing as a result of concerns about economic conditions affecting valuation.
In Singapore, 4 unicorns (Razer, Garena, Nanofilm and Grab) went public, with Lazada and Bigo Live acquired by Alibaba and YY, respectively. Indonesia has included Bukalapak and GoTo on its unicorn list.
Unicorns in ASEAN face sustainability challenges, including concerns about overvaluation. The $1 billion unicorn threshold often reflects aspirational valuations slightly than empirical assessments, and limited data makes it difficult to check. When unicorns go public, profitability becomes key, which generally is a challenge in uncertain global conditions with rising rates of interest. This shift toward profitability contrasts with the sooner deal with rapid growth, making attracting investors tougher for loss-making startups.
The “camel” model is becoming increasingly popular, emphasizing sustainable development, quality over price battle and positive money flows. This signals a shift away from unicorn appeal as firms prioritize long-term stability and profitability.
