Planning an IPO or merger? Here's what start-up founders need to know

There haven't been any home run style exits in South East Asia, reports Tech in Asia

Start-up founders need to understand the exit landscape from the perspective of financial investors—venture capitals (VCs) or private equity (PE) funds.

Recently, Garena, South East Asia’s most valuable tech start-up, was reported to appoint Goldman Sachs for a $1 billion IPO in the US, the largest IPO ever from a SEA-based tech start-up.

SEA vs global tech public market

According to a report by Tech in Asia, there have only been 13 tech IPOs (consumer facing, web 2.0 type) since 2001 from SEA start-ups. However, other than Migme, these are all mainly bootstrapped start-ups, which unfortunately has been facing much criticism from the media for its poor performance.

In other words, there haven’t been any home run style exits for financial investors so far in the region. 

A flourishing private tech market in SEA

Rather than taking the IPO route, SEA tech start-ups have been raising funds in the private market more aggressively. In 2016 alone, SEA tech start-ups cumulatively raised an impressive $2.2 billion in private funding, with a staggering compounded annual growth rate (CAGR) of 58 per cent from 2013, as outlined in the State of SEA Technology Ecosystem.

Exit plans?

A company, once funded, is expected to go into a liquidity event, aka exit in the future. With an ever-increasing sum of private funding going into the SEA tech scene, financial investors’ exit expectations will be higher.

Therefore, before founders start their fundraising round, they will need to have a game plan in place to understand how the business is going to generate financial returns for investors in the future. Which liquidity event will take place? An IPO? Mergers and acquisitions? This is an excerpt from Tech in Asia. You can read the full article here