2022 wrap-up: Kickstart Ventures’ insights, learnings and strategies for the future

2022 was a turbulent year for most of the world, and the VC/startup ecosystem was no exception. Global political and economic turmoil shook investor confidence and triggered a pullback from the record levels of startup investment we saw in 2021. In the third quarter of 2022, startup venture funding fell 50 percent year-on-year, triggering dire warnings about funding of winters and predictions of an impending recession in 2023.

Despite the investment slowdown, VC firms in the ASEAN region set new records by raising US$3.03 billion across 23 funds in the first half of the year. Key sectors such as e-commerce, logistics, transportation and agritech continue to attract investment dollars – with Alibaba’s combined US$1.3 billion investment in Lazada being particularly notable. Impact startups, especially climate technology companies, are also starting to see investor interest.

As we head into 2023, there are lessons we can learn from 2022 — which, after all, was still the second-highest investment year in history — and hopefully use those lessons to navigate expected headwinds for the startup investment ecosystem in the year ahead.

Kickstart’s 2022 snapshot

We have accelerated our speed of implementation over the past three years. Between the three funds we manage, we closed seven new deals and seven follow-on investments with a combined value of over $23 million. We have successfully structured complex investments to optimize risk and return in turnaround situations and deepened our legs of investment experts.

Also read: A year in review: How e27 served the tech ecosystem in 2022

  • Under the AKTIV Fund, we closed five new deals and five follow-on investments. Highlights include: Co-leading the Series A+ round for Clarity, which uses innovative hardware and software solutions to monitor air quality affordably and at scale.
  • Leads Series A round for Mosaic Solutions, a complete restaurant management system for the burgeoning Philippine F&B industry.
  • Series A lead by Eezee, a Singapore-based B2B marketplace offering a glimpse into the future of industrial procurement.
  • Series A lead for SariSuki, the leading social commerce startup in the Philippines.
  • We also participated in the Seed round of Esevel, a workforce supply startup serving the IT needs of fast-growing companies across Southeast Asia.

For Kickstart Fund One, our evergreen fund focused on early-stage startups in the Philippines and beyond, we closed two new deals:

  • Pickup Coffee, a fast-growing, digitally enabled coffee chain serving high-quality beverages at affordable prices.
  • Closer, a centralized chat app for all direct messages.

Apart from new investments, we made sure to support existing portfolio companies in navigating the ongoing global turbulence. We made follow-on investments in seven companies across our portfolio and provided strategic advice and commercial introductions to several others.

These activities align with ACTIVE Fund’s investment theses and the Ayala Sustainability Blueprint, which serve as our guide for investing in the future we hope to build for the Philippines.

What Kickstart sees in 2023

We believe online-to-offline (O2O) commerce, mobility solutions, food insecurity solutions, and solutions addressing resource insecurity and climate change will see rapid growth in 2023.

Southeast Asia’s digital economy is expected to hit 20 percent gross merchandise value (GMV) growth this year despite headwinds and could reach the $200 billion milestone a full three years earlier than predicted.

We also expect the shopping habits achieved during the COVID-19 pandemic to continue. With such a long growth trajectory and a growing digital-first population, O2O models show promise in converting new and existing online channel visitors to offline sales.

Developing countries continue to struggle with mobility issues, particularly with growing urban sprawl outstripping the expansion of public transport networks. The countless inefficiencies in public mobility cost countries billions of dollars annually and reduce citizens’ quality of life. Solutions such as electric vehicles (EVs) are still in their infancy in this region, but there is an opportunity for VCs to participate in driving technical solutions.

Similarly, food insecurity is also a glaring problem that needs immediate attention, especially in the Philippines. Nearly 12 percent of the Filipino population suffers from involuntary hunger, but the Philippines is a net importer of staple foods and retail food prices are double — if not triple — farm-gate prices. This makes food inaccessible to many Filipinos. We are looking to new technologies such as AgriTech, alternative proteins and supply chain/logistics technology to close the gap.

Last but certainly not least, climate change has regularly been cited as a major driver of catastrophic events, and emerging economies such as those in Southeast Asia are particularly vulnerable. The Philippines alone sees around 20 typhoons a year, each claiming hundreds of lives and causing millions of dollars worth of damage.

Also Read: Meet the VC: Philippines’ Kickstart Ventures to Become the Country’s Gatekeeper for Startup Ecosystem Scaling

Although this is a complex and multifaceted problem to solve, we are keen on climate technology, including CleanTech, renewable energy and battery storage solutions. We are also determined to continue to champion the decarbonisation agenda via ACTIVE Fund’s investments.

Kickstart’s 2023 plans

We have a comfortable amount of dry powder that we need to use through the ACTIVE Fund. Although the outlook for 2023 remains publicly bearish, we recognize the opportunity this presents to make good trades, with valuations likely to be more favorable due to cautious investor sentiment.

Given the promising growth projections for the SEA region, our focus for 2023 is likely to remain in SEA. We look at a number of companies that have demonstrated good fundamentals and are currently at attractive valuations – we believe that if these companies can weather this storm, they will emerge in very strong positions when markets recover.

Now that we have an expanded investment team and borders have reopened across the region, it’s much easier to connect with founders and investors, experience new innovations first-hand and seize the best opportunities to invest in promising startups – especially in our sectors of interest. As such, we intend to increase our investment pace for 2023.

Advice and forecasts for 2023

In the near term, we expect late funding to continue to decline as global macroeconomic conditions are currently not favorable for initial public offerings (IPOs). In fact, many startups have already postponed their IPO plans this year.

Overall, we expect conditions to improve and trend upward again next year as the global situation stabilizes, but we do not expect it to be a rapid recovery.

As such, Kickstart’s suggestion to founders preparing for 2023 is to focus on what you do best and protect the progress you’ve already made. With many companies now strapped for funds and headcount, especially with the recent spate of technology layoffs, companies must prioritize strategically to conserve resources.

Core projects that can deliver faster, tangible gains should be prioritized over more speculative or experimental projects. Similarly, growing an existing customer base will incur fewer costs than trying to acquire new customers and will also provide healthier margins. The idea is to build a long enough runway, boost morale and confidence, and be tough enough to survive the winter and wait for spring to come.

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