Homegrown tech giants are slated to go public one after another, with several putting up impressive market debuts. A dealmaking boom, fueled by mergers and acquisitions, is well underway. Even global investors are looking to our region for opportunities.

We’re at a point where local venture capitalists (VCs) are no longer selling pie-in-the-sky stories of theoretical valuations and potential liquidity. The returns have been demonstrated.

The moment comes just as Indonesian e-commerce platform Bukalapak went public on the Indonesia Stock Exchange (IDX: BUKA.JK). The move gave Bukalapak the moniker of Indonesia’s first listed tech unicorn and saw its share prices jumping by 25 percent within minutes of opening. The firm raised US$1.5 billion in its initial public offering (IPO) — the country’s largest IPO to date — which valued the company at a hefty $6 billion.

This success was met with celebration, even though Bukalapak is not actually the largest e-commerce firm in Indonesia. In fact, it sits at number three, behind local competitor Tokopedia and Singapore-based Sea Group’s Shopee.

Bukalapak’s strong performance and massive returns for investors will soon be replicated many times over in Indonesia, Singapore, and the rest of Southeast Asia.

A torrent of big IPOs is poised to happen, and institutional investors have to be ready. After years of establishing large customer bases and refining their products and services, the region’s tech startups are now generating massive revenues and strong cash balance sheets.

While it did take a few years for tech brands to reach critical mass, the paradigm shift happened in a flash, taking industry incumbents by surprise. Several players were made irrelevant or wiped out, while those that remain are now trying to find ways to harness the digital swell.

Current unicorns aside, there are several digital disruptors that may be tomorrow’s IPOs. For example, Tanihub has solved inefficiencies in the fresh produce supply chain by cutting out the industry’s middlemen, thus increasing income to farmers nationwide. Investree, Indonesia’s pioneer of P2P (peer to peer) lending, provides financing options for SMEs, making illegal loan sharks with predatory interest rates a problem of the past. Meanwhile, local e-wallet LinkAja is helping four of Indonesia’s state-owned banks (and its largest telco) disrupt themselves by offering an all-in-one experience for digital payments. 

Unlike most other sectors, the tech industry was actually bolstered by the pandemic. Social distancing forced people to look for online alternatives, thereby accelerating the region’s digital adoption. In fact, one in three internet users in Southeast Asia began using new digital services due to the pandemic, according to Google’s latest e-Conomy SEA report.

Most would be familiar with decacorn GoTo’s rumored dual listing on both the Nasdaq and IDX or Grab’s upcoming Spac listing in the United States, which would value the super app at $40 billion.

But these tech behemoths aren’t the only companies looking to go public. Much like the United States, the region’s up-and-coming firms are also turning to domestic stock exchanges as an increasingly viable exit strategy. Other than Bukalapak and GoTo, at least three other homegrown tech companies worth around $2 billion in total are in talks to list on the IDX.

Over in Singapore, proptech firm PropertyGuru is set to go public via a $1.8 billion Spac deal, and rising firms like Carousell, Ninja Van, Carro, and Ryde are eyeing IPOs as well. But one concern that many investors have regarding this new phase of evolution is an overall lack of profitability in these companies.

Nasdaq-listed Sea Group, for instance, posted a net loss of $422.1 million in the first quarter of this year, despite revenue more than doubling to $1.76 billion. In the same vein, neither Bukalapak, GoTo, nor Grab have achieved profitability either. This has even led to speculation that we are in the middle of a Southeast Asian tech bubble, akin to the 90s dot-com bust in the United States.

However, analyzing a tech company versus a traditional business is an ‘apples to oranges’ comparison when it comes to stock market investing.

One key characteristic of tech companies is their exponential growth rates. While traditional companies usually grow at a linear trajectory, tech companies tend to record growth of more than 20 percent year on year.

This requires investors to calibrate and focus on growth potential, also known as “momentum investing”, rather than looking only at past and present performance. Both solo and institutional investors have to understand that, for tech companies, profitability takes a backseat to growth. Even Amazon only became profitable years after it was listed on the Nasdaq.

In the end, the story here in Southeast Asia is not a tech bubble but an awakening, one that is set to continue for years to come.

For investors looking to get into the technology realm, there is no better time to start than now.  However, they need to be equipped with sufficient knowledge so as to make the best investment decisions possible. With new whispers of tech IPOs swirling up almost weekly, it can be difficult to sift through the plethora of rumored listings.

Retail and institutional investors should learn as much as they can about a company. Instead of riding the hype and jumping on the company with the most media buzz or popular founders, do your research. This can be difficult, as private companies most often don’t get as much coverage nor fully disclose their information.

Look for the company’s competitors, press releases, and available financial information. Also, look at their niche and the industry they operate in to determine if there is potential for growth.

The prospectus is also vital. Though it can be a dense piece of information to plow through, it is undoubtedly necessary. For example, it tells you how the money raised from the IPO will be used, and what the company’s projected earnings are. This will then give you a good sense of its long-term sustainability and whether the firm has a credible roadmap to profitability.

With all the hype and chatter swirling around, it can be difficult for investors to discern what is the most relevant and actionable tech intel. This is where VCs can come in and provide reliable information, so as to shape the future of the local stock market in a healthier way.

There are multiple ways that institutional players can engage with VCs. For example, they can gain investing know-how in an advisory sense, or even get their money into pre-IPO tech investment vehicles to gain the biggest possible upside later on.

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The writer is CEO of BRI Ventures, the corporate venture capital of Bank BRI.