Temasek sees no sharp rebound in global startup valuations

SINGAPORE (Reuters) - Funding for global tech startups should return,even if valuations don’t rebound to their 2015 levels as investors press for less inflated values, a senior executive at Singapore state investor Temasek [TEM.UL] said.

A Temasek Holdings logo is seen at their office in Singapore July 8, 2014. REUTERS/Edgar Su

Lured by a potential market for app-based, on-demand and logistics-heavy businesses, venture capitalists and others have thrown billions of dollars to startups that often need only cash and a working app to enter the fray.

Some industry watchers warn of a tech bubble, and capital inflows to the sector have eased since late last year.

“We have seen that slowdown because valuations are adjusting in Silicon Valley, they have adjusted in China, in India. It’s not just Southeast Asia,” Rohit Sipahimalani, joint head of portfolio strategy & risk group at Temasek, said on the sideline of an industry event in Singapore on Tuesday.

Temasek, which manages a portfolio worth S$266 billion ($193 billion), has invested in several startups including India’s restaurant search and food delivery service Zomato and online marketplace Snapdeal, as well as Chinese ride-hailing firm Didi Chuxing.

But some firms are coming under pressure to raise capital at cheaper valuations. HSBC’s brokerage arm recently slashed Zomato’s valuation by 50 percent, citing concerns around its business model, and it prompted the startup’s founder to hit back, arguing the markdown was unjustified.

“Globally it (funding) has eased up, but partly because there was probably too much exuberance maybe 6-12 months ago... The valuations may not come back to those levels for companies at a similar stage,” Temasek’s Sipahimalani said.

“Funding should be available at fair valuations. Funding should come back because the opportunity space is there.”

Southeast Asia’s internet economy, which attracted capital from such investors as Alibaba Group Holding and Softbank Group Corp, will surge six-fold to about $200 billion in the next decade, according to joint research from Temasek and Google, a unit of Alpabet.

Global funding to venture capital-backed firms dropped 8 percent to $25.5 billion in the first three months of this year, after slumping nearly 30 percent in the fourth quarter from the previous quarter, according to a KPMG and CB Insights report.

The number of privately-held startups worth $1 billion or more, known as unicorns, have grown to 163, including ride-hailing app firm Uber to Indian online commerce platform Flipkart, according to venture capital research firm CB Insights.

Reporting by Aradhana Aravindan; Editing by Simon Cameron-Moore