A retelling of the IPO narrative for technology founders in Southeast Asia

Beyond the Gong: Succeeding in the public markets

A retelling of the IPO narrative for technology founders in Southeast Asia

Information and quotes adapted from a closed-door panel on “Going Public for Technology Companies” held with Aaron Tan, co-founder and CEO of Carro, and Mohamed Ismail, Global Head of Equity Markets at the Singapore Exchange last October. 

M&As dominate, but IPOs key to proving SEA ripe for the next stage of growth 

The exit landscape in Southeast Asia remains driven largely by M&A deals. The pool of buyers have expanded from industry incumbents and old money conglomerates to include even the unicorn platforms like Go-jek, which acquired more than seven startups in the last three years. The takeover value of tech companies in Southeast Asia has steadily increased over the last three years from $1.7B in the first half of 2017 to $4.9B over the same period this year, and shows no signs of slowing down moving into 2025. 

Even then, the numbers still pale in comparison to more mature markets, and late stage funds are still waiting for the big ticket M&A deals and IPOs to reach a critical mass before doubling down on the region. Liquidity events at this scale will be the groundbreaking proof for global investors that the region’s technology space is ripe for heavy picking. 

As opportunities open up on the path to IPOs, so do the cautionary tales 

But when it comes to IPOs, they are less of a holy grail for tech startups in the region than they are in the West or China. The differences across markets make the whole affair much less straightforward. And this intimidating image of IPOs has only been buffed up by the failure of recent, high-profile IPOs in more mature markets to meet the prophesied expectations of investors. 

Even then, as more capital flows into the region, there are more accessible pathways and opportunities for tech startups to transition into the public markets. Institutional platforms in the public market like the Singapore Exchange (SGX) emphasize the benefits of going public, and that goes beyond the reliable access to capital. 

“You would be recognised as achieving the gold standard in regulation and governance, and that gives you a lot of credibility as you go out to expand across the region. That is invaluable. It can give you opportunities and visibility that you may not have had before.” 

Mohamed Nasser Ismail, Senior Vice President and Global Head of Equity Capital Markets at SGX

But if there’s anything for founders to take away from the recent IPO shocks, it’s that the public markets are not for everyone and it takes more than just shouting “unicorn,” billion-dollar valuations, or an investment story to winning over public market investors. While this approach has worked for a handful of companies, it often results in a “Boy Who Cried IPO” scenario for many, breaking the trust of public investors — a key ingredient to a successful IPO. 

And these misconceptions are fed by the dominant portrayal of IPOs as an exit or end, which fails to truly capture its role in the growth of a business. For investors IPOs are a liquidity event to realize returns, but for entrepreneurs, going public is more a beginning than an end, more a milestone than a goal on a journey into a completely different landscape. 

IPOs are less a graduation than the start of a career in the public markets

There needs to be a retelling of the IPO narrative in Southeast Asia, all the more now that tech startups are becoming more exposed to these options for growth and the pressure mounts to deliver on investor expectations in the region. 

If funding rounds are the different year levels in primary, secondary, and undergraduate education, the IPO is not the graduation ceremony but the first day at work and a career in the public markets. The demands of work are much more complex and high-stakes than school. 

“When you are in the public markets, the demands on the company are very clear: that you should be growing the business and delivering outcomes and returns for shareholders. The demands are unrelenting and continuous. It is also about managing the complexities of the interaction with the public market, you have the different stakeholders, greater transparency, greater demands on you, so it [requires] a mindset shift,” notes Ismail. 

Becoming IPO-ready requires fundamental changes to company operation

As such, it must be clear early on to founders what the motivation will be for going public and how it will play into business’s growth trajectory. This motivation must also sync up with timing for preparations. The business should be at a fairly mature stage of growth, generally revenue-generating and able to demonstrate the path to profitability.

With this clarity and timing, the next step is to lay the foundations for the transition, which can take anywhere from 6 to 18 months, and involves fundamental changes in the company. The preparation generally involves meeting financial reporting requirements and listing standards in three main areas — governance, risk management, and internal controls.

If these processes and frameworks are not robust enough, even the best performing companies can fall because of singular mistakes in key departments. And the greater the scale of operations, the higher the risk. This is why strengthening these fundamentals stand to benefit every company, regardless of whether they are gunning for an IPO or not.

Building confidence in leadership and consistency instead of valuations

Once the transition is finally official, setting the right targets and having visibility with investors is key. The adage “underpromise and overdeliver” applies in this case when laying out expectations with public investors. This doesn’t mean selling low. It’s about leadership setting targets that it is confident in achieving.

Investors look at the captain on the deck and how capable the captain is at steering the ship to the set destination long before sailing off. Hitting targets consistently builds confidence amongst investors in the company’s ability to achieve its future plans, solidifying them as partners for the long run. 

IPOs are not the holy grail, building a sustainable company is

These changes that come with the transition to the public markets will often stand at odds with the startup mentality and approach that prizes growth and speed over stability and security. But according to co-founder and CEO of Carro Aaron Tan, who had seen a number of IPOs in his days in San Francisco as an investor, the road to an IPO does not have to be a zero-sum game between growth and profitability. 

“At the end of the day my firm belief is that if you build a good, sustainable company, with good gross margins especially, you will be able to exit one way or another. Even if you don’t exit and build a company that’s profitable and that stands alone by itself, that’s good, [albeit] counterintuitive to the kind of tech companies we have today. There’s a balance, where you can grow and build a great company that’s sustainable.” 

Aaron Tan, Carro co-founder and CEO

While not every company will sound the gong (or ring the bell) in the public markets and celebrate their IPO with a rain of confetti, the same mindset shifts and fundamental company transitions that go into preparing for an IPO can set a company up to be more sustainable moving forward.

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Paulo Joquiño is a writer and content producer for tech companies, and co-author of the book Navigating ASEANnovation. He is currently Editor of Insignia Business Review, the official publication of Insignia Ventures Partners, and senior content strategist for the venture capital firm, where he started right after graduation. As a university student, he took up multiple work opportunities in content and marketing for startups in Asia. These included interning as an associate at G3 Partners, a Seoul-based marketing agency for tech startups, running tech community engagements at coworking space and business community, ASPACE Philippines, and interning at workspace marketplace FlySpaces. He graduated with a BS Management Engineering at Ateneo de Manila University in 2019.