500 Global closes $143M fund for Southeast Asia startups

500 Global, the venture firm and seed accelerator, has closed $143 million in financing for what it claims is its largest Southeast Asia early-stage fund to date.

The new tranche, 500 Southeast Asia III, or "500 SEA III" for short, counts a sovereign wealth fund, public and private pension funds, a university endowment and 500 Global portfolio companies valued at over $1 billion among its cohort of limited partners. Originally targeted for $75 million, 500 SEA III is 500 Global's third Southeast Asia-focused early-stage fund.

To clarify, 500 SEA III closed at $100 million. The remaining funds -- $43 million -- were closed for the growth vehicle, not early stage.

500 Global says that 500 SEA III will primarily invest in businesses and "AI-enabled technologies" that advance rural digitalization, sustainable cities, human and machine productivity, healthcare, food security and financial inclusivity. 500 SEA III aims to back 100 pre-seed, seed and Series A startups in total, providing first checks between $250,000 and $500,000 across Malaysia, the Philippines, Vietnam, Thailand, Singapore and Indonesia.

Southeast Asia is a hot region for startups. It's expected to be one of the leading sources of growth for the global economy over the next few years, driven by increased urbanization, trade, diversifying supply chains, real estate and pushes for sustainability.

VCs made 393 investments in Southeast Asia startups in the first half of 2021, according to Cento Ventures. And startup funding in the region could exceed $14 billion by 2023, per a Golden Gate Ventures report.

To wit, Go-Ventures, now Argor Capital, closed a $240 million just a few months ago to invest in early-stage and mid-stage tech companies in Southeast Asia. Other investors active in the region include Square Peg Capital, which has a $550 million fund for Southeast Asia, Australia and Israel; Sequoia India and Southeast Asia, which recently raised $2.85 billion in funds; AC Ventures, which has a $250 million Southeast Asia-focused tranche; and Lightspeed, which last July raised $500 million for a new India and Southeast Asia fund.

That's not to suggest that there aren't potential headwinds that could, at some point in the future, sour investors on Southeast Asia startups.

In a recent analysis, Bain & Company noted that governments across Southeast Asia, while launching initiatives to support the growth of tech companies, are also tightening regulations and increasing taxes on them. Indonesia passed a law requiring tech firms with online services to pay value-added tax on local sales, for example -- even when the purchases are initiated offshore. Singapore, meanwhile, has introduced digital banking licenses, as has the Philippines and Malaysia.

Over the past decade, 500 Global has backed more than 340 companies across Southeast Asia, the VC firm claims, including the ride-hailing app Grab, car e-commerce platform Carsome and Indonesian aquaculture startup eFishery3.

"We continue to believe in the strong potential and opportunities in Southeast Asia," Christine Tsai, 500 Global's CEO and founding partner, said in a press release. "With a global portfolio of over 2,800 companies across more than 80 countries, we believe that the founders in Southeast Asia will benefit from one of the few truly global venture platforms with deep local roots and in-market expertise."

Founded in 2010 and based in San Francisco, 500 Global has $2.4 billion in assets under management and has backed more than 2,800 companies operating in over 80 countries. It currently has a team of around 190 entrepreneurs, investors and operators located in over 25 countries.