Cash-burning Asian tech unicorns at a crossroad

A new report by leading ratings agency S&P Global, questions the long term viability of some of South and Southeast Asia’s best-known technology ‘unicorns’.

The companies called out by the agency in the report seen by Asia Markets include, Sea Limited (NYSE: SE), Grab Holdings (NASDAQ: GRAB), ANI Technologies, and GoTo Gojek Tokopedia (IDX: GOTO).

The reports states the tech unicorns are at a crossroad, in which they must choose between aggressively expanding to reach economies of scale, or focus on conserving cash balances and improving cash flows.

“The unicorns are having to prioritize now,” said S&P Global Ratings credit analyst, Shawn Park.

“They can’t continue spending if operational turnarounds are delayed and cash balances are narrowing while fund-raising remains difficult.”

After focusing on rapid growth over the past few years, many so-called technology unicorns across the global are being forced to follow more traditional cyclical businesses in cutting costs, and rationalizing or exiting impaired business segments. 

Park notes many tech unicorns have taken initiatives to achieve financial sustainability in recent quarters, with some startups taking dramatic steps to rein in spending, including layoffs. 

“It won’t be easy for the unicorns to become cash flow positive solely based on cost-cutting measures. Consumption growth will slow, while competition will likely remain stifled,” he said.  

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