Asia Partners Announces Final Close of Second Fund at US$474,000,000

Southern Right Capital is pleased to announce the final close of Asia Partners' second fund at US$474,000,000 in commitments.

SINGAPORE – January 9, 2024 – Asia Partners, a Singapore-based growth equity investment firm, is today announcing the final close of its second fund, Asia Partners II LP (the “Fund”), at US$474,000,000 in commitments. 

With this close, Asia Partners has now reached an important milestone: US$1.0bn in assets under management. Notably, given the current macroeconomic backdrop,  Fund II is 23% larger than the Firm’s inaugural fund, Asia Partners I LP, which had US$384,000,000 in commitments and completed its final close in March 2021.

Asia Partners is focused on the intersection of three key themes:

• The long-term growth potential of Southeast Asia, a region with almost 10% of the world’s population, and Southeast Asia’s increasing economic connectivity to the rest of Asia and the world.

• The rapid growth of innovative technology and technology-enabled businesses in the region, many of which are platforms with pan-regional or global aspirations.

• The scarcity of growth equity capital for these companies, particularly in the $20 million to $100 million investment size range, often described as the ‘Series C/D Gap’ between early-stage venture capital and the public capital markets.

More than 9% of the Fund’s capital is from Asia Partners’ employees and Advisory Board members; this is amongst the highest ratios in the industry and signals a strong degree of alignment with Limited Partners.

The Limited Partners in the Fund include institutional investors, family offices, and individual investors across six continents. Returning investors include the International Development Finance Corporation (DFC) and Financial Investments Corporation (FIC) from the United States, the Deutsche Investitions- und Entwicklungsgesellschaft (DEG) from Germany, and Generation Capital from Canada. The International Finance Corporation (IFC) joined as a new investor in Fund II, among others.

“At Asia Partners, we believe in the potential for growth equity to accelerate economic growth throughout Southeast Asia and beyond,” said Oliver M. Rippel, a Partner of the firm and a member of the Investment Committee.  “We continue to believe this decade will be a golden age of entrepreneurship and innovation for Southeast Asia, and we are focused on accelerating that progress.”

The Asia Partners Advisory Board is chaired by Mr. Hsieh Fu Hua, the former CEO of the Singapore Exchange, the co-founder of the PrimePartners Group, and the Chairman of the National University of Singapore.

“Southeast Asia is highly strategic for international investors, given its importance in global trade, supply chain management, rising affluence and the increasing digitization of daily life,” said Mr. Hsieh. “Opportunities abound for our regional economies to be transformed by the combination of entrepreneurial innovation and growth equity.”

“Asia Partners is deeply committed to supporting the growth of Southeast Asia’s next generation of entrepreneurs,” said Nicholas A. Nash, Managing Partner and a member of the Investment Committee.  “We look forward to continuing our investment program and to applying our leadership team’s and Advisory Board’s collective experience to helping our companies expand, both geographically and strategically.”

Asia Partners’ legal advisor on the fundraise was Gibson, Dunn & Crutcher. Southern Right Capital Limited and Monument Group acted as placement agents.

For more information, media contact: media@asiapartners.com

Incus Capital turns 10, and announces the successful close of European Credit Fund IV at €650 million in commitments

Madrid, December 5, 2022

Incus Capital (“Incus”), the Madrid based private market investment advisory firm, announces the successful close of its European Credit Fund IV (“Fund IV”), reaching its hard cap of €650 million in commitments. The Fund IV close also coincides with the 10th anniversary of the firm.

Similar to its predecessor funds, Fund IV invests in credit opportunities focussing on small and medium- sized enterprises (“SMEs”) in Europe. The pan-European fund targets value-oriented asset-backed investments. The Fund IV investment program has been active since July 2022 and has already invested and drawn significant amounts of capital for multiple transactions in the firm ́s main sectors of infrastructure, renewables and real estate.

Fund IV received strong support from its existing investor base. Martin Pommier, partner of Incus, said, “We are pleased to have again attracted such a high-quality and diverse group of LPs. We want to thank our investors joining us in this fourth specialty credit fund for their continued trust and support.”

After more than 10 years in business, Incus Capital has established a predominant position in providing financial solutions for real assets in the mid-market sector in Europe. The firm has now grown to more than 35 professionals across the five main offices. Consistent investment returns, a strong code of ethics, and a true partnership approach to investing has given Incus a unique brand and reputation in the market. Incus partner, Estanislao Carvajal said, “There have been a significant number of disruptions to the markets over the past years. Incus has shown that we are a useful partner for our clients throughout this volatility. We believe that our clients appreciate our unique approach to being a reliable and stable long term funding provider.”

In the face of rising rates and a looming recession, equity solutions and traditional bank finance are significantly constrained for a lot of companies today. “We are delighted to have gathered a large pool of investable capital at this difficult moment in the cycle. We ́ve seen demand from SMEs for flexible solutions expanding as uncertainty over inflation and economic growth affect the capital and bank markets.” said Incus managing partner Andrew Newton. “We anticipate this market dislocation to last for the medium term and we will remain patient”. Incus is currently focused on selective investment themes, including financing the development of energy transition assets, bridge financing to high quality assets and companies, and low LTV loans against liquid assets.

About Incus Capital

Founded in 2012, Incus Capital is a real assets investment advisory firm with offices in Madrid, Lisbon, Milan and Paris. The firm focuses on providing flexible capital solutions to mid-market companies in Europe. The Incus strategy includes a strong focus on downside protection and asset-backed collateral with target investment sizes between €20 million and €50 million. Incus Capital acts as the investment advisor to Incus funds that have raised over €2.5 billion in assets under management (“AUM”). The funds have successfully closed more than 100 equity and credit transactions across the firm ́s core markets of Spain, Portugal, Italy, France and Benelux.

The Incus funds investor base includes Public & Private Pension Plans, Insurance Companies, Sovereign Wealth Funds, Endowments, Foundations, Family Offices and Fund of Funds in the US, Canada, and Europe.

Oil Equities: The Quality Compounders of the Next Decade?

Written by the GQG Research Team

Up until recently, investors who had bet on oil equities over the last decade received mediocre returns, at best. Say one had invested $100 in the S&P Energy Index in 2012, that investment would have compounded to a mere $105 at the start of 2022. Instead, if one had invested $100 in the S&P 500 Index during the same period, one would have received $400. Given the poor track record of the industry, why are we so excited about the space? Put simply, we think the market dynamics have changed. On a forward-looking basis, energy supply/demand fundamentals coming out of COVID are the healthiest they have been in the last decade.

Incus Capital announced as winner of the 2021 Alternative Lender of the Year: Southern Europe

Alejandro Moya and Martin Pommier of Madrid-based Incus Capital, winner of the 2021 Alternative Lender of the Year: Southern Europe award, explain why the firm occupies a unique position in the market

Asia Partners 2021 Southeast Asia Internet Report

In 2019, growth equity firm Asia Partners forecast that the market value of Southeast Asia’s tech companies would soar by a mind-boggling US$425 billion within a decade, starting out with a total of US$86 billion at the time. Two years on, the region’s tech firms are already halfway there.

Watch as Asia Partners’ co-founders break down the details of their latest Internet Report:

GQG Announces Initial Public Offering on the ASX

We’re delighted to share the below release from our partner GQG Partners.

The founders were also featured in a short CNBC interview on the IPO.

***

FORT LAUDERDALE, FLA. — October 25, 2021 — GQG today announced its IPO on the ASX with the company’s founding shareholders listing approximately a 20 per cent stake. With an IPO offer price at $2 AUD/share, which implied a nearly $6bn AUD valuation, the IPO was oversubscribed.

“It is exciting to bring a global investment boutique of GQG’s caliber to the ASX,” said Richard Sleijpen, Managing Director Head of Global Capital Markets, Australasia at UBS. “This is the largest IPO in Australia this year and it received a strong response from both Australian and global investors. GQG’s exceptional growth profile and culture of investment performance and alignment with both clients and shareholders clearly resonated.”

GQG’s co-founders and team continue to own roughly 75 per cent of the company post-listing and every team member will now have an equity interest in the firm.

“This is an important step towards the vision we laid out when founding the company, of building an investment-led culture, and an institution that can outlive its founders,” said CEO Tim Carver. “Since our inception five years ago, this experience has outstripped anything we could have imagined. I am so proud of the efforts of our team, the quality of their work and the support of our clients.”

“This business has to be all about performance,” said Chairman and CIO Rajiv Jain. “That’s why we have always focused on having skin in the game. We want to be the most client and shareholder aligned firm that exists in the market.” Mr. Jain continued, “I think a public currency is a very valuable competitive weapon in the search for talent. We believe it will help us keep our great people and will give us an edge in finding the players or teams who can continue to drive our business forward in the years to come.”

In a continued commitment to client alignment, Carver and Jain have committed to co-invest at least 95% of their after-tax proceeds from the offering in GQG’s investment strategies for at least seven years.

ABOUT GQG PARTNERS

GQG Partners is a majority employee-owned investment boutique listed on the Australian Stock Exchange (ASX:GQG). The firm manages global and emerging market equities for institutions, advisors and individuals worldwide. Headquartered in Fort Lauderdale, Florida, we strive for excellence at all levels of our organization through a commitment to independent thinking, continual growth, cultural integrity and a deep knowledge of the markets. Supported by many leading investment consultants and financial institutions, GQG Partners manages more than US$80 billion in client assets as of September 30, 2021. For more information, please visit gqgpartners.com.

GQG Partners Hits 5-Year Anniversary and Announces 8 New Partners

We’re pleased to share the below release from our partner GQG:

FORT LAUDERDALE, FLA. — June 3, 2021 — GQG Partners, a boutique investment management firm headquartered in Ft. Lauderdale, FL, celebrates its fifth anniversary this month and announces eight new partners. Founded by Rajiv Jain and Tim Carver in 2016, GQG Partners strives to be among the most investment focused and client aligned firms in the investment management industry.

Central to that goal, GQG announces that it has added eight new partners to the firm, bringing the total to 17 partners. The new partners are:

James Anders, CFA; Mark Barker; Carolyn R. Cui; Phil LoGrasso, PhD; Greg Schneider; Xavier Sément; Rick Sherley; and David Tuthill.

“We are thrilled to expand our partnership with such a talented, committed, and passionate group of people,” said Tim Carver. “We have always said that partnership at GQG is about being in service to something greater than ourselves, committed to bringing lasting value to our clients and the world. This team embodies that ethos fully.”

With an unrelenting focus on compounding clients’ wealth, over the past five years GQG Partners has:

— Added value across every investment strategy for its clients;

— Built a partnership with 17 equity partners;

— Opened offices in London, New York, Seattle and Sydney;

— Grown to over 100 employees;

— Developed meaningful client relationships in the United States, Australia, the United Kingdom, Canada, Europe, the Gulf Region, Japan, and Southern Africa;

— Built a robust trading, technology and operational infrastructure; and

— Continued to expand the reach of The GQG Partners Community Empowerment Foundation, which was established to help the most vulnerable parts of our society by providing funding to over 50 organizations.

“I have always said that managing clients’ investments is an honor and a privilege,” stated Rajiv Jain, co-founder and Chief Investment Officer. “We are humbled by the overwhelming support of GQG Partners over the past five years.

“I am most proud of the fact that we have added value in every strategy we manage since founding GQG Partners. At the same time, we are keenly aware that our focus must remain on tomorrow’s performance and maintaining the high standards that we set out in the early stages of this business. My first goal remains to deliver investment excellence because the performance we deliver to our clients will ultimately define our firm.”

GQG Partners has continued to expand its team with professional talent across all functions of the business with a goal of delivering a top-flight client service experience. The alignment of this team continues to deepen as the firm now has 17 partners.

Tim Carver, co-founder and Chief Executive Officer, remarks, “I believe our early success at GQG Partners is entirely based on the quality people that we’ve been able to attract. We have assembled a group of independent thinkers who are diverse in their backgrounds, experiences and perspectives but united by the common desire to exceed our client expectations across every aspect of the business. I am excited to see where this team will take us over the next five years and beyond.”

ABOUT GQG PARTNERS

GQG Partners is an independent, majority employee-owned investment boutique. The firm manages global and emerging market equities for institutions, advisors and individuals worldwide. Headquartered in Fort Lauderdale, Florida, we strive for excellence at all levels of our organization through a commitment to independent thinking, continual growth, cultural integrity and a deep knowledge of the markets. Supported by many leading investment consultants and financial institutions, GQG Partners manages more than US$75 billion in client assets as of April 30, 2021. For more information, please visit gqgpartners.com.

Atomico cofounder Ljungman launches Moonfire Ventures with a $60m Fund I

For more than a decade, Mattias Ljungman helped shake up Europe’s once-sleepy VC scene as the cofounder of Atomico, the $2.7bn firm that has backed the likes of Klarna and Lilium. 

Now he’s back with a new firm to fill a gap in seed stage funding.

Today, Ljungman has formally launched Moonfire Ventures, which has raised a $60m fund to target seed and pre-seed deals. For Llungman, Moonfire is the latest sign that Europe has only just started to tap into a vast entrepreneurial potential.

“This ecosystem is really on fire,” Ljungman said. “It’s really sort of a golden era.”

Asia Partners Announces Final Close of Inaugural Fund at US$384,000,000

Southern Right Capital is pleased to announce the final close of Asia Partners' inaugural fund at US$384,000,000 in commitments.

Asia Partners I, LP (the 'Fund') is the largest debut technology fund in history specifically focused on Southeast Asia, and one of the region’s largest debut funds across all industries.

Asia Partners is a Singapore-based growth equity investment firm with six co-founders: Jill Cheong Hsi Min, Pitra Ciputra Harun, Nicholas Avinash Nash, Oliver Minho Rippel, Kien Nguyen, and Vorapol Supanusonti. Southern Right Capital formed a partnership with the team in the summer of 2019 shortly after launch.

Asia Partners is focused on the intersection of three key themes:

• The long-term growth potential of Southeast Asia, a region with almost 10% of the world’s population.

• The rapid growth of innovative technology and technology-enabled businesses in the region, many of which are platforms with pan-regional or global aspirations.

• The scarcity of growth equity capital for these companies, particularly in the $20 million to $100 million investment size range, often described as the ‘Series C/D Gap’ between early- stage venture capital and the public capital markets.

Asia Partners has already invested more than US$90 million across its first three investments, which collectively have operations across every major economy in Southeast Asia.

The Limited Partners in the Fund include institutional investors, family offices, corporations, and individual investors across six continents. The Fund’s investors also include the U.S. International Development Finance Corporation (DFC) and the DEG from Germany.

“At Southern Right Capital, one of our founding principles is the importance of alignment - something we look for in the selection of our investment manager partners and demonstrate through investing ourselves as Limited Partners” said Gideon Nieuwoudt, Managing Partner of Southern Right Capital.

“In Asia Partners case, the co-founders and Advisory Board members make up more than 7% of the Fund’s capital, amongst the highest ratios in the industry and a fantastic testament to this shared value of strong alignment with Limited Partners. We are proud to have assisted Asia Partners with this fundraise and wish the team continued success.”

For more information, please visit www.asiapartners.com. The final close was also covered in the Wall Street Journal and Tech In Asia among other publications.

Building the next Generation of VC funds for Europe with Mattias Ljungman

From a recent Station F Interview:

In 2019, Mattias founded Moonfire, a European seed fund focused on helping founders at the very start of their journeys to create the right foundations for exponential growth.

For the last decade, he has seen how US seed has flourished, driving strong returns with successful funds, such as FirstRound, Felicis, Floodgate, Upfront, Uncork, and True Ventures. The same evolution is accelerating in Europe, as a flood of late-stage capital boosts demand for seed opportunities. Moonfire is perfectly placed to take a leading position in the nascent European seed ecosystem to help the next generation of founders and we got the chance to talk about it with him.

Southeast Asia's Golden Age: Resilience and Recovery

We’re delighted to share the latest thoughtful and well-researched insights from our partners in Singapore, Asia Partners.

About This Report:

This report is the ‘second chapter’ of our study of Southeast Asia’s internet economy, which began with ‘chapter one’ in 2019. It takes stock of the eight predictions we made in 2019 and, in the spirit of holding ourselves accountable, looks at what we got right and wrong, with the benefit of hindsight. In addition, we are also sharing a few new ideas in this report. We talk about the threshold for the next generation of IPOs from Southeast Asia, the similarities and differences in how emerging markets tech ecosystems develop, and several case studies of how industries are being re-shaped by the tragedy of the COVID-19 pandemic.

What’s in the Report?

• A look back at the eight key predictions from our 2019 Asia Partners Internet Report, and how they’ve held up from the perspective of 2021

• The financial threshold for the next generation of IPOs from Southeast Asia (“The Rule of 25”)

• What can we learn from how different emerging market ecosystems evolve over time (“The Cargo and The Rails”)

• The tragedy of COVID-19 in the region (“Southeast Asia Through the Crisis”)

• Case studies on four industries transformed by COVID-19: education, autos, travel, and healthcare

GQG emerges as pandemic winner with $30bn asset growth

The investment firm set up by former Vontobel star manager Rajiv Jain has more than doubled its assets to $62bn this year, making it one of the standout winners in the fund management sector from the coronavirus crisis.

GQG Partners, which was set up by India-born Mr Jain in 2016 and which manages funds focused on emerging markets, US and global equities, had net client inflows of $18.2bn in the first nine months of this year, the Florida-based firm told the Financial Times.

Read the FT’s latest coverage on GQG here:

Carsome Announces Series D Fundraising led by Asia Partners

Capital to accelerate regional expansion of Southeast Asia’s largest integrated e-commerce platform for cars

KUALA LUMPUR, JAKARTA, BANGKOK & SINGAPORE, 8 December 2020:

Carsome, Southeast Asia’s largest integrated car e-commerce platform, recently completed its Series D fundraising. The US$30 million round, one of the largest all-equity financings to-date in Southeast Asia’s online automotive industry, was led by Asia Partners and was joined by existing Carsome investors Burda Principal Investments and Ondine Capital.

According to Eric Cheng, Co-founder and Group CEO of Carsome, this fundraising round, the largest equity investment in Carsome’s history, is a strong endorsement of its integrated business model, with end-to-end digital enablement across used car sellers, dealers, and buyers. “We will use this capital to strengthen our existing regional leadership in consumer-to-business (C2B) used car e-commerce and accelerate our already successful new offering in the business-to-consumer (B2C) segment. We look forward to rolling out Southeast Asia’s first-ever C2B and B2C integrated e-commerce platform for used cars, a significantly superior new retail experience,” said Cheng.

“Over the past six months, we have doubled our monthly revenue compared to pre-pandemic levels, a dramatic acceleration due to the impact of the ongoing Covid-19 pandemic on consumer behavior across our region,” Cheng added. “Consumers across our core markets of Malaysia, Indonesia, Thailand, and Singapore are increasingly purchasing cars to keep their families safe and adapt their businesses.”

Commenting on the fundraising, lead investor Oliver M. Rippel of Asia Partners observed that Carsome’s combination of strong executive leadership and a robust business model position the company well for future growth. “Carsome’s integrated approach offering a one-stop solution to used car buyers and sellers is genuinely impressive. We see that this will be the way forward for the used car industry, and we look forward to working closely with Eric and his very capable team in further scaling the business across the region.”

Founded in 2015, Carsome has grown to employ more than 1,000 people and today transacts an annualized 70,000 cars totalling US$600 million in transacted value on its online platform. Building on its original foundation in Malaysia, one of Southeast Asia’s largest car markets, Carsome then launched its operations in Singapore, Indonesia and Thailand, deepening its regional footprint.

Since founding, Carsome has delivered an impressive record of accomplishments, growing from strength to strength. Carsome recorded its highest revenue quarter in Q3 2020 in its history, doubling its revenue from the pre-pandemic period. In November 2020, Carsome celebrated its 100,000th car sold through its platform – an important milestone achieved within five years of founding.

Notably, Carsome has also achieved operational profitability as of October, ahead of earlier projections. “We have built a defensible, scalable, and profitable business with very healthy unit economics attributed to both growth in gross margin and steady improvements in productivity and conversion metrics,” said Juliet Zhu, Carsome Group Chief Financial Officer. “Our Series D round will further support potential merger and acquisition opportunities in acquiring ancillary capabilities and consolidating our supply chain.”

Crucial to Carsome’s success has been its commitment to rigorous car inspections, offering Carsome-inspected and certified cars directly to customers in a seamless fashion, building a reservoir of consumer trust and brand equity in an essential but historically complex industry. Every car that transacts on the Carsome platform goes through a comprehensive 175-point inspection, and every Carsome car purchase is backed up with an extended warranty and a money back guarantee.

Carsome’s successful track record of digitizing a traditionally offline and fragmented industry, as well as its resilience in the face of the global pandemic, were key factors in several existing investors’ decisions to reinvest in the Series D round. “We appreciate the way Carsome has continued to support car sellers and dealers through the pandemic,” said Albert Shyy, the Singapore-based Managing Director of Asia for Burda Principal Investments, who first invested in the Series B round. “We witnessed Carsome’s growth and resilience during the pandemic and are proud to continue our support,” added Randolph Hsu, the Taipei-based Founding Partner of Ondine Capital, who first invested in the Series C round.

While the platform flourishes from digitalization tailwinds, Carsome remains focused on supporting its partners to navigate new challenges brought about by the pandemic. Carsome introduced various incentives and bonus rewards for used car dealers in Malaysia, Indonesia and Thailand under its Dealer Alliance Support Program. The company also introduced its Covid-19 Support Fund this year for employees affected by the pandemic.

Coverage in the FT: Online used car sales fuel Asia fundraising burst

Rajiv Jain: The Gravity of the Growth/Value Debate

An opinion piece from our partner GQG in Funds Europe.

The value or growth framework is "overly simplistic", says Rajiv Jain, chairman and CIO of GQG Partners. While avoiding "value traps" is critical to long-term returns, some in the growth camp "have gotten a bit ahead of themselves".

History has taught us many lessons but uncovering those lessons is easier said than done. Under trying circumstances such as our current environment, it’s often difficult to carry a prudent optimism. But what if history shows us that human progress can push forward despite our less than ideal current conditions? Let us explain.

During the Great Plague in 1665, many people made a rush out of the cities to retreat to the countryside (not unlike 2020 where not a day goes by that a story isn’t published about a rush out of cities and an embracing of suburban or rural life). One such person retreating to the outskirts during this period of turmoil was none other than Sir Isaac Newton. During this period of quarantine and exodus, Newton made great strides in not only what would ultimately become known as calculus, but also this very small thing involving an apple and ultimately what keeps us glued to the ground – gravity. In hindsight, and driven by Newton’s insights, this particular quarantine earned the moniker annus mirabilis – the year of wonders.

In our current environment, and while not as extraordinary as calculus, but still quite extraordinary, is something that we’re all readily accustomed to at this point – virtual everything.

Just six months ago, this interconnected global system of virtual meetings, events, etc. was almost entirely inconceivable, at scale. The teleconference, while not new and arguably if not for our current circumstances, would have remained relegated to quick meetings squeezed in between the really important ones or simply saying “hello” to family members abroad.

Overly simplistic

So like Newton, a reframing of the environment, even if under less than ideal circumstances, can bear great fruit (pun intended). The goal, of course, is to recognize those opportunities before others do, a proposition much easier said than done. Therefore, to do this, the industry often uses an overly simplistic framework, one of value or growth.

Value: purchasing securities that are “cheap” based on some metric such as low price to book or low price to earnings. The value factor has been recently maligned but historically revered due to its somewhat intuitive formulation combined with academic citation rings on its efficacy.

Contrast this with the historical underdog, “growth” which is rooted in optimism about the future and based on metrics such as above average revenue and earnings per share growth. While not nearly as academically sound as its value foil, growth has been favored by investors for more than a decade due to a perceived “growth scarcity” as well as the prevalence of companies with strong network effects, which has seen growth strategies and indexes accrue relative gains over value.

Because of this decade long phenomenon, much like the urban exodus articles noted above, not a day goes by that some publication doesn’t run with a story from one camp, explaining their plight with religious zeal, in defense of one “factor” versus the other. While we think there’s nothing wrong with being religious in your personal life, we believe a more agnostic approach to investing is worth pursuing.

GQG Partners’ is not one of value nor growth, we’re simply focused on compounding and teasing out a process that works. Having said that, we do believe a company needs to be growing in order to be worth the work as we believe avoiding value traps is critical to long term returns. But we also think that areas of the market, particularly in the high growth camp, those that have directly benefited from the current virtual revolution or those that are perceived as “revolutionizing the planet” in some other way have gotten a bit ahead of themselves.

We think this is especially true for those “revolutionary” companies that have not produced cash flows commensurate with their recent price appreciation or have come to market under the newfound gusto for blank check companies. Why such caution? Because as students of history, we’ve seen this before.

Much like the speculative fervor that was produced in the decades following Newton’s annus mirabilis, we think investors in certain areas would benefit from recalling the words of Thomas Babington Macaulay, describing the high growth investors of his time as having “an impatience to be rich, a contempt for those slow but sure gains which are the proper reward of industry, patience and thrift".

While it’s not always easy to resist the push and pull of either camp, agnostic we shall remain, solely focused on identifying opportunities wherever they exist, most likely due to the distractions caused by the battles between our more zealous style-box focused peers.

Coatue Leads $200 Million Funding Round for Impossible Foods

Plant-based meat producer Impossible Foods Inc. said it raised $200 million in its latest funding round, bringing the total investment raised by the company to nearly $1.5 billion.

The new investment will be used for research, product development, international operations and other core functions, the company said in a statement. New investor Coatue Management LLC led the round, and Mirae Asset Global Investments, Temasek Holdings Pte and XN Capital also participated.

Impossible Foods Announces Starbucks Partnership

Impossible Foods is known for its plant-based meat alternatives, but it’s expanding its breadth of products, buoyed by a cultural movement, an unforeseen pandemic and — in true Silicon Valley fashion — science. On Tuesday it announced that its Impossible Breakfast Sandwich has been added to Starbucks’ menus and most  of its locations in the U.S.

FT Interview: Lessons learnt from a career of investing through crises.

Rajiv Jain is used to a crisis. The founder of boutique GQG Partners made his name as a star emerging markets trader during a long career at Vontobel Asset Management.

Read the FT’s latest interview with Rajiv here:

Impossible Foods Continues Growth Trajectory With $500M Series F

Impossible Foods raised $500 million in a Series F round, bringing its total funding to nearly $1.3 billion.

The State of European Tech from Atomico - The most comprehensive data-driven analysis of European technology

We are delighted to highlight the single, most comprehensive data-driven analysis on European technology today, produced by Atomico in partnership with Slush and Orrick.

Find the report here: https://2019.stateofeuropeantech.com/

Private Equity: Looking at Southeast Asia’s promising tech businesses

The last few years have seen Southeast Asia become a major focal point for private investment dollars. With the region’s 600 million-strong population and fast-growing middle class, its consumer market is the latest battleground for businesses looking to grow. Investment dollars have poured into the region, seeking large unicorns and even larger returns.

Looking ahead, Southeast Asia’s growing influence as a consumer market will give rise to a slew of technology-focused companies, many of which have the potential to hit billion-dollar status. In fact, Singapore-based private equity firm Asia Partner’s proprietary models suggest that the region’s tech ecosystem will see the emergence of many unicorns in the next 10 years.

“We are tremendously optimistic that there will be 20 more billion-dollar companies in the region over the next decade. Our projections mirror the findings of Bain & Co, which forecasts that 10 such companies will emerge over the next five years,” says the firm’s co-founder Nick Nash.

In fact, he and co-founder Oliver Rippel see China’s all-conquering consumer market (and the tech giants that have risen as a result) as a compelling proxy for the investment thesis that they are running in Southeast Asia. The firm focuses on growth equity in the region’s technology space.

To this end, the co-founders are bullish on tech-focused marketplace businesses that cater for Southeast Asia’s burgeoning consumer base. “We look at e-commerce businesses in the travel vertical. We also look at online car and real estate classifieds. We have seen a lot of offerings pop up in Southeast Asia for cars and even motorcycles, for example. Other than that, online education, healthcare technology and financial technology are all verticals that we look at,” says Nash.

Technology and business have become so intertwined in the last decade that the strict business-to-business (B2B) or business-to-consumer (B2C) delineations do not always apply to this new generation of tech companies such as online marketplaces.

Rippel explains, “We live in a world where the lines between these old descriptors [B2B and B2C models] are blurring. The very definition of the new marketplace business is that it links a broad group of suppliers with a broad group of consumers. In fact, these marketplaces serve both end-users and businesses that ultimately want to reach the consumer.”

The duo believe that their investment thesis is sound as their research has tracked compelling similarities between the evolutionary phases of the Chinese technology landscape and that of Southeast Asia’s. Evolving right alongside China’s technology is the country’s one billion-plus population. As it becomes more prosperous, its consumers will become an increasingly attractive market to sell to. Over the last 10 years or so, a number of Chinese billion-dollar tech giants have emerged to serve this population.

Rippel says China’s consumer market took its economy through four distinct evolutionary phases and that Southeast Asia is mirroring that evolution. “Looking back at the last two decades, China went through four distinct phases before it became the thriving technology ecosystem that it is today.”

The first of these phases was the development and widespread adoption of telecommunications infrastructure, or what he refers to as basic plumbing of the tech world. Next, came the so-called Internet 1.0, which saw the emergence of very large, mainly horizontal, consumer-driven e-commerce platforms.

“These broad-based e-commerce platforms covered everything from fashion to electronics. Examples include Amazon.com, eBay, Alibaba Group Holding and JD.com,” says Rippel.

Later on, within the e-commerce space, there was a shift away from the broad-based selling platforms, says Nash. As that generalist e-commerce space began to saturate, businesses evolved to develop e-commerce niches of their own.

“We started to see the emergence of specialised e-commerce platforms catering for just one particular segment. For example, fashion platforms have become very popular. Their interfaces are specifically catered to optimise the fashion shopping experience. In addition, these platforms go very deeply into the unique fashion supply chain for the benefit of fashion merchants,” he says.

This was the third evolutionary phase and one that China moved out of in the last few years.

According to Nash, China is currently in the fourth evolutionary phase. “We commonly refer to it as the online-to-offline (O2O) model. We are starting to see the emergence of omni-channel platforms that cover both the online and offline realms,” he says.

Last year, Chinese tech giant Alibaba opened a slew of supermarkets that use the O2O model. Founded in 2015, Hema has opened 150 stores across 21 cities in China, according to a June news report by Caixin.

It is possible for customers to purchase raw produce, have it delivered to on-site kitchen staff for cooking and then have the food ready for them at a designated dining area. The entire series of transactions take place via Alibaba’s payment app.

Nash says the pattern of initial public offerings (IPOs) by Chinese companies, broken down by sector, between 1995 and 2019 corresponds quite precisely to these four stages of industry evolution. “I would suggest that China is 11 years ahead of Southeast Asia in terms of affluence [based on per capita GDP]. Combining these ideas, it will not be surprising if Southeast Asia’s technology ecosystem is about 11 years behind that of China, as measured by the timeline of the IPOs.”

Successful exits

The two co-founders have unique credentials when it comes to identifying and building multibillion-dollar tech companies. Prior to joining forces, Nash and Rippel oversaw two successful exits in Asia ex-China — the 2017 New York Stock Exchange IPO of Southeast Asian technology giant Sea Ltd and the 2018 Walmart Inc acquisition of Indian e-commerce giant Flipkart respectively.

Nash joined Sea (formerly known as Garena) from one of the company’s earlier investors, General Atlantic, in 2014. Singapore-based Sea is a diversified Southeast Asian tech company that owns and manages online gaming platform Garena, e-commerce player Shopee and e-wallet provider AirPay.

Nash was appointed group president of Sea and he led the company to its listing on the New York Stock Exchange in October 2017. The IPO, which raised US$884 million, remains the largest ever for a Southeast Asian internet company. It had achieved an internal rate of return (IRR) of 67.7% as at end-July. Year to date, the stock is up nearly 177%.

An Asian-American, Nash moved to Singapore in 2011 to work with US investment firm General Atlantic. As principal and head of Southeast Asia, he opened and led its Singapore operations that year. “After making our first investment in the company that is now Sea, I ‘retired’ from General Atlantic and joined Sea as group president.”

Nash co-led the business alongside Sea founder and group CEO Forrest Li, overseeing the company’s region-wide expansion, the launch of Shopee and the eventual IPO. “I was intimately involved in leading the IPO journey which, very happily, turned out to be a major success for investors. We went public at US$15. The stock is now trading in excess of US$29.”

The counter was trading at US30.55 on Nov 6.

Rippel is a veteran of the Asian B2C investment space. Prior to co-founding Asia Partners, he was CEO of B2C e-commerce at Naspers, a large South Africa-based global technology investor. “Naspers is notable for being the largest shareholder (32%) of Chinese tech giant Tencent Holdings Ltd,” he tells Personal Wealth.

While at Naspers, Rippel was one of the early investors of Indian e-commerce giant Flipkart. He initiated the investment, served on its board and then brokered the eventual sale to US retail giant Walmart Inc at a massive US$21 billion valuation. The sale garnered a return on capital of 3.6 times, resulting in a net gain of US$1.6 billion for Naspers, on the back of an initial investment of US$600 million. “The Flipkart exit got Naspers an estimated IRR of 29%,” he says.

Rippel also spent almost nine years with eBay in various regional leadership positions.

Nash and Rippel have known each other since 2011 as they both came to Singapore around that time. In fact, they were already acquainted because Naspers was an indirect shareholder of Sea (Naspers is a major shareholder of Tencent which, in turn, is a major shareholder of Sea). “We have exchanged thoughts on consumer technology in emerging markets and Southeast Asia for a long time,” says Rippel.

Fresh off their highly successful exits, Nash and Rippel did what they saw as the natural progression for themselves — joining forces and setting up Asia Partners with three other friends; a Thai, an Indonesian and a Vietnamese.

Travel theme a strong pull

Perhaps unsurprisingly, Asia Partners’ maiden investment is indicative of the co-founders’ belief in Southeast Asia’s influence as a consumer market. In mid-August, the firm led a Series C funding round for Singapore-based budget hotel booking company RedDoorz. According to its website, RedDoorz has more than 1,000 properties across Southeast Asia.

According to Crunchbase, the funding round netted RedDoorz US$70 million, although Asia Partners declined to specify the size of its investment. RedDoorz has raised US$134.4 million to date.

The start-up is a customised platform catering for budget travellers in Southeast Asia. “RedDoorz focuses on budget hotel offerings and provides a very specialised solution for travellers as well as property owners,” says Nash.

Incidentally, per the co-founders’ views on the emergence of more Southeast Asian unicorns, they believe RedDoorz is well on its way to billion-dollar status.

The budget travel sector is a multibillion-dollar market, with hundreds of thousands of budget hotels across the region, says Rippel. “This is currently a very fragmented marketplace. The one and two-star budget hotels are often managed directly by the property owner, who probably has one or two small properties. These hotels tend to have varying levels of quality and service and face the big issue of low occupancy rates. RedDoorz increases occupancy rates for hotel owners by helping them professionalise and standardise some of their offerings.”

But the company faces a number of potential challenges to its growth. It is competing against a SoftBank-backed unicorn in the budget travel sector. Known as OYO, the India-based company has branched out to a multitude of global locations in recent years. According to media reports citing 25-year-old founder and CEO Ritesh Agarwal, OYO operates in more than 80 markets globally and manages more than 1.2 million rooms. As at July, the company was valued at US$10 billion, according to TechCrunch.

Nash and Rippel remain confident in RedDoorz’ prospects for a number of reasons. Among others, the hospitality business is not a classic “winner takes all” kind of market. “The hotel business is a multiplayer and often, a multi-winner sort of market. Our research on this theme found that there were very few players operating in RedDoorz’ space. And yes, one of those companies is OYO,” says Nash.

He adds that they believe the business of online marketing and distribution of budget hotels is fundamentally a local, rather than global, business.

On a broader scale, their research led them to conclude that technology businesses fall into three core categories — the global network effect, unique local winners and the local network effect. It is a central tenet of their investment approach, one that they say is incredibly predictive.

Companies in the first category include Alphabet Inc’s Google, Facebook Inc, Amazon Web Services and Microsoft. Unique local winners include Chinese search engine giant Baidu. And the third category includes Alibaba, Grab, Gojek and RedDoorz. The vast majority of emerging market tech companies are concentrated in the third category.

The model, among others, explains why the likes of Grab and Gojek outcompeted Uber in Southeast Asia, despite the latter raising much more capital globally. Uber, itself a beneficiary of the local network effect, albeit in its home region of the US and other Western markets, entered Southeast Asia without an appreciation for various hyperlocal customs.

For example, Gojek ran ahead of Uber in Indonesia because the former understood the latent demand for motorcycle riders to ferry passengers around. Gojek brought these services to market much earlier than Uber.

As for Malaysia’s Grab, it understood very quickly how Malaysians preferred to pay cash and thus, provided that as a payment option. Uber only followed suit much later during its short lifespan in the country.

Simply put, these locally founded companies had a better understanding of their immediate surroundings than other, much bigger and well-funded global rivals. That is why Nash and Rippel believe RedDoorz is such a compelling investment prospect, even when compared with OYO.

Woe the unicorns?

The early successes of RedDoorz and OYO notwithstanding, 2019 has so far seen a number of high-profile failures and missteps by once seemingly imperious unicorns. The list of failed or struggling unicorns over the past five years is growing.

Ride-hailing giants such as Uber and Lyft have significantly underperformed their IPOs earlier this year. Both companies have had long standing questions on profitability and cash burn rates, even well before going public.

Going back a few years, US biotechnology start-up Theranos, helmed by its charismatic founder Elizabeth Holmes, promised to revolutionise the medical testing sector. The billions in investments the company received sensationally made Holmes the youngest and wealthiest self-made female billionaire in the US at one time, according to Forbes.

In 2015, a Wall Street Journal exposé revealed serious allegations of fraud, with employee complaints revealing that the company’s supposedly breakthrough blood testing machines were inaccurate and not fit for purpose. The allegations sent Theranos into a tailspin, culminating in its closure last year.

Regulators filed fraud charges against Holmes and her former chief operating officer Ramesh “Sunny” Balwani. At the time of writing, the two are fighting the criminal charges in a US court.

The latest multibillion-dollar implosion is that of co-working start-up WeWork. Another company backed by the billions of SoftBank, WeWork saw a high-profile crumbling of its much-anticipated IPO, initially set for the second half of this year. Since then, founder Adam Neumann has been removed as CEO amid allegations that the company was vastly overvalued.

Last month, The Wall Street Journal reported that SoftBank had agreed to take a majority stake in the ailing start-up. As part of the agreement, Neumann walked away with a payout of nearly US$1.7 billion in exchange for agreeing to cut ties with the company he founded. The deal values WeWork at just US$8 billion, giving SoftBank a roughly 80% stake in the company. Just a few months ago, WeWork was valued at US$47 billion.

The growing list of failures has brought into sharp focus the detrimental impact on investors. Should high-net-worth individuals, limited partners and even public markets have an appetite for technology companies with opaque business models and a long-standing track record of heavy losses?

Nash and Rippel hasten to distance their portfolio company from recent technology struggles. “While it is difficult to comment on some recent tech IPOs as we were not investors in those companies, we observe that ultimately, investing in innovation requires a long-term horizon. We also note that the larger driver of venture capital investments and IPO appetite tends to be the broader, macro-IPO cycle [which occurs in waves and is loosely correlated to economic cycles], rather than the performance of any one or two particular companies,” says Nash.

They also note that RedDoorz founder Amit Saberwal runs a very lean operation and is careful to avoid the excesses associated with founders who have come into millions of investment dollars. Instead, they point to the outperformance of a slew of global tech IPOs over a 10-year period (July 2009 to July 2019). When ranked by aftermarket IRR, investors who bought into a slew of now-household technology IPOs and held the stocks until the present day would have been handsomely rewarded.

Between the respective IPO dates and July this year, investors would have seen returns of between 101.9% and 14.3% had they invested in any of the top 20 IPOs during the time frame in question. The proprietary ranking includes Facebook, HR solutions giant Ceridian HCM Holding Inc and Sea.

Original Article: https://www.theedgemarkets.com/article/private-equity-looking-southeast-asias-promising-tech-businesses