Japanese-backed and Singapore-based seed stage investor KK Fund is on the prowl for deals in the fintech and logistics segments, as the firm looks to tap into innovations in these sectors, a top official said.
KK Fund founder and general partner Koichi Saito said he had been observing these the two sectors, and is of the view that there were many opportunities in this space, that the firm should not pass on.
Fintech has been a key investment theme among Southeast Asian startup markets in 2015, and the trend is not slowing down this year.
Logistics technology and startups have also started to blossom, especially among businesses that have a delivery component to its offering.
“We are keen on fintech but we’re interested specifically on businesses that involve loans, with data. We’re keen on fintech startups that look at improving efficiencies in less financially mature markets,” he told DEALSTREETASIA, noting that remittance, credit scoring, peer-to-peer and accounting are of interest to KK Fund.
As for the logistics technology, Saito believed that there could be more innovations developed to make the industry function more efficiently.
“As is, the logistics industry is a very fragmented one,” he said.
While the firm has primarily invested in online marketplaces, it is not entirely unfamiliar with the fintech or logistics startup scene, as KK Fund recently led a seed round in Malaysia’s TheLorry.com.
In the Philippines, the firm has invested in LoanSolutions.ph, a loan comparison portal.
This year, KK Fund is optimistic it will be sealing a number of deals.
Although Saito did not elaborate on the potential startup investees, he observed the continued mushrooming of many tech-oriented startups which indicates a strong pipeline of possible deals in line with its investment thesis.
KK Fund will continue to look at online marketplaces, that do not carry inventory, in any verticals.
The focus on marketplaces, Saito said, stems from understanding the Series A investors’ appetite.
He noted that while there is no guarantee that the investors will hold the same opinion when the time comes for an exit among KK Fund’s portfolio companies, the consensus interest among the investors at later stages have been in online marketplaces.
Within Southeast Asia, most venture capital (VC) firms are concentrated at the Series A stage, Saito added.
Thus far, four of KK Fund’s 10 portfolio companies have raised a following round of investment. Saito said the remaining six should be raising their next funding within 2016.
Beyond SEA, and a second fund?
While the VC firm has committed funding to 10 startups in Southeast Asia since it was set up in March 2015, it is also looking to seal its first deal beyond this region – in Taiwan.
Saito said KK Fund is closely following the Taiwanese startup scene and hopes to conclude a deal soon.
The firm is also looking at Hong Kong for potential deals but Saito is realistic about the expectations for the cash-flushed market.
“In Hong Kong, there are so many angel investors who can put in $200,000 on their own, (the startups) don’t need to go to a VC for a seed or pre-seed funding,” he said, noting that KK Fund will need a different strategy to court startups there, in one of Asia’s main financial centres.
Thus far, it has six portfolio companies based in Malaysia, one each in Singapore, Indonesia and the Philippines, with Thailand the latest geography covered.
Event Pop will utilise the funding to expand its market coverage in Thailand, focusing on international content to attract inbound attendees from around the region.
On raising another fund, Saito said he and the team was considering that option.
“Now is a good time to raise a second fund, because Japan and China still have a strong appetite for expanding into the Southeast Asian market,” he said.
Towards the end of January, Japan announced it was adopting negative interest rates in an aggressive move to stimulate economy amid wider global economic headwinds. This could further spur investments from corporates that back VC firms.
On whether it will be a larger fund, Saito said it would depend on the corporate investors’. What is for certain is, however, that KK Fund will remained focused on seed stage investments.
KK Fund has never revealed their total fund size before, although it is reported that the firm’s seed funding deals are typically in the $200,000 to $250,000 range.
The firm also prefers to lead the investment rounds. “If we follow, it depends on the valuation,” he said, noting that the regional startup valuations are on the rise, even in early-stage deals.
“Compared to three years ago, when startups had a small angel investment, and take about half or one year to gain traction (before moving onto seed funding), the situation is changing now,” Saito commented.
Unlike during his directorship in IMJ Investment Partners, Saito does not wait for proof of traction to invest in startups. Saito was with IMJ Investment Partners for two years before leaving to set up KK Fund in March last year.
“We fall back on looking at the founders – strong founders, and if it is the right market area, and that we can help bring them to the next level,” he said.