DSA Summit: Global VCs expect more M&A-driven exits in SEA

DEALSTREETASIA’s Asia PE-VC Summit 2017 held in Singapore. In the panel: Rachel Lau, Wei Hopeman, Edgar Hardless, Finian Tan & Chris Pu.

Global venture capital players are expecting more exits driven by corporate M&As in Southeast Asia despite the many challenges in the region, according to panelists at the DEALSTREETASIA’s Asia PE-VC Summit 2017 held in Singapore recently.

Wei Hopeman, Managing Partner, Arbor Ventures, said, “In SEA we’re starting to see more exits, from a corporate perspective there’s a lot more active acquirers out there now, both globally as well as from China, that potentially can be investors.”

Hopeman was joined by Rachel Lau, Co-founder of RHL Ventures, as moderator, Chua Kee Lock (Group President & CEO of Vertex Venture Holdings), Finian Tan (Chairman of Vickers Venture Partners), Chris Pu (Partner and Head of Greater China of Telstra Ventures), and Edgar Hardless (CEO of Singtel Innov8).

Hopeman highlighted that apart from exits, it is more important for players to think about building strong teams and sustainable businesses.

“We’re early-stage (VC) so we don’t think about exits right away. In fact, It’s a big turn off for us if the first pitch we get is about exit because the future is unpredictable, what you can manage now is about building the best team and business that you can,” she said.

Exits in SEA have been challenging partly because there is relatively less liquidity in the stock exchange markets across the region, compared to that of the US or China.

Finian Tan, Chairman of Vickers Venture Partners, said: “There isn’t a really good stock exchange yet in Southeast Asia, and the reason is sovereignty, which is a pity. Somehow I hope the region will get together and can launch a virtual currency that can be big enough.”

Chris Pu, Partner and Head of Greater China, Telstra Ventures added on the issue: “We do consider exits when we invest, given that we have been operating in China and US for quite a while. In SEA we are very active as well and what we want to see more is the M&As, and that hopefully will boost the whole ecosystem. At the end of the day, as investors you do look at your valuation, so somebody has to pick up the next balance. That’s important.”

Mitigating cross-border risks

Hopeman also shared her views on risks in different countries Arbor Ventures invests in.

“Every market has different risk profiles, we have portfolio companies in China and Japan and SEA as well as US and Israel. When we look at investments in China obviously it’s a very competitive space both in terms of available funding and also the number of startups.”

“SEA has grown tremendously for the last couple of years but it’s still a very nascent market, we look at things like the team, experience set, how we can augment that, potentially bring some talents from other geographies. With US and Israel we focus on deep tech that we believe  can help them to commercialize.”

Meanwhile, Chua Kee Lock, Group President & CEO of Vertex Venture Holdings believed that global VCs need to have deep understanding of the markets they operate in.

“Today, everybody is very transparent, everybody can learn deals from the media or anywhere else. So, now it becomes how deep you know your local companies. Global investors today need to have a local team,” he stated.

Edgar Hardless, CEO of Singtel Innov8, said that it is important to mitigate differences of knowledge when investing cross-border. In the end, he said, it’s about making sure that all related parties are comfortable with the sets of terms that have been agreed on.

“Obviously in the US market has been around for 150 years – so everybody already knows the market terms, expected valuation and so forth. When we started 7 years ago in Singapore there was a lot of education required for the early-stage, but now people understand a bit more. Ultimately, it’s making sure that both sides – investors and founders – are comfortable with the sets of terms.”

SEA-India and China relationship

Meanwhile, Tan is of the view that the relationship between SEA-India and China will play a significant role in shaping the regions’ growth in the next 20 years.

“Everybody is now talking about 20 years of super growth in India and SEA, and in order to achieve that growth they need the trillions of dollars that they don’t have – the capital from US, Europe, Japan, including China. So, anybody in between who can import capital will benefit,” he stated.

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