The COVID-19 crisis has created long-lasting shifts in consumer and social behaviour patterns, thereby creating new opportunities for investors, said top executives of US private equity (PE) behemoth General Atlantic.
The adoption of various digital platforms such as e-commerce, digital media and digital payments have witnessed significant growth that would have ideally taken 5-10 years, Sandeep Naik, General Atlantic managing director and head of India & Southeast Asia, told DealStreetAsia in a rather candid chat.
While the recent pressure on personal finances has reduced discretionary spending for many people, social distancing norms have prompted consumers to opt for internet-based, easily accessible solutions for both work and leisure.
“We are seeing new investment opportunities that address some durable, structural shifts [in the digital space],” said Naik, highlighting how the PE major is spotting big opportunities in the new-economy sectors.
General Atlantic is betting big on edtech, a sector it was enthusiastic about even before the pandemic days. Its current edtech portfolio includes companies across geographies – BYJU’s and Unacademy in India, Ruangguru in Indonesia, Arco and Hotmart in Brazil, OpenClassrooms in France, and Duolingo and Quizlet in the US.
“We see more opportunities emerging in this space,” he added. Currently, digital learning accounts for only 2.7 per cent of the total global education spends, which is expected to increase in the years to come.
General Atlantic is also betting big on healthcare as the relevance of access and innovation in the sector has come to the forefront after the pandemic.
It cited life sciences as its fifth core investment sector in October 2020, alongside consumer, financial services, healthcare and technology.
Earlier this year, the PE major made headlines for its $55 million investment in the life sciences space when it pumped in capital in Indonesia’s Kalbe Genexine Biologics (KGBio).
The investment was reportedly made to support KGBio’s ongoing clinical development and commercialization needs, asset acquisition plans, and production capacity expansion efforts.
Prior to KGBio, General Atlantic invested in India’s Rubicon Research, a generics pharmaceutical product-development company since April 2019. In total, General Atlantic has investments in 17 life sciences companies around the world, according to its website.
It has pumped in over $1.4 billion in life science companies globally – in countries such as the US, Latin America, EMEA, India, Southeast Asia, and China, said General Atlantic managing director and head of Indonesia Ashish Saboo.
“Even prior to the pandemic, we believed we had entered the golden age of life sciences and biotechnology,” Saboo added.
Its growing focus on SE Asia
General Atlantic is scouting for opportunities in the region with entrepreneurship increasing and the government taking necessary steps to boost investments in various sectors.
Take healthcare for example. The COVID-19 pandemic has encouraged reforms and opened new investment opportunities in areas of biotechnology, telehealth, pharmaceuticals, and diagnostic medicine.
This is expected to give a significant leg-up to the sector in which Southeast Asia is already spending close to 4 per cent of GDP, according to data available with World Health Organisation (WHO).
Also, member countries of ASEAN are gradually beginning to commit capital to the universal healthcare system. Indonesia has one of the most extensive free healthcare programmes globally that cover around 180 million people, Saboo continued.
Echoing the same sentiment, Naik added how “biotech and pharma have assumed critical importance on the global stage – underscored by the pandemic – and we believe the opportunity set is immense”
What’s more, the region is also ramping up its research and development (R&D) across all industries, accounting for about one of every three dollars spent on corporate R&D spending.
General Atlantic started investing in India and Southeast Asia in 1999 – it was amongst the early investors of Singapore-based internet and mobile platforms Sea wherein it pumped in capital in 2014.
The firm is raising $5 billion for its fourth growth equity fund. It has raised $3 billion and is expected to close its fundraising in June, which brings the total committed capital for investments in fast-growing companies to $20 billion. In 2018 it raised $3.3 billion for its third fund.
Going forward, it sees Singapore, Indonesia, and Vietnam as the three countries having the most valuable tech ecosystems in Southeast Asia.
General Atlantic’s Singapore strategy will be consistent with its global programme that focuses on five sectors – consumer, financial services, healthcare, life sciences, and technology.
“What’s been compelling in Singapore is that many of the entrepreneurs that we meet with are thinking regionally, if not globally, from day one,” Naik said.
But among other Southeast Asian nations, Indonesia is believed to offer one of the most exciting growth opportunities, due to its internet economy that is valued at over $25 billion with more than 150 million active internet users, he added.
General Atlantic opened its office in Indonesia in 2019 but way before that, in 2016, it made its first investment in the country in listed food and beverage retailer PT MAP Boga Adiperkasa Tbk. Thereafter, it made a few investments in the archipelago with its portfolio comprising edtech firm Ruangguru (December 2019) and life sciences company KGBio (January 2021).