In 2018, armed with dry powder from its record Series H fundraising round, Southeast Asian ride-hailing giant Grab launched its own investment arm, Grab Ventures.
The plan was to invest in and partner with tech startups in the region. Since then, Grab Ventures has been making investments in three ways: venture building such as with GrabFresh, GrabKitchen and GrabWheels services, accelerator programmes and direct investments through the traditional venture capital route.
The firm in 2019 announced investments in Singapore-based logistics startup NinjaVan and British ride-hailing roaming startup Splyt. Last week, it launched its first early-stage accelerator in Southeast Asia, Grab Ventures Ignite, in Vietnam.
As investors across the globe turn cautious and slow down their pace of dealmaking, Grab Ventures chief Chris Yeo said the venture unit continues to see several opportunities to partner with and/or invest in startups in Southeast Asia.
Within each of Grab’s three core services — transport, food delivery and financial services– there is still room for both Grab and startups in the region to grow, he added.
Edited excerpts of an interview:
Grab Ventures Ignite is an early-stage programme designed for Vietnam. What is your plan for late-stage investments in this country? Can we consider the Ignite programme a stepping stone for Grab Ventures to explore late-stage opportunities?
When we decide to work with startups, we want to make it a journey that we go through with them. So definitely we see GVI as just the first part of the journey. We hope that these startups will not only have an investment relationship (with us) but also have potential partnerships for the Grab platform. And perhaps later on, they might be feeders for Grab Ventures Velocity, which is more tailored for pre-Series A companies.
What we are interested in is making investments that support our core businesses of transport, food, financial services and logistics.
Some investors are saying Vietnam is facing a Series B crunch? Do you also see a scant supply of investible startups at this stage?
The Vietnam ecosystem has grown a lot in the past two years in terms of deal flow. The second point to note is that it is still very early stage. There is still runway in terms of growing startups through the lifecycle from seed to Series A and B. We are very bullish on the startup ecosystem here because of a number of reasons.
First, there are very strong macroeconomic fundamentals in the country. The demographics are very strong, with 70 per cent of the population under 35 years of age. The middle class is expanding very fast, which means rising consumption. And there is a high mobile penetration. This is very important for tech startups. You need to hit certain levels of these conditions for startups to scale up in a country.
Second, Vietnam has a very deep engineering talent. That is why Grab has an engineering centre here. The third thing that we have also noticed is the increasingly strong government support. We are very fortunate to be able to partner with the National Innovation Centre (of Vietnam). This is very important for a successful accelerator programme.
Profitability of tech startups has become an important investor concern at the moment. How do you view it at Grab Ventures?
Having a clear path to profitability is very important. It is one of the fundamental criteria when we do due diligence on any startup — What is the business model? Do they have sound unit economics and do they have a clear revenue model and path to profitability?
The other thing we look at is the team and the founder – that is really important. And because we are a strategic investor, the third thing that we look at is what is their potential fit or synergy with the Grab ecosystem.
Grab’s main operational areas of transport, food and fintech have grown significantly. What could potentially be the next disruption at Grab?
We focus on transport, food delivery and financial services. And we are one hundred per cent committed to Southeast Asia because these are [our] home countries. Within each of these three core services, we believe that we are actually still scratching the surface in terms of growth and market penetration. If you think about transport, our core business in transport — ride-hailing — is still growing very strongly. But we see further growth being driven, for example, in electric vehicles. We will continue to see innovation in transport and mobility. We see continued strong growth for food delivery and of course, for financial services. There is plenty of runway in those businesses.
As a corporate VC unit, how do you look at exits?
We are a strategic investor, which means that the ROI for us is the strategic value as well as financial value. The financial value goes back to one of the criteria for investing in companies, which is being financially viable. Meanwhile, the strategic value comes from a variety of things, such as how an investment benefits certain core businesses, or how it helps accelerate the startup’s metrics.
Those do not necessarily mean exit, because we are not looking for financial returns only. That is useful for the startups we invest in because we are in the partnership and investment for the long term.
What kind of benchmark do you want to set for tech investments in the region?
We are not looking at setting standards. For every investor, whether you are a strategic or financial, everyone has a different objective and hurdle rates. For Grab Ventures, the targets we have for each investment are quite customised and unique. What is most important for us is we want to make sure that our investments benefit the startups.
We are committed to nurturing the next generation of tech leaders in Southeast Asia. It all comes back to the exact same journey that we went through. We have been very blessed to be where we are today, and the only reason for that is because many people helped us along the way. That is why we have always felt that we need to give back to the ecosystem. Our philosophy is that for the tech ecosystem to flourish, it is all about open partnership. We absolutely believe that there can be many more large tech companies and global leaders coming from Southeast Asia.