Alternative asset management firm Indies Capital Partners is launching its second tech-focused fund.
Indies Capital expects to raise $100 million for the fund targeting late-stage tech companies in Southeast Asia, the firm’s partner Harold Ong told DealStreetAsia. “We’re helping with intermediate liquidity.”
The fund’s strategy is similar to that of its predecessor Indies Pelago Investments, which raised over $70 million in September 2019. It has been about 80% allocated to secondary purchases of stakes in mid-to-late-stage, pre-IPO tech companies in Southeast Asia. Ticket sizes ranged from $2 million to $10 million.
Indies Capital’s portfolio currently comprises stakes in 14 companies, about half of which are in Indonesia. Ong says that the fund expects to close an investment in a 15th company by the end of May. Companies that Indies Capital has invested in include Indonesian last-mile delivery startup SiCepat Ekspres, Bangkok-based e-commerce services provider aCommerce, and Southeast Asian ride-hailing giant Grab.
Ong says that about half of the companies in the portfolio should be listed on the public markets by 2022. Grab is set to list on the New York Stock Exchange via a SPAC merger, while aCommerce has talked of raising $200 million in an initial public offering.
As Ong explains, Pelago’s strategy is to acquire stakes in companies that are fundraising, and about two to four years away from a public market listing, though the pandemic has accelerated the timelines for some of the companies.
In his view, tech secondaries started to become attractive about two to three years ago, as the first generation of venture capital funds in the region approached the end of their fund life.
“I had a thesis that there would be intermediate liquidity needs in the market. The earliest investors or management, or even the sub-pool of VC investors, may not want to wait until the final liquidity event or exit,” Ong says.
“They may not be able to because it may take eight to 10 years for these companies to eventually IPO, which we’re seeing today. So you suddenly have a lot more pressure to IPO and find liquidity.”
The way Ong sees it, this investment strategy bets on sector leaders strengthening their positions in time to come.
The first clutch of tech unicorns has had the advantages of the biggest investor base, as well as lowest customer acquisition costs, which allowed them to expand quickly and command market share in their respective sectors.
“I wanted to invest in that first generation of companies in Southeast Asia that were more mature in Southeast Asia. And I had a thesis that the ones picked will get bigger, so why not invest in them before the IPO?” he says.
“The big will get bigger. We saw that in the US and China. If you rewind to where the ecosystem in the US was as young as it is in Southeast Asia, 15 to 20 years ago, the big players in the US are the same big players today.”
Indies Capital, led by managing partners Denny Goenawan and Pandu Sjahrir, also runs a US dollar-denominated private credit strategy. In Q4 2020 it did a second close on its Indies Special Opportunities Fund III focusing on private credit, with $118 million in commitments. There are additional commitments expected this year. The predecessor fund closed two years earlier in Q3 2018 with $145 million in commitments.
Editor’s note: This story was updated to correct that Indies Special Opportunities Fund III has not closed.