Finding investment opportunities in the time of COVID-19

Photo by Lucrezia Carnelos on Unsplash

Editors’ note: This article has been corrected to reflect that Morrison and Foerster is an international law firm.

As the COVID-19 outbreak and the seeming failure of governments in the key economies of the US, UK, and Europe to check its spread roil markets globally, some private investors are already scoping out hidden opportunities.

According to private equity investors and venture capitalists who spoke to DealStreetAsia, under-the-radar picks include productivity platforms and digital healthcare businesses.

“Productivity platforms – remote working apps, online edtech apps – were beginning to be considered as having reached their peak potential. However, during this disease outbreak, the companies are gaining a lot of momentum as usage spikes globally, providing them [with] new opportunities to convert free users to paid ones,” Mandiri Capital director Joshua Agusta told DealStreetAsia.

In Agusta’s view, other select sectors that could also gain momentum during this critical time include content-related platforms and media companies.

“Startups in areas such as AI, [and] SaaS – basically any technology that helps companies do more with little reliance on manpower – are seeing COVID-19 as an opportunity for them to do more business, and marketing,” one Singapore-based VC said. “Apparently, deals have been picking up for them.”

Indeed, the enterprise services players – Microsoft Corp, and Zoom – have already seen their businesses boom.

In the last seven days, Microsoft has gained 12 million daily users, on a base of 32 million. Last week, its networking platform, Teams, was reportedly overloaded and crashed just as millions of European workers were logging on amid a lockdown against the virus on the continent.

Meanwhile, Zoom Video has converted more than 20 per cent of its users onto its premium video conferencing service. The service has also been acting up, presumably owing to a spike in demand, with users finding themselves unable to join group calls.

In Indonesia, SaaS company Mekari reported a significant uptake in one of its services.

“The need for work-from-home mode has caused spikes in our mobile attendance features. We see a significant demand over the past few days, specifically for this feature. [Another] product enables HR and managers to track the attendance of employees working remotely,” Mekari CEO Suwandi Soh told DealStreetAsia in an email.

Mekari, which was formed after the consolidation of Indonesian SaaS-based platforms Talenta, Sleekr, Jurnal, and Klikpajak, offers services in the fields of human resources, software, accounting, and tax management to support SMEs. It has previously secured undisclosed Series A funding from investors including East Ventures, Mandiri Capital Indonesia and Money Forward Japan.

“Once we pass this outbreak, people will understand the value of cloud software. If you are running an on-premise solution, you will probably be facing many difficulties at times like this,” Soh added. “The uptick for our business most likely will happen after the dust has settled.”

Separately, Indonesian edtech startups Ruangguru, Zenius, Quipper and Sekolahmu have decided to offer free online learning programmes to their students.

Zenius, which recently announced a $20 million Series A investment led by PE firm Northstar Group, has been offering free access to its 8,000 e-learning videos.

“We are seeing a significant increase in the adoption of our app since the outbreak across all our metrics. Our tech team is working around the clock to make sure the traffic spike will not crash our platform,” Zenius CEO Rohan Monga said.

Monga did not disclose the number of new users gained by the startup or the type of content accessed by students during the last few weeks.

Finally, given the nature of the ongoing crisis, health-tech will likely be a focus for investors, even after the outbreak passes.

“The healthcare, medical R&D and pharmaceutical industries will likely be high on the list of priorities in China’s next five-year plan, which could present investment opportunities [for private equity firms]” Lip Kian Ang, a partner at international law firm Morrison and Foerster, said during a recent webinar. He cited the example of China’s Ping An Good Doctor, which recently reported exponential growth in the usage of its platform, with cumulative visits hitting 1.1 billion.

“The number of individually accredited and institutional investors enquiring about healthtech deals on our platform has surged significantly,” said a spokesperson for Fundnel, which allows accredited investors to invest in private companies at the pre-IPO stages.

Besides startups, Fundnel has also seen a surge in investor interest in venture capital funds, especially those targeting health-tech investments. Sector-focused VC funds allow investors to diversify their allocations into specific themes — online pharmacies and telemedicine are especially popular — as opposed to health-tech companies that require a dedicated investment for a long period of time, reasoned an industry executive.

Another opportunity is seen in the tech-based value-chain business as the healthcare industry can still be crippled by an inefficient supply chain.

According to a recent McKinsey analysis on the impact of the coronavirus on the private equity sector, companies focused on healthcare and retail are considered part of the frontline response. These businesses provide critical products and services and need to ensure that their supply chains are operating at peak performance.

One venture capitalist said that COVID-19 has helped to “open up opportunities in weakened offline value chains” in any sector which continues to rely on traditional methods, and that may be pushed to adopt tech-enabled solutions.

Vynn Capital founding and managing partner Victor Chua agrees, adding that the impact of the pandemic will see the tech industry work more closely with traditional sectors and that corporates will need to invest in improving the supply chain.

Ultimately, companies that are able to ride the momentum generated by the outbreak with the right strategy and tactics will outperform the market in this crisis, said Mandiri’s Agusta.

“What we can do right now is to stay vigilant and to adjust our projected/expected returns considering the market circumstances that have been highly affected by the virus outbreak,” he added.

Kristie Neo, Leslie Shaffer, and Nguyen Thi Bich Ngoc contributed to this story.

 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.