Anthem Asia, a private equity and advisory group which set up shop in Myanmar in 2013, has already made a handful of investments in the frontier market, that is just opening up.
Its portfolio companies, which largely span the digital business space, include Xavey, a developer of a mobile data collection platforms; Zagar Communications, a full-service agency; Blink, a marketing agency; Hintha Business Centres, flexible office space provider; Thahara, property marketing and management platform; and Revo Tech, a creative digital agency.
Talking to DEALSTREETASIA, Anthem Asia co-founder and director Peter Witton says, the firm is looking for investible themes in small sized businesses with a strong local brand.
How do you assess the climate for private equity/venture capital investment in Myanmar?
The global economy definitely is shakier than it was before. Especially what is happening in China will have repercussions all across Asia. I think in bigger groups, these are the sort of conversations happening but the fundamental thing has not changed. The world has changed around Myanmar. For us, we will continue to do what we’re doing.
What do you look for in potential investee companies? What are the sectors and stages (investment stages and size) that is most attractive to your investment thesis?
For us, the biggest risk is not political or financial risk. The single biggest risk is implementation and operational risks. Our conversation with any of our investee companies is how we’re going to do it. You got a great idea. But how are you going to do it? How can we help you? We offer capital, experience, work with smaller companies and networks. From our point of view, it is not just about the money. The experience of growing the business plus the network. Things like helping you put in place structures, strategies and corporate governance is key.
What we look for in potential investee companies is good ideas where people have thought through.
We are interested in building domestic brands. In a lot of sectors, there is no reason why domestic brands should not be successful. Like business services, consumer related sectors, education and training and agri-business.
Our typical investment range is six figure dollars to a million in the first phase. We tend to be in the smaller end in the SMEs, startups and we also do growth capital.
What are the capacity-building initiatives that a venture fund needs to make in a market like Myanmar?
You have to support with capital, invest in initiatives and training. We provide some direct training within our own team. It is a problem in every business about finding good, experienced staff. We support initiatives, do conference talks and business panels. All these small things add up slowly.
Are there challenges in raising funds for investments in Myanmar?
The fundraising environment has changed a lot. There are different sources to raise funds nowadays which did not happen in the past. The obvious one is philanthropy. There’s a whole spectrum of different funds, social impact funds and venture philanthropy funds. Myanmar will have access to all those different pools. The China stock market situation will have an impact but people who have already known about Myanmar and interested in Myanmar, they will follow through.
How has Anthem’s investment journey in Myanmar been like?
It’s been up and down. We’ve learnt a lot. The good experience is when you meet somebody who has a clear idea of their business. The other good thing is there are a lot of things you can do here. The legal structure here, even it is very old, still works.
From the downside, what are the two things you could change? One is to make the actual basic banking system easier. It is really still very complicated. Another thing is to make it easier to lease property. Legally, it is a one year lease. A classic case is of downtown Yangon. It should see thriving retail. There should be shops, cafés and restaurants, all over the place. There are not that many now. If someone wants to set up a restaurant, and only has a one year lease, why would he do that? If you can fix those two things, life would be easier for everybody.
Apart from conventional venture investment, you are also into providing debt and equity and a combination of both. Please tell us what structures work best in Myanmar ecosystem?
It is a very immature or undeveloped capital market here. Normally with investments you have a debt, equity and convertible bonds. And that’s not really possible here at the moment. Basically we put in equity.
Tell us about your advisory practice
We’re fundamentally into investment. Advisory comes along. We do some but if you are not careful, advisory takes into consultancy and we’re not a consultant. We have the expertise to do it but advisory comes with investment. We help them with strategy, corporate governance. Sometimes companies just need somebody to talk to. That’s part of being a partner.
What are the exit options available for venture investors looking at Myanmar?
There are only three. You either do a trade sale, or you grow the business and keep it, or do a stock market listing. Normally private equity firms, they have cycles, of about five years. You raise, draw capital and sell. Conventional private equity firms don’t hold. That’s not working here. You need to stay longer in Myanmar. We talk about patient capital. The market is too early to talk about exit. So part of our philosophy is patient capital. Whatever, model you use elsewhere, it’s going to take longer here.
What is your assessment of the regulatory environment and ease of doing business in Myanmar?
We can live with what we’ve got. We will adapt. You can set up a company pretty easily. I think the key issue is to ease the standard lease (property) and banking.