Since the beginning of 2016, Japanese venture capital firm Cyberagent Ventures has scored three investments in Vietnamese startups, including on-demand maid service Jupviec.vn, e-learning site Kyna.vn and healthcare information platform ViCare.
Likewise in Thailand, the Japanese investor has also made three investments in 2016, in fashion e-commerce startup Stylhunt, analytics app StockRadars and HR platform Getlinks. In September, Cyberagent Ventures closed the exit of price comparison site Priceza, selling the stake to Germany’s media giant Hubert Burda Media.
In Vietnam, Cyberagent Ventures is among the most active venture capital investors. Cyberagent Ventures, which has recently made several exits from its mature investments, will continue to look for more opportunities in Vietnam, said Dzung Nguyen, the fund’s head for Vietnam and Thailand markets. He also told DEALSTREETASIA about the exit climate in the region, as well as his strategy for invested portfolio.
Cyberagent has made some recent exits. Could you elaborate on the timing and reason?
One of the reasons is that the investment term has come to an end. VC investors typically hold a portfolio within 3-7 years, and our portfolios have also reached that period.
Second, the exit landscape in Southeast Asia in general is very tough, because an IPO market for technology companies is not there yet, and we haven’t seen a lot of seasoned individual investors who are really into tech businesses as in more mature markets like the US or Japan.
That is one of the biggest issues facing investors in Southeast Asia, which leads to the lack of big deals in this region. Therefore, when we find the right buyers that generate returns for the investments, it is time to make the exits.
IPO is a possible exit route, like what Mekong Capital has done for Mobile World. But IPO is a tough market for tech companies in Vietnam particularly, so a more viable way is to seek buyers through M&A.
Some of your portfolio companies have gained a lot of traction. Do you plan to invest further in them, or would you look at only new startups?
We would do both, because our ultimate goal is investing. Any projects with the appropriate capital requirement and a sizable return potential are relevant for our strategy. At any invested companies, we will add more value into the business, help them grow and shape them into what strategic investors would want to buy.
As per recent investments, like in ViCare and Jupviec.vn, there are similar startups in the region. How do you help differentiate them from others?
The value that Cyberagent Ventures brings to the invested startups is helping them identify the business strategies and giving the right resources so that they can make the right decisions.
In addition, we have a network of portfolio companies, investors and corporates around the world to make the matching. That will help their business grow and get funding faster than doing alone. We are also helping them in hiring talents for the growing stage.
In terms of raising funds, the value we bring is the referral they have got when reaching to other investors and strategic corporates.
When you make the exits, which types of buyers are you looking for? Is it later stage VCs or companies?
At Cyberagent Ventures, we do both early stage and later stage investments at series B and C rounds. The buyers do not necessarily need to be only either VCs or corporates. It’s a very flexible strategy. It is a match-making process, where the sellers and buyers find each other and transact the assets at the agreed prices. The key point is to create a win-win situation. The win for the buyers is that their assets have the ability to grow bigger.
What is the relation between the interest of VCs and corporates when they buy a startup?
In general, some VC firms invest in a startup to create business alliance or synergies for its existing portfolio. Companies can gain organic growth, but at times it is difficult to organically expand to some certain markets. For this purpose, when a company acquires a similar business in another country, it is actually the strategy of its VC investor. Expansion helps the company grow, which, in turn, helps the VC have an exit.
Their further goal is consolidation, possibly creating a holding consortium to swap shares among the companies, paving the way for a possible IPO.
That is what I generally see that is happening in the market. For Cyberagent Ventures in particular, we have recently exited to corporates who search for regional growth. The exit opportunities are many more in that space.
Traditionally, startups in the areas of gaming, digital advertising and e-commerce have secured investments. What will be the next trends?
Cyberagent Ventures typically invests in Internet service companies, those that capitalize on technologies to provide essential services to the customers. We do not invest in the trend, but follow the “time machine” investment philosophy.
There are proven models in other countries, and the human needs and behavior are basically the same anywhere. Therefore, those models can work in Vietnam. The next thing to be done is to assess the market size, consumption power and whether the overall climate allows the models to be executed.
For instance, fintech has been rising as one of the hottest trends for startups, but in Vietnam, the industry is pulled back by regulatory barriers.
Regarding the trends, fintech, edtech and medtech are big markets, and technology is the tool to bring services offline to online. There are also augmented/virtual reality, big data and artificial intelligence fields which are attracting huge funding capital from US and Chinese investors. However, it will take some time for Vietnam to see such industries grow.
In Vietnam, historically, Cyberagent Ventures invested in the early stage to help educate the market about new services. We are willing to do something new and accept the risks. Vexere (bus ticketing platform) and Foody (gourmet media startup) were two challenging ideas for us because they were then new to the market, but we tested and led the market successfully.