Silicon Valley-based venture capital firm Fenox Venture Capital is looking to expand its presence in Asia by launching special investment funds for two of the largest countries in the region–India and China.
The investment firm recently partnered with the Chinese government to launch a large incubator and accelerator programme in Chengdu in the Sichuan province of China. The company is also likely to launch a “very large fund” focussed on Chinese companies, Anis Uzzaman, General Partner and founding member of Fenox Venture Capital told DEALSTREETASIA in an interview.
“In 2018 we will be basing the ground, and we have to physically build the incubator and accelerator in Chengdu, hopefully we should be able to get the programme running by the end of June. And, hopefully by the end of the year we should start discussions on the large fund for China,” he said.
The Chinese government is keen to attract knowledge from the Silicon Valley to help local startups, for which they are very willing to provide the infrastructure and finance.
“They are also thinking that as these companies grow a little bigger and need Series A and Series B levels then obviously there needs to be funding. So a fund of a pretty large amount will be on its way after this incubation and acceleration centre is set up,” said Uzzaman.
Fenox Venture Capital works with emerging technology companies and operates out of offices across eight countries including Bangladesh, Taiwan, Dubai, Indonesia, Japan and South Korea. Its investment spread covers 14 countries and it has a 115-strong portfolio. It manages several multi-million dollar funds and invests in technology startups from artificial intelligence, robotics, and big data to virtual reality, fintech, and healthtech domains.
The single LP model
“We have around 17 funds today, 90 per cent of which are single investor funds (having sole limited partner). Fourteen of the 17 funds are invested by a single investor, which happens to be some single large corporation. Around 25 large corporations have decided to form their venture capital arms using Fenox,” explained Uzzaman.
A recent example is that of Taiwan-based AsusTek Computer Inc (ASUS) jointly launching a $50 million venture fund with Fenox, which will concentrate on technology startups operating in the areas of artificial intelligence (AI), Internet of things (IoT), Big Data, cloud, AR/VR and other related technologies.
Late last year, Fenox also partnered with Wistron Corporation to launch a $20 million venture capital fund to work with global technology companies.
While the main structure of operation for Fenox is managing the corporate venture capital funds by major corporations, Uzzaman says that for countries like China and India they are likely to launch special schemes where in they raise separate country specific funds, inviting their partners to participate.
While for the China-focussed fund the local government is likely to come in as the main LP, a lot of interest will also come in from Fenox’s current partners.
“I strongly believe that the Chinese government is going to become the main limited partner in this case and obviously since it is China, we have also seen quite a bit of interest from private parties the same way as we see the interest for India, because of the population and economy,” said Uzzaman.
“Our large corporate partners today, 25 of them we have now, all of them are very interested in both India and China but the Chinese government is playing a very prominent role and most probably becoming the first and anchor investor in this and then have the private sector to join in,” he added.
Fenox scouts for local partner in India
For India, Fenox had planned to float a $50 million venture capital fund dedicated to investments in the country, and had also roped in Venkatesh Shukla, chairman of TiE Global, as a General Partner. However, Shukla left soon after the announcement due to other personal commitments, said Uzzaman adding that Fenox was now looking for someone to replace him.
While the Fenox currently doesn’t have any country-specific funds, Uzzaman says India and China are special cases.
“For these countries (India and China) we are looking at special schemes where we ask all of our limited partners that we are going to launch an India-focussed fund and if they are interested in investing in it. Last year we did that and we got many hands raised. These are our exiting LPs and we asked them if they were ready to invest in India, because here we would not only invest in technology but also e-commerce and other sectors,” he said.
According to Uzzaman, apart from investing from the focussed fund the corporate funds would also be keen invest side-by-side with the India-focussed fund, making the bandwidth to invest much larger.
Besides scouting for a general partner to spearhead its India investments, the US-based investment firm is also looking to partner with local investors in the country.
“That is one item that we are also exploring right now, if we can partner a VC than creating our own entity. I feel that even if we have our own GP that person will have to work with some local partners for sure. But we need to find that GP first who is not only a good GP but is also well connected with the local players,” added Uzzaman.
Strong Indonesia base
Fenox also has a strong presence in Southeast Asia. With a base in Jakarta most of its 35 investments in the region have been in Indonesia, with some deals in Singapore and Malaysia as well. According to a recent DEALSTREETASIA report, the venture capital firm is poised to strike its first deal in Vietnam next year.
“Our headquarter for Southeast Asia is Jakarta Indonesia is the fourth largest populated country in the world it has 261 million people, which really is attractive. Also, the Indonesian infrastructure is extremely good and the government has played a major role, every single minister in the government is talking to us and is making sure that we are comfortable,” said Uzzaman.
Another country that whose government has played a pivotal role in attracting Fenox VC, is Bangladesh, which led to the firm investing around $1 million each in seven startups in the country.
“We manage 17 funds and any of these funds could be between $20 million-$200 million . Most of these corporations when they are a single investor, so if they like a company they don’t care how much is left in the funds or which country the company is in. We do have in some sense billions to spare in the next 5-10 years for the world,” said Uzzaman.