Amid hopes of an active 2017 for venture capital firms in the region, Malaysia’s TinkBig Venture has cautioned that the next 12 months could see several startups doing down-rounds with valuations going down by about 40 per cent.
TinkBig, a comparatively new venture capital firm that has invested about $2.4 million in eight companies, mostly consumer focused, is of the opinion that as many as 30 per cent startups could down shutters in the coming year.
“The companies that VCs have invested, had a high valuation but they could not have an aggressive growth and are not making enough money. They(startups) are still having a burn rate and losing money and they cannot raise another round. But, no one would come in at that valuation,” serial entrepreneur and TinkBig’s founding partner Andrew Tan in an interaction with DEALSTREETASIA.
In fact, this also provides an opportunity for venture capital firms who is keen to get in at such a time and turn around the companies.
“Now, what they (startups) need is someone who comes in to bridge that gap of 6-8 months for them to sustain, but I am not going to come at that valuation, and that is why I say there are going to be down-rounds and I would love to get in at this time and turn around these companies,” said Tan.
He explained that during the initial 3-4 years, the startups are very excited and the investors were giving swell valuations but most funds have a life span of 4-5 years and next year is a time when most of them would be looking to exit.
TinkBig calls itself a venture capital firm that provides smart capital to startups and tends to invest around internet and mobile startup that focus on consumer sector, and as Tan calls “Online to Offline”– businesses that employ technology to solve offline consumer issues.
Among the portfolio companies that the firm has invested in are BurgieLaw, Refash, Sportsplay and GOtixs. The investment ticket size for the firm is ranges between $250,000 upto $3 million an it looks at a stake ranging 7.5 per cent to 15 per cent.
The firm has a fund size of $10 million with $4 million invested from Tan’s own pocket while the rest is from its General Partners.
With a focus on Southeast Asia, the firm has a strong foothold in Malaysia, Indonesia, Singapore and Thailand. It has now also started to look at Vietnam where it is currently exploring opportunities.