Jungle Ventures will remain “razor-focused” on being Southeast Asia’s early-stage investor of choice, even as the region continues to witness a spurt in IPO and Special Purpose Acquisition Company (SPAC) exits.
The Southeast Asian investor announced a $225 million first close of its $350 million fourth Southeast Asian fund earlier this week, roping in institutional investors such as Singapore state investor Temasek, the World Bank’s IFC, Germany’s DEG, and Asian family offices as limited partners (LPs).
Most of Jungle’s LPs are returning investors with several re-upping in this vehicle, shared Amit Anand, the founding partner of Jungle Ventures.
Jungle’s fourth fund will deploy cheque sizes of $500,000 and $20 million across 15 to 18 companies, making them a seed to Series B investor. This strategy of taking fewer and more select bets on startups also allows Jungle to create greater room for follow-on capital for its portfolio, explained Anand.
As such, Jungle does not see itself launching growth-stage funds or venturing into SPACs, which a number of regional VCs such as Vertex Ventures are looking to do.
“We like to focus on our strengths, which is taking the companies from zero to hundreds of millions in valuation, and then having the right partners come in and help these companies grow from there. Our focus will continue to remain on being the best early-stage platform in the region,” shared Anand in a video call.
The VC firm has already seen a number of its portfolio firms crack unicorn status, including Buy Now Pay Later (BNPL) giant Kredivo, whose parent FinAccel recently agreed to merge with Victory Park Capital’s blank cheque firm at a combined valuation of $2.5 billion. Other names from its portfolio include Indonesian beauty platform Sociolla and B2B e-commerce platform Moglix.
Jungle will continue to look at emerging themes in Southeast Asia particularly in social commerce, SME digitalisation, B2B payments, and fintech.
According to Anand, Jungle has achieved a multiple of invested capital (MOIC) of 7x for its $100 million second fund from the 2016 vintage, and 3x MOIC for its $240 million third fund from the 2019 vintage.
Edited excerpts of DealStreetAsia’s interview with Amit Anand:
You just conducted the first close of your fourth fund. How was the fundraising process? Was the first close entirely from existing LPs or did you rope in some new ones?
There are a few new LPs but there were also a lot of returning LPs. Our focus was to go and seek the support of existing LPs, and… the majority of that closing came from existing ones. A number of our LPs re-upped. Now we’re starting to engage with the pipeline in the funnel where we look at a new LP perspective and hopefully we’ll finish up towards the end of the year. There’s been a lot of interest. At last count, the funnel in our CRM system was sitting at close to $750 million at various stages of maturity.
Any interesting new LPs that you’ve been seeing these days? We’re noticing a shift especially among the US and other overseas investors in Southeast Asia in the last year.
Yes, the family offices, sovereign wealth funds, pension funds, they’re all here. I would say that one group that has done more than anybody expected is tech founders. They want to participate with funds, do co-investments, help portfolio companies, and give back to the community. Most of them are investing in their personal capacity. Some have set up their family offices. I haven’t seen consortiums as much.
Any significant difference in strategy between Fund 3 and 4?
I think one of the consistent features about Jungle is that we are a multi-stage fund. We are as comfortable writing a $500,000 seed cheque as we are a $15-20 million growth-stage cheque. So we are still a seed to Series B fund, much like how Sequoia is in this region. Our average cohort is about 15 to 18 companies. From a sector perspective, there are three major themes that we see evolving in the ecosystem — social commerce, SME digitalisation, and B2B payments and fintech.
How have you seen valuations play out in Southeast Asia and in India last year? How does that influence the amounts you set aside for your firms?
Our reserve ratios have always been high. I believe it is one of the features of Jungle that has attracted a lot of founders to us. We tend to make fewer investments than our peers, even though we are almost twice as large, which means we actually have four times more capital per company than our peers. We haven’t changed that at all, quite frankly.
Regarding valuations, I think the bottom line really is that the value growth of the underlying asset is also improving quite dramatically. I’ll give you a very simple case from the 2015 cohort.
We had a company in e-commerce that was raising a Series B of about $23 million at about $40 million pre-money valuation. This company was doing about $10 million in annualised revenue run rate when they raised the Series B.
Fast forward to the 2019 cohort, we have another e-commerce company, which raised $25 million, this time it is $70 million pre-money valuation. This company was doing about a $30 million revenue run rate when they raised this money.
So I think with regards to valuation and round size growth, the question to ask is about the value of the underlying asset, whether its revenues, its users, or other ways of qualifying value is growing as quickly. I think it’s growing much faster than the valuations are growing.
So you’re obviously taking a very deliberate approach of selected bets on a few companies rather than expanding into multiple stage funds like what we’ve seen with other GPs in the region.
Yes and that results in a few things, right? First and foremost, we want to be seen as the franchise in this region which has been consistently delivering unicorns on an annual basis. We don’t want to be seen as a one-hit-wonder, and that doesn’t happen if you don’t focus your efforts and if you’re not thematic. We’ve generated two unicorns in the first six months, and there will be many more guaranteed in the next six months.
On the other hand, if we continue to be some of the largest investors in companies that are doing well — like how we are in Kredivo — you will see that even after the company has raised so much capital and now going public, we’re still the largest or the second-largest investor in the business. So even in terms of capturing value back for ourselves and our LPs, this model is better if we have five unicorns in every vintage, as opposed to trying to get the one-hit wonder going.
Does Jungle Ventures have any plans to launch a SPAC?
The answer is no. Our thought process on follow-on capital is all driven by listening to our founders. Our founders in the last 3-4 years have raised close to $2 billion in follow-on capital, all of which has come from Tier 1 growth investors globally, whether it’s a Temasek or KKR, Tiger Global, or SoftBank.
So from that perspective, we tend to be seen as the partner of choice for some of these people from an early-stage deal flow perspective, and our founders appreciate the relationship that we’ve built. Over the years, many of these partners have done transactions in the portfolio. So we like to focus on our strengths, which is taking the companies from zero to hundreds of millions in valuation, and then having the right partners come in and help these companies grow from there. Our focus will continue to remain on being the best early stage platform in the region.
What are some of the biggest shifts you’ve seen in the Southeast Asian ecosystem?
I think there are two changes from a pipeline perspective. One is volume, which is a consistent feature of a growing ecosystem. There’s been a growing number of deals we’ve got to track across the geographies.
But I think what’s become more exciting for all of us is the quality of entrepreneurs you’re now starting to see in the funnel. The majority of the investments we’ve made in the last 18 months or so are entrepreneurs who are still first-time startup founders, but are not new to startups. They’ve been part of a Grab or Gojek or Google and Facebook and in many ways, seeing the journey there from zero to one, they’ve been able to build deep insights in many ways to know where the next big opportunities are coming. They are also going from zero to one pretty quickly.
Nowadays when some Series A or B startups come out to fundraise, they are at 2x or 3x of revenue run rate, far ahead from the time we were investing in 2015. It’s extremely exciting to see that kind of entrepreneurial talent compared to the cohorts we saw in 2015 or even 2019.
Do you think that increases the pressure for Jungle to provide even more value to founders compared to just a few years ago when more hand-holding was probably needed for founders?
I keep telling my LPs that we’re (also) much like a startup and have to think about our customer and their pain points and evolve our offerings based on that. In 2012, I remember we had around nine venture partners and operating partners. We had a lot of people that were functional experts, people who had done sales, people who had done finance, HR, marketing and so on, because what we are seeing in that generation of founders was that it was the first time they were building businesses. They couldn’t go and hire a finance person who suddenly knew how to handle cross-border payments, or subsidiary creation.
Compare that to today, a lot of those things have become plug and play in the ecosystem. You don’t have to focus on that, (but) you will have to evolve your value creation to founders. A lot of these founders today are still building businesses for the first time, but they still haven’t managed teams in the hundreds and thousands, or independently run a board, or have experience in organisation building. So we’ve had to evolve your offering there. Here at Jungle, our Net Promoters Score (NPS) keeps changing vintage to vintage and thankfully, they’ve been going up. So hopefully, we’re doing something right.