OOCTANE, a Cambodian venture capital (VC) firm backed by local logistics company Worldbridge Group, is scouting for ‘late-stage investment opportunities’ in the country due to paucity of quality deals in the early stage.
The $55 million-VC fund is also looking to provide advisory services to companies as it looks to tap the private equity space. Its targets are “good revenue-generating businesses” that have strong unit economics, with clear traction, growth strategy and road to profitability,” its general partner Tapas Kuila told DealStreetAsia.
OOCTANE closed its debut fund in late 2018 with a mandate to invest in Cambodia-connected technology-enabled businesses.
The firm focuses on sectors such as logistics, e-commerce, real estate and financial services within the technology umbrella. However, it is also open to investing in traditional brick-and-mortar companies that are using technology as an enabler for digital transformation.
An associate with WorldBridge Group, one of Cambodia’s largest logistics companies, OOCTANE also advises on M&A deals for the group.
According to Startup Kingdom: Cambodia’s Vibrant Tech Startup Ecosystem 2018 report, challenges in the country’s nascent startup ecosystem revolve around ‘investment readiness’ issues.
To date, there are only 30 publicly-disclosed tech startups with institutional capital investment. Many early-stage firms still lack understanding of what ‘investment readiness’ means or what conditions are required to close institutional, corporate, or even significant angel investment.
The investment firm assesses startups in terms of markets they cater to, their teams, and their growth prospects.
In January last year, OOCTANE made its first and only investment in local food delivery service startup Muuve.
While the value of the deal was not disclosed, it was a strategic investment to help Muuve expand to new cities in Cambodia and strengthen its current operations.
While there has been a lull in terms of investment activity due to the COVID-19 crisis, OOCTANE claims to have spent a considerable amount of time last year advising and assisting its portfolio companies on how to survive the onslaught of the pandemic.
“In general, we add value by adopting a hands-on approach with our portfolio companies by playing a very operational and advisory role for them as per their needs,” Kuila added.
The venture capital landscape of Cambodia is still at a nascent stage, with just a handful of VCs operating in the market.
Among those active in the VC space in Cambodia are Smart Axiata Digital Innovation Fund (SADIF), 500 Startups, and Obor Capital.
In terms of private equity, sector-agnostic firms such as Emerging Markets Investment Advisers (EMIA) and Belt Road Capital have made headlines – they have made investments in relatively established technology-enabled businesses.
There are currently over 300 active technology startups operating at various stages of development, according to the Startup Kingdom Report.
The country’s investment landscape is improving, driven by increased interest in the technology sector. This is also fuelled by positive market conditions, such as relative currency stability with a primarily dollarized economy, less capital flow restrictions compared to neighbouring ASEAN markets, and openness to foreign direct investment (permitting 100% foreign ownership of companies with limited exceptions).
Given the coup in Myanmar, Cambodia is expected to become a destination for investors to shift their capital. Andrew Durke, COO of Obor Capital believes that many Myanmar-focused investors might now cast wider nets. “I expect a lot of investors that leave Myanmar to shift from a Myanmar-only strategy to a regional strategy,” he said.
Phnom Penh-based Obor Capital, which has invested in five Cambodian businesses and one Vietnamese company is betting big on Cambodia as a preferred investment destination.
Durke expects Cambodia to write a story similar to that of Vietnam. Cambodia can absorb more capital, especially for deals in the range of $500,000-3 million, he said. “Examining the characteristics that make Myanmar attractive to investors, I think Cambodia is the most similar [to Myanmar].”