China’s largest insurer Ping An Insurance Group is looking to deploy another $100 million from Ping An Global Voyager Fund, its first overseas $1-billion fund, by the end of 2018.
In an interaction with DEALSTREETASIA, Ping An Group chief innovation officer and Ping An Global Voyager Fund CEO Jonathan Larsen said the fund has deployed about $100 million so far. It made its first investment last September in European fintech company 10x Future Technologies.
Managed by Larsen from Hong Kong, the Global Voyager Fund was launched in May 2017 with a mandate to invest in fintech and healthtech businesses outside China to accelerate Ping An’s digital transformation.
The fund typically cuts checks between $15 million and $30 million. At the same time, it is open to inject up to $100 million in a single startup if it saw an opportunity to do so, Larsen said.
“The fund is open-ended because it’s strategic nature. There may be something where we realise value and there may be something that we’d like to hold [on to] indefinitely. Our basic thesis is that typically we’d take a 10-20 per cent stake in the company and we do that in companies that have strong, intrinsic trajectories that can generate strong, standalone value over time.
“On top of that, we want to have some co-operation that allows us to access and then deploy the core capabilities of these companies within our business ecosystem and more generally, in the China market in the first instant,” he said.
The fund recently invested in Israel-based startup MeMed Diagnostics and US-based startup TytoCare. Global Voyager Fund’s current investments are largely scattered across the globe and Larsen, a former Citigroup banker, said it currently tracks about 7,500 healthtech and fintech companies.
Ping An has Southeast Asia on its radar too. The Chinese insurance giant has invested in ride-hailing unicorn Grab and is in the midst of setting up a joint venture which will see its telemedicine arm Ping An Good Doctor offer medical services via Grab’s app. The joint venture with Grab will also enable Ping An to enter 225 cities across eight countries in the region.
There’s so much innovation in China itself. Why was there a need for a $1-billion fund to look beyond China?
In China, there’s indeed a digital revolution and in many ways, people’s lives have been changed in China more than anywhere else. Having said that, there are still huge opportunities in the world and we’re just scratching the surface.
The philosophy of the Voyager Fund is two-fold: one, we want to make sure we know what’s going on in the rest of the world so we’re not taken by surprise, and we can keep ourselves abreast of the best innovation globally. Two, it doesn’t make sense for us to be innovating everything on our own. If somebody already has the right technology we’d much rather access it and build on it instead of taking several years building it from scratch.
How significant is Southeast Asia to the fund?
The focus of the fund is fintech and digital health and its purpose is to access capabilities that are going to be helpful to Ping An Group. That means capabilities that we can bring into China that can complement the capabilities that we’re creating ourselves through our own R&D and business-building efforts. In general, those cases are a service that we can consume within our own business ecosystem and make available to third parties in China. Typically, these are services hosted on our cloud. That’s sort of the first rationale.
We’re in the process of looking very carefully at international expansion opportunities. So if possible, in addition to some of these capabilities that we’re bringing in to China and gain access to on behalf of Ping An, these could be relevant to things that we do outside China and they could be in Southeast Asia and other parts of Asia. It may even be in other parts of the world.
So, that’s contingent upon the strategies that we have and are working on. In businesses such as OneConnect, which has a Singapore office and an excellent CEO, as we sell enterprise solutions to businesses in Southeast Asia, that may well be a third-party service that integrates with our services on our platform.
As other opportunities come our way internationally, a similar logic applies. But I think there’s a third possibility that may come along in the future. It could be that we’re looking for partners to build new businesses in new markets. We don’t have specific plans for that at this stage. Clearly, one thing we could do with the Voyager Fund is to form alliances with potential partners/organisations.
For example, we announced that Ping An Good Doctor is partnering with Grab. Good Doctor’s business today is almost 100 per cent in China, but Grab is in eight Southeast Asian markets. To work with Grab through a meaningful partnership, that’s a way for us to accelerate the deployment of Good Doctor in Southeast Asian markets. That particular partnership came by the virtue of having SoftBank as an investor in both Good Doctor and Grab, and SoftBank is very proactive in trying to find synergies and partnership opportunities in its portfolio companies.
We can do the same thing – invest in other platforms across the region which could form the basis for our future partnerships. But that said, we don’t have specific plans for any of those as yet. That’s more of a concept at this stage.
What are some of the key trends that you’re seeing in the fintech and medtech space in the region?
Most of our focus is global and we have no geographic boundaries. This is not a universally true statement but we tend to find most of the content innovation or product/concept innovation in the US, Europe or Israel. What we tend to see in Southeast Asia and India is the adaptation of concepts from elsewhere and the deployment of those skills in a new and unique market environment. It’s not entirely a correct statement for every innovator and startup that we see in SEA and India, but in general, it’s true.
There are some exceptions – we see some pretty interesting companies in the AI space across the region, particularly in Singapore and Taiwan. This is perhaps true more for businesses that require analytics talent for AI innovation. What we clearly see in the financial services space is that the technology infrastructure that supports financial institutions is moving away from on-premise licensed software that is dominant today.
Most of them have their own platforms or third-party platforms that have been licensed for purchase/modified/customised or are being maintained to support the on-premise operations in their own data centre or an outsourced data centre. We think, first of all, that pretty much all of that activity will go to the cloud. Second, it will go to the SaaS platform providers. This is a tremendous and important trend.
We invested in a company called 10x Future Technologies in London which does exactly that for banks. We’re about to announce something in Europe with a company that is active in many areas in a similar vein across the financial services spectrum. So the ‘platformisation’ of finance is a really important trend. Typically, that’s a B2B opportunity – it’s really relevant to us because we’re in the businesses that would be affected, so these platforms are going to be very helpful to Ping An. They’re also going to be helpful for our OneConnect platform that are serving other financial institutions.
How much of the fund has been deployed so far?
We’ve deployed about $100 million, and we expect by the end of this year – if a few things in the pipeline happen, which are at late-stage discussions right now – we expect to close the year with about $200 million of commitments.
So your investment strategy is to take a minority stake in these companies?
Yes, so our basic thesis is that typically we’d take a 10-20 per cent stake in the company and we do that in companies that have strong, intrinsic trajectories that can generate strong, standalone value over time. On top of that, we want to have some co-operation that allows us to access and then deploy the core capabilities of these companies within our business ecosystem and more generally, in the China market in the first instant.
The combination of alignment through shareholding and partnership through co-operation is a powerful combination. The objective is to have companies that have a strong independent value trajectory and then put a layer of value on top of that through our partnership. We’re also very interested in helping our portfolio companies strengthen their proposition by adding in Ping An technology like our facial or voice recognition or blockchain technology.
What are some of the challenges in investing in these two sectors?
First is to find a good company. Both the health and fintech universe are pretty extensive and we track about 7,500 companies in each space – that’s a lot of companies, and no one can keep them in their heads. But we constantly find good companies that we’ve never heard of before.
Second, Ping An is a huge company – 330,000 employees and 1.4 million agents. We’re a massive and complicated company. For us, it really doesn’t make sense to invest in small companies or very young companies. Typically, companies need to be 3-5 years in, they need to have a product/platform and some revenue stream as well as clients. They also need to have the bandwidth to have a strategic conversation with large companies like Ping An, and in a completely new market like China, where their product almost certainly has to be readapted.
Third is finding the right shared vision. That means having a similar philosophy with the management and having aligned objectives.
Fourth, I’d say, is economics – making sure that we’ve run the equations that work for everybody. There’s a lot of hyper valuation out there and we don’t really want to overpay for things. And it’s totally possible that the first three boxes got ticked, and we find that the price doesn’t work for us – that’s fine for us as well. In some cases, there may be another way of working together and just figuring out how to cooperate without the alignment that investment might add.
How has the transition been for you from Citi, where you spent 18 years, to a chief innovation officer and managing a $1-billion fund for Ping An?
It’s been a great experience. I left Citi at the end of 2016 on very good terms and the Citi folks remain very good friends. I was looking for a change basically and was planning to take a one-year sabbatical. But I met Peter Ma three months in, and a month later, I was working for him. It all happened very quickly because I was so impressed with what Ping An has achieved and with Peter as a leader and business thinker.
Besides scouting deals, what exactly do you do as a chief innovation officer?
Ping An is already a very innovative company and the innovation in Ping An is both top-down and bottom-up. Peter and the other top management executives are themselves innovators, constantly challenging the organisation with new ways of thinking – that’s a very positive thing. And equally, we have very seasoned people in the businesses.
The culture in Ping An is very oriented towards change and renewal. So you see a lot of good things that come out of the business bottom up. My job is not to interfere with any of those. My job is to find ways of helping and thinking about new opportunities that Ping An hasn’t been thinking about, in particular, to bring new connections to Ping An from overseas that the company might not come across otherwise.
We’re starting to see some success in that area. For example, we’ve just started a relationship with GitHub where we’re GitHub’s primary hosting partner in China. That’s a very exciting opportunity for our cloud business and that’s representative of the many opportunities we have ahead of us.
Since you’ve partnered with Grab on the medtech side, will you be looking to partner with the ride-hailing startup’s financial arm?
We haven’t really looked at it but we could. We have very strong and sophisticated payment and lending capabilities and there may well be future opportunities with Grab but let’s see how it goes on the health side first.
What check sizes are you looking to cut?
So we’re a billion-dollar fund. Minimum is about $10 million. Typical size is about $15-30 million. In theory, we can go up to $100 million if there’s a right opportunity.
How long is the fund life?
It’s open-ended because it’s strategic in nature. There may be something where we realise value and there may be something that we’d like to hold [on to] indefinitely.
Are you also looking at co-investing opportunities?
We’re already doing that when we participate or lead funding rounds. What’s important is that we’re very interested and willing to work with particularly financial institutions or healthcare partners who are equally interested in the capability and where both of us can actually bring use cases to the service. When you do that, you change the business case for the investment. So that’s a very interesting opportunity.
Health is a fascinating area – I have to say that it’s entirely new to me, given my background. And we’re very fortunate to have a very strong chief medical officer and strong resources for the Chinese businesses and the Voyager Fund. One of our first [healthcare] deals is TytoCare which makes digital stethoscopes. We’re the largest telemedicine provider in the world through Good Doctor and what’s interesting is the ability to put these two things together.
We’re just working through the details on how we operationalise that right now and how we can use our life insurance agents to promote this combined service. It synergises with what we’re doing with Good Doctor. We’re about to close an investment with a Chinese company in the imaging AI space that could analyse a photograph of the back of your eye to diagnose diseases. We think that capability will soon be able to be delivered via the camera on a mobile phone, making the phone a ubiquitous healthcare device. What we’re trying to do in health is to bring care, which may have previously been centralised, to patients where they are and remotely deliver diagnosis.