The pandemic may have bashed economies globally, but Alfred Chuang, general partner at Race Capital, said it has created the best tech-investment climate ever.
“I think we have never seen a better time to go do a new technology company than present ever in history,” Chuang said in a pre-recorded session at DealStreetAsia’s Asia PE-VC Summit Tuesday. “There’s never been the need, the declaration of the desire to adopt technology” like the current environment, he said.
Chuang said his company is proceeding with investment plans, despite being unable to meet entrepreneurs in person.
“I think it’d be foolish for any investors not to accept we will be investing through Zoom, because this is going to be the way that we’re going to be for a long while. It could be a year or two, or maybe even longer before we go back to total normalcy,” he said. “During this time, speed is everything in investing, because obviously, prices, like tides, are rising.”
Race Capital is aiming to raise around $125 million to $150 million, Chuang said, adding the fundraising has been going “very well.” His fund plans to invest in formation stage and seed-level companies, with eight deals already completed.
Chuang co-founded BEA Systems, an enterprise software company, which was acquired by software giant Oracle for $8.5 billion in early 2008, amid the erupting Global Financial Crisis.
Part of the reason for starting Race Capital was a desire to play it forward after Warburg Pincus invested around $50 million in BEA Systems, Chuang said.
He said he and his partners have spoken with more than 370 companies since the pandemic started.
While Race Capital generally invests in US-based companies, it is also willing to look at other geographies.
Chuang noted that the pandemic has allowed all companies to decentralize their employees and operations.
“It really doesn’t matter what you, where you are anymore,” Chuang said. “If you created the company from scratch, they’re fully decentralized. Having someone in Singapore, someone in Hong Kong, someone in London, or someone in Budapest, and someone in San Francisco, if they can figure out how to really manage the company culturally and procedurally, it can do magic.”
On the trend of large US tech companies investing in Southeast Asia’s startups, he said it was “only logical.”
Recently, Google has invested in Indonesian e-commerce company Tokopedia and in ride-hailing unicorn Gojek. Facebook, PayPal and Vis have also invested in Gojek – as have Chinese tech giants Tencent and JD.com. Microsoft has invested in another Indonesian e-commerce company Bukalapak.
Apart from Gojek and Tokopedia, Google has also forged partnerships with Southeast Asia’s largest online travel app Traveloka and e-commerce giant Bukalapak.
“When you have exploited the market a lot, you either put new products into those existing markets, so your channel can sell those other products, or you have to go to other markets,” Chuang said. “The easiest way to get in these markets is not to fight the locals, so partnership and investment in a local e-commerce up-rising company is super-critical.”
Eventually, local companies will likely be acquired by the tech giants, or the tech giants will squeeze into those markets and compete with them, he said.
Chuang advised that local companies avoid competing with the US tech giants, such as Facebook, because it involves “reinventing the wheel,” and struggling to build up the scale of users.
“However, things that you pluck on top or on the side or reinvention of those technologies is super critical,” he noted.
He added, however, that he expected new dominant tech players to emerge ahead, noting that 10 years ago, Facebook didn’t exist and that the big tech names were IBM, Intel and HP.
“We haven’t seen that one company from India, or maybe from Singapore, that’s going to be the next world giant, but I’m going to bet we’ll experience it in our lifetime,” Chuang said.