Singapore sovereign wealth fund GIC and Temasek Holdings are among the leading snvestors in unicorns (startups valued at over $1 billion), according to data compiled by venture capital database CB Insights.
Also, three of the top five major sovereign wealth funds, who invest in technology vertical, originate from south east Asia: Khazanah Nasional of Malaysia, and Singaporean state funds GIC and Temasek Holdings
There are currently 185 private unicorn companies globally as on January 2017. The global leaders in the unicorn investor category are Sequoia Capital, New York City-based hedge fund Tiger Global Management, and SV Angel, who together have 23 such firms in their portfolio.
Airbnb, where Temasek has a stake, is particularly noteworthy given that it is backed by all eight of the top unicorn hunters.
The 10 most active sovereign wealth funds’ (SWFs) investments in private technology enterprises grew to $12.66 billion in 2016, an increase from $5.05 billion in 2014. As per CB Insights, Temasek Holdings has 15 unicorns, while GIC has five unicorns in its current portfolio.
Two of the top eight unicorn hunters are large, typically public market investors (mutual funds, asset investment banks, etc.) that have crossed over into private market investing, usually at the later stages.
According to CB Insights, these two firms are Fidelity Investments (20 unicorns) and Wellington Management (19 unicorns). There are now 76 institutional investors with at least 5 unicorns in their portfolio, up from 70 investors in October 2016.
Let’s take a look at the unicorns in Southeast Asia – Garena, Grab, Lazada, Razer, Tokopedia, Traveloka and VNG. Temasek has invested in Garena, Grab, Lazada and Razer, either directly or indirectly through vehicles such as Seatown Holdings and Heliconia Capital Management. It has also backed Chinese firms including China Internet Plus Group, the country’s largest online group buying site, as well as Alibaba Group.
What is notable is that Temasek has invested more in technology ventures compared with other sovereign funds combined, with more than 70 enterprises dating back to the dot-com era.
Meanwhile, Indian online marketplace Shopclues secured an investment in a round led by GIC in January 2016 that valued the firm at $1.1 billion. GIC also has Chinese smartphone maker Xiaomi in its portfolio.
A notable unicorn in GIC’s portfolio that imploded was Vasan Healthcare, in which the state fund had invested $100 million along with Sequoia Capital in 2012. The startup imploded in December 2015 due to mounting debt, and mismanagement and corruption issues.
This reflects a recognition by both Temasek and GIC that technology startup ventures make compelling additions to their portfolio, given their scalability and ability to generate strong returns on an investment.
According to a PWC report, “The major role of sovereign investors in the global economy: A European perspective”, argues that what is motivtating sovereign investors is ‘alpha’ ( i.e. earning a return in excess of the benchmark index)
The PWC further adds: “Regardless of the differences in their missions and taxonomies, the ultimate goal of most sovereign investors is to preserve their capital and maximise the returns of their investments for future generations. By nature, however, superior returns are not sustainable over time and the funds must be flexible and seek the optimal strategies at each point in time.”