DSA Summit: Singapore’s Makara Capital’s $700m fund to focus on later-stage startups

Singapore-based private equity firm Makara Capital is looking at later stage deals as its sweet spot even as it plans to steer clear of early stage investments.

“We are bringing private equity to the edge of the venture capital space. So, our sweet spot is going to be in the late stage B, C, D, and growth stages,” said Ali Ijaz Ahmad, the firm’s CEO, at the Asia PE-VC Summit 2017, DEALSTREETASIA’s flagship annual conference in Singapore on Friday.

Recently, the private equity firm in partnership with The Intellectual Property Office of Singapore (IPOS) established the Makara Innovation Fund, with a corpus of S$1 billion ($717.5 million).The mandate of the fund is to boost innovation and intellectual property (IP) in the city-state, and to aid innovators and enterprises in translating their concepts into tangible assets.

Elaborating on the deployment of the fund, Ahmad said, “Our research with our partners shows that there is a lot of capital at, say, pre-Series A and at the late growth stage. But there’s a lot of dearth of capital between the C and D stages, and this is where it gets interesting for our fund’s strategy in two areas – globally competitive IP, so we are agnostic as to where we are buying technology, and of course IP.”

He said, Makara works very closely with the management teams even after the funding. Besides expansion, the funding is also used to help the company scale up its ideas and technology.

“Enterprises themselves tell us what they need to scale up. The 100-odd companies that we have worked with so far were keen that we assist them in growth strategy. This is also one reason why we chose our LP base. Most of our LPs are large global sovereign (entities). The idea to bring LPs was for two reasons  – deal flow, and to access their markets.”

On sector preferences of the fund going forward, he said, it will not stick to a particular vertical or a sector. Citing the example of Amazon that is present in retail, payments, and even logistics, Ahmad said, “the company would similarly look at enterprise-aligned investments which lead to another part of our strategy, where we are allowed to invest up to 10% of the fund into the VC space as well. We work very closely with the VCs here because they are an excellent source of deal flow for us.”

Giving his views on the importance of IP and IP ownership to the GDP of a country, Ahmad said, “Every Apple iPad sold in the world contributes $10 to China’s GDP. Apple does a lot of its assembling and manufacturing in China. As opposed to this, $250 goes to the US GDP for IP ownership in brands or designs, conceptualization, etc. This gives a sense of how critical IP as an asset is going to become for the developed economies.”

Asked if Makara would like to play role of an LP going forward, Ahmad said, “We are not a fund of funds. We have core strategies for which our LPs have given us money. We intend to work very closely with VCs and their underlying portfolio companies. We, as per our mandate, are not going to be LPs in any of the VCs.”