Singapore-based Jungle Ventures, which hit the first close of its $100 million VC fund earlier this year, had launched SeedPlus in 2016 to invest in early-stage startups. Jungle Ventures began as an angel investment firm in 2012, and now participates in Series A and B rounds.
SeedPlus, headed by Michael Smith, a former CTO at streaming service HOOQ, is responsible for investments in Southeast Asia. Along with his operating partners, Smith works closely with portfolio companies, taking a hands-on approach. For that purpose, SeedPlus provides office space for all its portfolio firms. In case a company is based in another country in SEA, it helps with getting it incorporated in the city-state.
Smith is one of the speakers at the Asia PE-VC Summit in Singapore, DEALSTREETASIA’s flagship event. In this interaction, he talks about his plans for SeedPlus at a time when VC funding is subdued, and questions are being raised about the viability of accelerators after Singapore’s JFDI closed down.
Southeast Asia is awash with early-stage capital. How is SeedPlus differentiating itself as an investor?
We start with a unique team and a unique perspective on the region and it’s potential. Our team is made up from three experienced product/operating partners who have worked for start-ups and large companies. Gabriel who worked at Spotify, Tiang who worked at Evernote, and myself who worked at Yahoo.
We hold the perspective that Singapore is an amazing city to headquarter a start-up and that the SEA region, with India and Australia/New Zealand is a massive market opportunity. Our team will fund start-ups, work with them day in and out to grow their start-up to the next level – which would generally be their series A investment. No other entity in Singapore is offering the quantum of capital, the team and the experience that SeedPlus can offer.
How is the incubator/accelerator scene in Singapore? The general perception is that there are too many start-ups but not enough quality.
Any ecosystem will have lots of funds, lots of start-ups and lots of programs using the funds to help start-ups – I am sure the USA or China has a vast array of offerings.
For us, these incubators/accelerators will create a great funnel of early stage companies who will need to access more capital and more assistance to continue on their path. Any large ecosystem will have its share of success and failures which are all part of the growth cycle. We absolutely love how far Singapore has come and think the ecosystem is as vibrant as ever.
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Singapore’s leading accelerator JFDI has closed down, which has raised questions about the viability of the accelerator model. What is your take on that given that you are also treading the same path?
Accelerators or funds evolve over time, reacting to changes in the market, not unlike a start-up and it’s a natural part of the ecosystem. Given our level of involvement and capital commitment, our model is quite different to typical accelerators and while it doesn’t work for every company, we think it’s a compelling model for many founders
Are you focussing mainly on disruptive tech?
Yes though it is a difficult term to explain. What we are focused on is early stage start-ups that have a pan-Asia or global market opportunity that need capital to grow and wants to partner with our team along the way to their success. We have worked out our themes and our sweet spots of focus and will continue to evaluate and evolve our activity as we go.
SeedPlus is just getting started so we have a lot to learn but we like to focus on companies who are investing in product or tech that builds long term competitive advantage versus investing in marketing for example.
What would be the sweet spot at which SeedPlus would like to invest?
It would be difficult to list all of our themes but we love SaaS, infrastructure plays, IoT, AI, machine learning, finTech, agTech, insurTech and folks working on hard problems using software as a tool.
That being said, we also know there are just great entrepreneurs working on interesting problems. Given this, we are pretty open to talking to any start-up that has a prototype or a product in beta so we can learn and see if there is a fit. As stated in my answer to number 4, if the market opportunity is there, the company needs the capital for the right reasons and the team is one we should partner with – then we will seriously entertain the deal.
Will companies backed by SeedPlus have any advantage at all in raising further funding from Jungle Ventures?
Our portfolio companies will have a unique opportunity to meet all of our LP’s and other strategic partners, including Jungle, and share their product vision and their funding needs. We believe this connection to follow on capital is very beneficial to the start-ups funded by SeedPlus and a meaningful part of our value proposition.
To see confirmed speakers for DEALSTREETASIA & MintAsia PE-VC Summit, click [here]
To know more about the agenda for the Summit, click [here]
To date, there are few examples of companies with global reach emerging out of Southeast Asia. Start-ups that have scaled, such as Grab or Lazada, are very specific to SEA. How can the region improve on that score?
Building ecosystems takes time and compared to other regions that have built global companies – the SEA ecosystem is pretty young and will continue to need capital and nurturing to start producing global companies. I do not think there is any secret sauce or trick to this, we have to keep investing in companies that we think can go global or bigger than the region and focus all the participants in the ecosystem on these same goals.
Singapore is a great capital to base a global start-up in. We have examples of companies that have left Singapore, graduated from YCombinator and yet return to Singapore to build out their vision. Singapore is on the global start-up map and after the next few years we think more start-ups will focus on global ambitions from Singapore and SeedPlus hopes to fund these companies and help them find the follow on capital they need to make it happen.
How many investments is SeedPlus looking to make this year, and what would be your average check size?
We project to make about 4-7 investments per year but the check sizes may vary from SG$250k upto SG$1m.
What are the investment trends that you are bullish on this year?
We tend to stick to our fundamentals – find a good market, good team and fund making things. That being said we are excited about the role of machine learning and artificial intelligence can have in making lives better. We think there is room to improve the lives of people by making financial and insurance products better and more accessible to the masses.
The global workforce is changing – some refer to this as the gig economy or the shifting sands of blue collar employment but we think that this will require better tools for employers and products that fit the lifestyle of this workforce. Lots of interesting problems are still left to focus some attention on.
When we look at the start-ups that are getting funded, a lot of them are in the e-commerce and consumer internet space. How about the real tech scene such as hardware, networks, security, AI, chips & processors, wearables and robotics – have entrepreneurs in SEA been able to make a mark in these spaces?
That is a fair point and I think any maturing ecosystem has to start somewhere. Singapore has some amazing start-ups working on hard problems but they tend to not get a lot of press. Some people are working on indoor agriculture, self-driving cars, automated power management and these needs are driving research into the hardware needed to pull these solution off at scale.
Generally these business require more capital, take longer to build, are usually pre revenue and have tougher technical hurdles. We assume we will see less of these than the easier stuff to build like e-commerce or consumer internet apps but this is good for us since these companies will find a lot of value in working with SeedPlus. We are confident that Singapore will create start-ups with deep technical solutions that can find global traction.
More than a dozen new VC firms have sprouted in ASEAN’s startup market, at a time when investment levels are down across stages, from early to growth. Is the VC market in the region maturing?
Venture capital is a long game with most funds being managed over 5 years so the ebb and flow of the current business climate is not really connected to the need for capital over a longer period. There has been some slowdown in late stage capital but seed and series A capital is pretty much at the same clip as it always has been.
At the Google/Temasek event it was highlighted that if the market is to grow to its projected size by 2020 than the need for venture capital at all stages will also keep growing. I think the VC industry is still relatively young with many of the local firms only on their second fund so there are many years left before one could say there is maturity in the ecosystem but there are clearly more firms and funds than ever before. I think this is a healthy sign of the potential of the region.
Indonesia is attracting a lot of investors’ attention – but can it deliver? What are the challenges?
Indonesia will be a big market and I think only a handful of dominant Internet companies will emerge there. We will only know what delivery means and whether it delivered years from now. Indonesia is clearly a big country and being the 1 or 2 top player in a large market will be a big business. I think it is more interesting to try and build regional companies from day one or as early as possible.
I use the term not geographically bound to refer to companies, regardless of location, that are building products that could be used anywhere. Does Indonesia make a good HQ for these types of companies? It is possible, but we don’t see a lot of it yet. I suspect we will see more of it even though I think for now Singapore makes for a better regional HQ. We have seen examples of start-ups running engineering out of Bandung while headquartered in Singapore.
SeedPlus is at the Seed Stage. But Southeast Asia is seeing a severe Series A crunch. Many start-ups that went out into the market to raise a Series A round are only able to close a seed plus, bridge or pre-Series A rounds these days. Is this not a case for concern?
I feel like crunch is an overused term and I think any good start-up who is trying to raise capital for a start-up with a great product/market fit and has a reasonable valuation in mind can raise money.
That being said I do not think there is a series A crunch at all. There is probably more series A money now than ever before. Raising a sizable seed round is hard though and raising series B and C in the region is also hard. The other situation is that there is not a good public market for start-ups in the region and exits are basically only acquisitions which are more frequent than before but still not as frequent as other markets like Silicon Valley or China.