SPH Media Fund, an investor or Limited Partner (LP) in US-based Fika Ventures and China-focused BlueRun Ventures, is mulling a similar strategy to tap deal flows in distant markets such as Europe and Israel, a top executive with the firm said.
LP is a generic term for an investor in a venture capital fund. It is a rare for a venture capital firm to become an investor or LP in another VC, and when such deals are executed, it is for strategic purposes.
SPH Media Fund, the corporate VC arm of the country’s largest newspaper publisher Singapore Press Holdings, is a $100 million vehicle that was launched in 2014. Earlier this year, it had backed Fika Ventures’ $40 million fund as part of its efforts to tap into the startup ecosystem in the US.
SPH Media Fund CEO Chua Boon Ping, in an interaction with this portal, disclosed that the firm had earlier become an LP in BlueRun Ventures, which largely targets Chinese startups.
BlueRun’s portfolio includes Waze, PayPal, Banjo and automated lending firm Kabbage. The firm is currently raising its sixth fund, a $200 million vehicle, and had raised $150 million for its previous fund in 2014, the same year Ping took charge as the CEO at SPH Media Fund.
“We have a strategy in place where we invest in certain funds. As a start, when we invest in a fund that targets a market like US or China, we get known locally there. For instance when we invest in TX (Zhuo Tianxiang of Fika Ventures), we can get entrenched in the local market there (US). They (Fika) have a portfolio now, and are introducing companies to us. So, there is no need for SPH to hunt for deal flows from the US,” said Ping, explaining the rationale behind investing in the two funds.
A common thread to both Fika Ventures and BlueRun Ventures is their Singapore connection. While Fika counts Singaporean Zhuo Tianxiang, popularly known as TX, among its founders, the BlueRun team has a Singaporean who has known Ping for over 15 years.
Ping ruled out the possibility of SPH Media Fund becoming an LP in any of the local VCs in Southeast Asia, but said the firm was open to such opportunities in Europe and Israel, where it did not have a presence currently.
He said SPH could ‘consider the fund-of-funds model of Europe and Israel’, but added that a Singapore connection was vital for it to take such a step.
“If you notice the two funds that we invested in, they have Singaporean at the founder-level, and there is a conscious thinking behind it. Being Singaporeans, they do travel back to Singapore periodically. If I invest in any fund in Israel – for a hypothetical discussion, say a $100 million fund – I am not going to be a big anchor LP. The fund’s focus will be their anchor LPs. But if it is funds run by fellow-Singaporeans, they come back here a couple of times a year, and there is a certainty that we will have more interaction with them,” he said.
“In Southeast Asia, I do not need to do fund of funds because we can access all countries here. US is tough, while China is a very competitive market. In fact, China is so competitive that Series B rounds are between $50 million to $100 million and it is too tough for someone like us to even get in. And capital is abundant in China – considering the market is so big, the only way we can get in is through a fund that knows China and has a track record there. Similarly, I can cover Los Angeles and Valley better by being in a fund there – we want a presence in that market as that is where innovation and interesting internet business models are arising from,” Ping further added.
SPH Media Fund, which is currently in its third year, has participated in a series of deals that include a funding round for cashback and consumer insight app Snapcart and Malaysia-based on-demand logistics start-up TheLorry. It also invested in RINGS.TV which is Singapore’s first interactive broadcasting technology platform to stream and broadcast live concerts, performances, conferences and other events and put in some money in an event-tech platform Hapz.
Among other larger investments that the fund participated in were Burpple, a digital guide to eating places in Singapore and Kuala Lumpur, which had bagged $6 million from investors including Tembusu Partners and Triumph Capital. In fact, the firm’s Indonesia portfolio company Kudo was acquired by Grab for reportedly “high double digit millions” earlier this year, marking the second exit for SPH Media Fund.
It has currently utilised about 50 per cent of its $100 million corpus.
“We have about 27 portfolio firms and we write on average about $1-2 million cheques – some higher and some lower. For instance when we invested in Moneysmart, we invested across two rounds,” Ping added.
The fund led a $2 million investment in Moneysmart, a homegrown finance portal that allows users to compare loans, insurance plans and credit cards, in 2015 and again backed it in a bigger round earlier this year that got the company S$14 million in Series B funding.
Meanwhile, among the challenges that Ping counts in Southeast Asia as a market is that large number of “average ideas” getting funded.
“I guess partly because, in Southeast Asia you don’t need tech because you may be solving some fundamental or local situation. In Indonesia you may not need to be the best company but you need to reduce the friction in certain things like e-commerce or delivery on demand. In terms of quality dealflows, I would say not all the deals are big and some ideas are not big enough and they still get funded,” he added.
In fact, sometimes, valuations rise to a point where even if it is an interesting deal, it is not in line with the stage the company is at, he pointed out. Moreover, Southeast Asia does not have a deep tech culture.
“I have not really seen an Artificial Intelligence firm which is a deep-tech and can solve a pain point. “The thing in technology is what I always ask — Are you solving a mass problem or is your product good to have? A lot of time we look at SEA, they are good to have. They could make things easier for you but if the consumer does not have your product, would it create a lot of pain? Not necessarily,” he explained.