Vickers Venture Partners, a Singapore-based venture capital (VC) firm, has raised $200 million for its $500 million sixth fund to invest in deep tech startups in Asia and globally.
The vehicle is one of Southeast Asia’s largest VC funds to date and is backed by Korea Venture Investment Corporation, pension funds from Switzerland, Germany and the US, and global family offices.
According to Vickers Venture founder and chairman Finian Tan, the venture firm has given itself 13 months to raise the remaining $300 million but acknowledged it is difficult to tell whether it can still do so within the timeframe. VC funds around the world are just beginning to experience early chills of a fundraising winter that has been made more severe by the COVID-19 outbreak.
“I think anybody who can reach their fundraising targets in these current times would be very, very happy. We do have some interested limited partners (LPs) with sizable cheques, so we will just push on and raise as much as we can… If we have to take a few months off to slow down, we can’t help it. But we think we have a good story to tell…and when people start re-focusing again, we believe we’ll get some traction,” said Tan.
But VC funds like Vickers won’t just be competing with those from its own asset class. They will also be up against liquid assets including equities, bonds and exchange-traded funds (ETFs), which present attractive buying opportunities following the recent global market selloff. VC funds, on the other hand, are comparatively riskier bets requiring a capital lock-up of at least 10 to 12 years.
“I think a lot of them (LPs) need the time to re-look at their portfolio and decide on allocations again. There’s a bit of a pause button at the moment because for most of them, the value of their liquid assets has dropped a great deal. So we’re giving them time to come back to us when they have a clearer idea of what their allocations are,” Tan said.
According to Tan, Vickers takes on a more defensive strategy deploying capital in deep tech startups such as Emergex, Samumed and RWDC Industries which focus on developing scientific breakthroughs or patent-backed solutions across biotechnology, nanotechnology and artificial intelligence.
Deep tech sectors like these are less likely to be affected by macroeconomic factors brought about by a pandemic, explains Tan. However the same can’t be said for portfolios exposed to consumer-facing segments like commerce, retail and F&B, all of which are likely to see a short-term dip in investor interest.
But even so, Tan intends to take a cautious approach to capital deployment this year in light of macroeconomic uncertainties.
“We have a strong portfolio of 11 companies which might find it a bit more difficult to raise capital in the coming months. So we would like to make sure that we have the capacity to back them if they are growing well and in need of capital. We’re basically conserving cash to assist the portfolio,” he said.
He added: “We’re not looking to expand the portfolio too quickly…Conserving cash is important and we had already begun doing that several months ago. We have not made any new investments recently, especially since COVID-19 hit China.”
Vickers invests about 50 per cent of its fund in existing companies, deploying widely across early and growth-stage opportunities to create a steady flow of exits.
According to its website, Vickers delivered a net IRR of 31 per cent for its $81.1 million fourth fund at the end of Q3 2019. One of its recent exits is Hillstone Networks, a $1.2 billion Chinese enterprise security unicorn. The Beijing-based firm listed on the Shanghai Stock Exchange’s STAR market in October last year.