Vynn Capital, a new Southeast Asia-focused venture capital firm founded by former Gobi executive Victor Chua and Singapore’s Darren Chua, says it categorizes Vietnam as one of its Tier 1 markets.
“This, coupled with our experience in Vietnam, we believe Vietnam is crucial for our investment strategy and will be a major driver of entrepreneurial activity in the region,” Victor Chua told DEALSTREETASIA in an interaction.
“In terms of deal volume, we anticipate that our Tier 1 countries – Vietnam, Thailand, Malaysia, Singapore and Indonesia will offer more startups to explore. At the same time, we are also active in Myanmar and Philippines as these are also sizable markets with signs of positive changes,” he said.
In an exclusive interview with the portal, Victor Chua shared Vynn Capital’s investment plan for Southeast Asia and his thoughts about the growth of SEA’s unicorns in the near future.
What led to your move to exit China-anchored Gobi Partners to launch Vynn Capital? What learnings from the Gobi experience will you draw from as you develop Vynn?
My departure is a result of personal ambitions to build a local brand dedicated to supporting local and foreign entrepreneurs interested in Southeast Asia. The other factor is about being able to focus more on the opportunity and trend that most appeals to me – helping traditional corporations and families adopt new technologies and digitalize their businesses.
The most valuable lesson from my experience with Gobi is the importance of having a localized approach in working with Limited Partners and founders. While it is important to demonstrate a scalable business, it is also important to be able to work with local communities and partners as well as recruiting resources to build to a larger vision that others can buy into.
We have learnt that Vynn Capital has raised an SEA-focused $40-million debut fund in the first quarter this year. Can you update us on the investments closed so far?
Yes. We are raising a $40-million fund – mainly from families and corporations of all sizes. We will be making our first investment very soon – stay tuned.
It is said that Vynn Capital will focus on seed and Series A stages. What drives your investment thesis?
First off, the focus on early-stage investment is based on my experience investing in this space and therefore is a natural focus for moving forward. The other reason is that the risk of investing in early-stage companies is decreasing as the market matures. In the past, LPs and investors were concerned that the funding value chain was incomplete as there was insufficient capital in the market to fuel growth stage investments as well as the maturity of entrepreneurs and business models.
At this point of time, we are seeing more growth funds coming online in the region – particularly by players who were previously investing in earlier rounds. This means that there is a sudden vacuum in early-stage investment and that there will be more capital to sustain these deals at later stages. So that solves one of the concerns. On top of everything, competition between startups in similar verticals is also improving the quality of early-stage companies, which further contributes to market maturity.
Which sectors will be on the radar of Vynn Capital? Why?
We are looking at travel, property, food & FMCG, female economics and logistics & enablers (including fintech and insurtech). These industries are selected based on a few key factors: Convergence of Southeast Asia as a region and synergistic value between industries and potential cross-over that allows more room for growth.
Which are the markets/countries within Southeast Asia that you would be actively watching for deals? And, why?
We believe Southeast Asia as a region has huge potential. As such, we should not overlook any local market within the region and will be evaluating Southeast Asia as a whole. In terms of deal volume, we anticipate that our Tier 1 countries – Vietnam, Thailand, Malaysia, Singapore and Indonesia will offer more startups to explore. At the same time, we are also active in Myanmar and Philippines as these are also sizable markets with signs of positive changes.
What do you think about the exit potential in early-stage companies? Is it easier to navigate an exit at this stage or a challenge?
This is the best time to invest in early-stage companies because we are also looking at a funding environment that is far more established than a couple years ago. We see a lot more Series B and growth stage funds out there in the market. As such, for early-stage investors as well as LPs, there should be less concern about the survival of investments. How that relates to exit is that now startups are no longer restricted to selling their company, but they also have the option of growing their companies to a larger scale before realizing the gains for shareholders and investors.
Over the past few years, Southeast Asia has received interest primarily from Korea, Japan and China, though it now increasingly attracts investors from other parts of the world such as the US, the Middle East and other regions. As such, exit scenarios are becoming much more optimistic than before. This is especially true when we have interest and activity from local companies and family businesses in incorporating technology as part of their business plan.
Investments into Vietnamese startups have gone up in the past few years. What do you think about the investment potential in Vietnam compared to other countries in the region?
We categorize Vietnam as one of our Tier 1 markets. This, coupled with our experience, makes us believe Vietnam is crucial for our investment strategy and will be a major driver of entrepreneurial activity in the region.
Of the $40 million debut fund, is there an allocation dedicated for investments in Vietnam?
For us, Vietnam is an exciting market with many great opportunities and a solid entrepreneur base. We do not have a specific quota to chase after, as we want to remain agile in our investment decisions. What is certain for us is that we are bullish on the Vietnam market and are currently talking to more Vietnamese startups as well as large corporations and families.
Which are the startups in Vietnam that Vynn Capital has invested in?
We are unable to disclose any investments in Vietnam at this time.
What is Vynn’s goal for 2018 in Southeast Asia in general and Vietnam in particular?
For Vynn, we aim to raise the majority of our fund this year. We are currently in talks with a number of potential LPs and are still open to discussions with new LPs. We also look to invest actively in the region and we are already talking to some Vietnamese startups at this point in time. For Vietnam, we are looking to work closer with regulators and industry builders to grow the local market. Our advantage is that we have an extensive track record building businesses that are able to scale regionally, and are able to apply these lessons to Vietnam’s unique characteristics.
What are your thoughts on the growth of SEA’s unicorns with the recent instance of Grab acquiring Uber’s Southeast Asia operations and assets? How would you play a part in a company’s journey to become a Unicorn?
This is a great example of a local company leveraging its in-market advantages to overcome a foreign competitor. Our role is to ensure companies we back are equipped with a long-term strategy for sustainable business growth. That means, as much as we love high growth companies, we also love sustainable businesses. One way of winning the growth game is to outlast your competitors.
Which countries are likely to spawn new unicorns in Southeast Asia?
I believe that the next batch of unicorns will not be from any country in particular. In fact, it will be a regional company – a business that has the scalability advantage to reach audiences from more than one market. You are seeing existing unicorns like Go-Jek expanding outside of Indonesia. That means that the region is maturing with signs of a converging environment that encourages companies to be as regional as possible.