BT EXCLUSIVE

Koh Boon Hwee on investment themes that excite him

Singapore

CHAIRMAN of Credence Partners Koh Boon Hwee prefers to stay out of the public eye - but his name pops up every now and then when a growing startup names its early backers. If Mr Koh is on its shareholder list, the audience will lean in just a bit closer.

Outside the ambit of the Credence private equity firm which he co-founded, Mr Koh, 67, has established himself as one of Singapore's most astute venture capitalists.

"You never know whether something's going to be a multi-bagger when you start, but you can have an inkling," the former chairman of Singtel, DBS and Singapore Airlines told The Business Times in a conversation earlier this month.

Twelve years ago, Mr Koh went long on digital gaming when industry revenues were growing at a rate of 20 per cent per year.

It wasn't a tough trend to spot, he said: "The truth of the matter was that you knew. Everybody knew. Everybody saw with their own eyes that a large proportion of teenage boys were playing games on a screen. It's just that people could not imagine the business model.

"What they saw was teenage boys spending an inordinate amount of time in front of a screen, to their developmental detriment. Everybody interpreted that negatively. I interpreted it positively, for the people who were in the gaming business. Because if I can make a game that appeals to teenage boys that captures their attention, it's only a matter of time before I develop games that will appeal to a broader audience and a wider age range."

He put some money into gaming tech firm Razer in 2006, and raised his stake in 2008. Razer was listed in Hong Kong late last year. Mr Koh doesn't want his returns from that deal to be highlighted, but he hasn't sold a share because Razer's revenues are still growing 25 to 30 per cent a year. Razer currently has a market value of HK$16.1 billion (S$2.78 billion).

He doesn't trade either: "Not my style. I don't like to watch the stock market every day, I have no idea what their stock price is on a day-to-day basis, I don't really care."

Although Mr Koh is not fond of share trading, some time back he did buy shares of Tencent, one of the biggest publishers of free-to-play online games in China, and graphics card maker Nvidia, since they were bets on the same theme. Investors limited to the public markets could have done the same, he said.

But early-stage venture capital is where Mr Koh gets his kicks. Mr Koh spoke candidly to BT about artificial intelligence, fintech, life sciences and precision medicine: "Genetics is unstoppable. The use of genetics and genetic information in healthcare is unstoppable."

Sequencing the first human genome cost about US$2.7 billion and took 13 years to complete.

"Today I can decode an entire genome for US$1,000 and in another four to five years it would be the same as a blood test, except for one thing - your genome doesn't change, so I only have to do it once," Mr Koh said.

"That allows in the future, highly personalised solutions to our health and medical challenges. Done the right way, genetic information should inform public policy so that public healthcare can be oriented towards prevention rather than cure, because prevention is always cheaper than cure."

Mr Koh is an investor in Renova Therapeutics, a San Diego-based gene therapy company that is "making a tremendous amount of traction in a cure for diabetes". He's also backed Lucence Diagnostics, started by medical oncologist and clinical geneticist Dr Tan Min-Han, the brother of Razer founder Tan Min-Liang.

Another thing that's unstoppable? Blockchain and its applications.

Mr Koh said: "We study it. Can we foresee all of the applications today? The answer is 'no'. The critics today allude to problems in the blockchain like its scalability, its speed, and say therefore it will never work. I don't belong to that school, because I've seen technology evolve many many times.

"I can still remember the days when people were predicting the limits to how tiny integrated circuits can become. Moore's Law still hasn't stopped operating. We listen to discussions about limits to how fast computers can be. I don't think the limit is in sight yet. So similarly, while I recognise there are deficiencies in the current blockchain technology, I expect them to be overcome."

Has Mr Koh dabbled in any ICOs (initial coin offerings)? Experimentally, he said: "The only way to learn something is to put something at risk."

He added: "I will just say that I think 99 per cent of them are probably worthless. You're just searching for that 1 per cent."

Mr Koh can think of a few problems that can be solved by a blockchain and a token. If drug companies can access a large database of a population's genetic information, that helps them to test their formulations.

"But the two arguments against this is number one, data privacy. The second thing is, I've contributed my information to you, and then you allow it to be utilised by big pharma, and you collect a payment, but I as a donor and owner of my genetic information get no benefit out of it," Mr Koh explained.

"That's a problem we can solve with blockchain and a token: Every piece of genetic information can be put on the blockchain and the identity of the donor known, only to the blockchain. You charge big pharma a million medical tokens to rent the database, and then everyone who has contributed their data will receive a share," he added.

"There are things you can do with token technology and the blockchain that you can't do with today's technology, and it makes it a much fairer world!"

Startups that build a fairer world are another investment theme that resonates with Mr Koh. In February, he invested in SolarHome, which provides pay-as-you-go solar services to off-grid households in Myanmar.

He's also a backer of SingX, a remittance start-up that offers customers better foreign exchange rates than banks, without any hidden fees.

Mr Koh said: "I like to make investments in people who are trying to disrupt the transfer payments process. In Singapore we hire a lot of domestic help. Sometimes they want to send S$200 home. If they go to a bank, they pay a fee of 5 per cent. That's a lot of money and I dislike that idea because you're taking money out of the poorest people in the world. If SingX can charge less, then I want them to succeed."

SingX is a Singapore company, Mr Koh notes, but the corridors of remittances are all overseas.

He takes a global outlook with his venture capital investments, which are spread far and wide, from the US to Japan, and to India: "I think you want to be very careful in investing in a startup that is focused on the Singapore market.... I won't invest in that. 100 per cent of a 5.5 million market is a very small business. I'd much rather have 10 per cent of the Indonesian market of 270 million people."

Mr Koh is also perfectly comfortable looking at hardware-based businesses. Together with Tan Chow Boon and Seow Kiat Wang, the two other managing partners at Credence, Mr Koh has made venture capital investments in materials science and chip design.

The three are co-founders of contract electronics maker Omni Electronics, and were former colleagues at Hewlett Packard prior to that. After Omni was acquired by Canadian giant Celestica in 2001, they set up Credence in 2006 to target mid-sized manufacturing companies.

Today Credence focuses on advanced manufacturing, including supply chain and logistics solutions, and "anything to do with technology", Mr Koh said.

Credence Capital Fund II raised S$200 million from investors including Heliconia Capital Management, and that has been fully deployed as of April, when Credence and EDBI led a US$30 million series C funding round for Zimplistic.

Zimplistic's Rotimatic is a wi-fi-enabled flatbread-making machine priced at S$1,349. Mr Koh said the team is already working on Rotimatic 'version 2': "We ran through the process of cost-reducing with them in a fair amount of detail. Because of our backgrounds, we can work closely with the company to scrutinise the bill of materials, their manufacturing process. We like to focus on those things because those are things that we've done in our careers."

In addition to his former stints as chairman of Singtel, DBS Bank and Singapore Airlines, Mr Koh also chairs corporate advisory firm Rippledot Capital Advisers, Yeo Hiap Seng, Far East Orchard and Agilent Technologies. He remains the non-executive chairman of high-precision plastic components maker Sunningdale Tech, which he founded.

In Singapore's hyped-up startup scene, many startups boast supersize valuations. Every now and then, fears of a tech bubble come to the fore.

But Mr Koh is nonchalant: "You must understand that both the investors, as well as the people in the country, must have the mentality to accept failure. Because, out of a thousand startups, less than 200 will make it. And out of that 200, maybe only 10 or 20 will grow into what we call mid-sized companies. And maybe only one or two will become well-known. That's something that we as a society have to accept."