BT EXCLUSIVE

Singapore venture capital firm eyes North Asia play

Golden Equator Capital is making moves to help startups scale up in the region and to facilitate potential M&As

Singapore

VENTURE capital firm Golden Equator Capital's (GEC) move to launch a S$120 million fund with Korea Investment Partners (KIP) earlier this year comes on the back of push-pull factors - the need for South-east Asian startups to expand into North Asia, and the growing interest of large Korean firms in these startups.

GEC's managing partner Daren Tan told The Business Times that the firm is intent on building regional icons with the ability to expand beyond South-east Asia.

"If you look at the South-east Asia market, you have about 650 million people, and everyone is focused on Indonesia. But even if you get a fraction of the market share of Indonesia, it's not a global view of how tech companies should scale," said Mr Tan.

"A lot of them desire to grow much larger. That's where the North Asia play - excluding China - comes in."

It was lessons from the growth of unicorns and feedback from the companies in GEC's portfolio that alerted the firm to the importance of this "North Asia play", said Mr Tan.

"For example, our portfolio company M17 has scaled South-east Asia, but they truly started to find the strengths and big developments when they scaled into markets like Taiwan, Korea and Japan."

M17 Entertainment was formed in 2017 through the merger of Taiwan-based livestreaming firm 17 Media and Singapore-based Paktor, which operates a dating app. GEC had participated in a US$10 million investment round into Paktor prior to the merger.

The firm is counting on KIP's 32 years of experience and links to South Korean industry heavyweights, the chaebols, to help startups gain a foothold in North Asia. Examples of chaebols - powerful family-run conglomerates in South Korea - include Samsung Group and Hyundai.

"It's probably the strongest point of connection you want to achieve there," said Mr Tan, adding that GEC is very open to launching more funds with KIP.

Seoul-headquartered venture capital and private equity firm KIP is managing 41 funds with assets under management of US$2 billion. It has backed some of South Korea's most successful tech companies, including Kakao and Naver Corp.

Besides helping startups to scale up, GEC is looking to get in on the potential M&A action resulting from South Korean firms' appetite for South-east Asian startups. Mr Tan observed that large firms in South Korea are starting to act like China's Baidu, Tencent and Alibaba.

These companies have long reached unicorn level - Naver has a market capitalisation of US$17.6 billion and Kakao's is US$8.5 billion - and are now expanding outwards by snapping up stakes in overseas firms.

For instance, Naver invested an undisclosed sum in Malaysia-based e-commerce firm iPrice Group, and K-wave giant YG Entertainment pumped US$3 million into homegrown influencer marketing startup Gushcloud.

"So it's not the case where China is that big brother who is always looking to buy into or expand in South-east Asia. Now we have Korea as well," said Mr Tan. He added that the acquisition-based expansion strategy is driven by the firm grip of chaebols on the South Korean economy, which has impeded the growth of innovation and disruption domestically.

For a tech-savvy nation, South Korea has yet to embrace the sharing economy, Mr Tan pointed out.

Giving an update on the GEC-KIP Technology and Innovation Fund, GEC said the first close was in 2018 and the firm expects a final close by the end of Q1 next year.

Mr Tan said that there are about five deals in the pipeline, which are expected to be sealed by the first half of 2019.

Two investments have already been made through the fund. GEC co-led a US$27 million Series B+ round in Indonesia fashion e-commerce startup Sale Stock, and led a S$4 million Series A in Singapore proptech startup Ohmyhome.