Through the eyes of venture capitalists
In today’s outlook, the big question remains: Where do investment opportunities exist? BizHive Weekly visits the Borneo Entrepreneurship and Investment Convention (BEIC) 2018 to gather views on pressing issues and the latest business trends. With one of the topics touching on venture capitalists, changing technology trends and the way this influences consumer trends:
The Southeast Asian region is growing and is set to see more foreign players buying into homegrown start-ups.
Judging from the berth of international venture capital and private equityplayers coming into the scene in recent years, signs are clear that Southeast Asian start-ups – including Malaysia – are hot on the radar for many of these exclusive financiers.
This comes as research from private equity giant Coller Capital affirmed that private- equity money is moving into Southeast Asia, with a view of conducting buyouts over the next few years.
According to the group in its Global Private Equity Barometer 2018, the majority of limited partners surveyed believe that the region will be an attractive destination for buyouts in the next three years, outstripping other Asian destinations such as China, India and South Korea, as well as Australasia.
“A net balance of a quarter of limited partners think that South East Asia will be more attractive for buyouts in the next three years. Elsewhere in the Asia- Pacific region, China shows a net positive balance of 14 per cent of limited partners, and Japan a net positive balance of 11 per cent.
“For no Asia-Pacific area do limited partners, on balance, think the outlook is deteriorating, but for several national markets positive and negative investor views are finely balanced,” it highlighted.
The Barometer researched the plans and opinions of 112 investors in private equity funds. These investors, based in North America, Europe and Asia-Pacific (including the Middle East), form a representative sample of the LP population worldwide.
This 28th edition of the Global Private Equity Barometer captured the views of 112 private equity investors from around the world.
Meanwhile, it saw that several Asia- Pacific countries were becoming less attractive for venture.
“The picture for venture capital is more varied, with the attractiveness of developed markets such as South Korea, Japan and Australasia seen as deteriorating by a net balance of investors,” it said.
“Venture in the emerging markets of the region is, on balance, seen as becoming a little more attractive. This was on the back of private credit fund returns are exceeding expectations.”
According to the research, for a good number of limited partners, returns from private credit funds are proving pleasantly surprising. Almost 30 per cent of them say that their European private credit funds are performing better than they expected.
Beyond Europe, 22 and 16 per cents of limited partners say the same for Asia-Pacific and North American credit funds respectively.
Money in lending
Thus, it comes as no surprise for Malaysian start ups – particularly those in technology – now see investors keen on investing at an earlier stage of a promising startup’s investment cycle.
This comes as many success stories such as Grab, Catcha Group, Lazada and so on have reaped healthy returns for their investors.
Another key indicator is a move made by Malaysia’s own Sunway Group via its new venture capital fund named Sun SEA Capital, proposing to spend up to US$50 million on digital startups in Malaysia, Thailand, Singapore, Indonesia, Philippines, Vietnam and Hong Kong.
Sunway Bhd, through its subsidiary Sunway City Sdn Bhd signed an Initial Exempted Limited Partner Agreement (LPA) -- a limited partnership agreement that is used to form a private equity fund, but structured as a limited partnership.
This partnership is made up of the resources and business smarts of the Sunway Group, combined with the experience of established venture capitalists Koichi Saito and Kuan Hsu.
The pair Koichi and Kuan enter this partnership with the experience of forming Singaporebased KK Fund in 2015. Launched in 2015, KK Fund has made 20 investments including Kaodim, TheLorry, Hostel hunting, Supplycart, Policystreet and CapitalBay.
In Sun SEA Capital, the pair will be acting as the fund’s consultants and directors, as well as playing key roles in the fund’s investment committee.
Better time of doing business
All these come at a time when businesses cite optimistic prospects in the way of doing business, specifically after the 14th General Elections (GE14).
The latest RAM Business Confidence Index ( RAM BCI) readings suggested that firms remained upbeat about their business outlook going into 3Q18 and 4Q18.
RAM Ratings noted that the Corporate and small and medium enterprise (SME) indices again charted positive sentiment at a respective 56.8 and 52.1, with continued improvement in their turnover and profitability subindices.
The ratings firm further noted that the sustained positive readings indicate Malaysia’s economic resilience in the first half of 2018 (1H18) is likely to carry through to 2H18, supported in particular by the Corporate segmentÕs firm optimism.
“The results of our survey also show that the outcome of the GE14 may have partly contributed to the more upbeat sentiment among firms,” it said.
“The better business sentiment post-GE14 is observable across all sectors for both Corporates and SMEs, except for the Corporate construction sector, which shaved off 1.0 point.”
On the proportion of firms citing rising cost of doing business as their main challenge, RAM Ratings pointed out that it was also much lower after GE14, likely on expectations that the zero-rating of GST and the threemonth tax holiday until the sales and services tax (SST) is reintroduced in September will allow businesses to achieve some cost savings.
As for SMEs’ access to bank financing, RAM Ratings stressed that it is important to ensure SMEs better access to funding, to support the countryÕs economic growth.
“Furthermore, SMEs’ turnover and profitability expectations have risen in the last three surveys – a sign pointing to potentially a greater need for financing.”
All these serve to ask the question: what do venture capitalists think of investing in Malaysian start-ups?
A net balance of a quarter of limited partners think that South East Asia will be more attractive for buyouts in the next three years. Elsewhere in the Asia-Pacific region, China shows a net positive balance of 14 per cent of limited partners, and Japan a net positive balance of 11 per cent. Coller Capital