Deutsche Bank's tech fund takes softly, softly approach

Deutsche Bank''s Asia Pacific technology fund kicks off with stake in Keppel venture.
Deutsche Bank has made its first investment in Asia via a $300 million technology fund. The e-millennium 2 fund (em2), of which Deutsche Bank is the lead investor, was launched in late July, and last week took a 10% stake in Trade1Asia (T1A), a Keppel Corporation initiative.

T1A is a business-to-business (B2B) online resource and exchange for small and medium sized enterprises (SMEs) and a hub for larger businesses to procure goods and services online at aggregated prices. The other strategic stakeholders in T1A are Keppel TatLee Bank, Keppel Telecommunications & Transportation, and k1eBiz Holdings, a Keppel Corporation subsidiary. Collectively, the shareholders have invested S$20 million ($11.44 million) into the B2B venture. Deustsche Bank declined to name the dollar figure of its investment.

"We have a very focused approach," says Harrison Wang, head of e-business Asia Pacific for Deutsche Bank. "Unlike venture capital funds, we are not making bets on technology. We invest on later stage, on validated proven technology initiatives at an early stage of their Asian expansion." Wang isn't fazed by the fall from grace of the technology and internet sector. "Adjustment is good, it gets rid of all the hype and allows the professional players through," he says. "Deutsche Bank has a longer term approach with this fund and we look at real value propositions."

Deutsche Bank has so far injected $150 million into em2, with the remaining $150 million coming from private investors. Wang says while the bank's monetary investment is modest, Deutsche Bank's strategic support for the fund is considerable. Em2's supervisory board includes three of the global bank's board members and the chief executive officer (CEO) for the Asia Pacific region.

"Singapore is a fertile ground to develop B2B e-businesses because of the excellent e-infrastructure, logistics, financial services capability, regulatory transparency and the overall operational efficiency. This partnership of Keppel Group and Deutsche Bank is a powerful combination of local and global strengths enabled by advanced technology and content," says Wang.

ICG Commerce will provide the technology for the e-procurement part of T1A. On the exchange, companies will be able to aggregate their maintenance, repair and operations (MRO) needs for discounts, or else outsource all aspects of purchasing indirect materials. T1A also aims to bring Keppel Corporation's SME customer base into e-commerce. The exchange, through the Keppel group of companies,  will provide application service provider (ASP) services, host e-catalogues, provide online business news and credit information, online payment facilities, and online trade tracking.

Plans to expand abroad

T1A CEO Yoon Kam Choon says that initially transactions will take place locally and in local currency. But the exchange plans to link with other vertical portals, which will mean cross border transactions in various currencies. Online services such as trade finance, foreign exchange, escrow and insurance will then be made available with the help of Deutsche Bank.

Buyers signed on to T1A so far are from the Keppel group of companies - some 150 of them - which collectively spend S$1 billion on direct and indirect materials. The group estimates that it will save between 5% and 20% on costs. "We will also benefit from a compressed process cycle and on head counts," adds Yoon. T1A is still in the process of signing on other independent third party buyers. Yoon expects the first transaction to take place next month.

Keppel Corporation has launched its e-commerce strategy in three parts. T1A is the group's first foray into the B2B sphere. Other delivery channels for e-commerce services will be business to consumer (B2C) and business to employee (B2E). The latter channel sees Keppel targeting employees as a customer base for products such as credit cards and insurance.