Vertex Ventures Southeast Asia and India hit the first close of $230 million for its Fund IV this month, and plans to raise another $50 million in the next six months.
The fund, backed by Singapore state investor Temasek, will focus on investment in disruptive and transformational opportunities, especially in consumer tech and fintech. In an interview with FinanceAsia, Ben Mathias, managing partner of Vertex Ventures Southeast Asia & India, explains how the fund chooses its investments in the region and adds value to the business.
“We have invested in technology-oriented businesses,” Mathias says. “SEA and India have a fast-growing internet population thanks to the spread of low-cost smartphones and cheap data.”
Mathias says that he is most interested in businesses that can use technology to change an old business model in the same way that Grab did to the taxi business. Technology solutions for small and medium enterprises are what he finds interesting. Vertex Ventures invested in Malaysian cloud-based POS system StoreHub four months ago.
Vertex also see a promising future in industrial internet-of-thing (IoT) businesses, as they can gather a huge amount of data and improve efficiency after it has been analysed. Its investment in IoT data analytic firm Flutura in January is just one example of confidence in the sector.
Southeast Asia is good for tech startups to grow, according to Mathias. The region now has a large number of graduates who studied abroad and have now returned. It also has a high number of software professionals, which makes the evolution of technology more feasible than elsewhere.
Consumer tech and fintech will be the focus for Vertex’s Fund IV, as both sectors are driven by the fast-growing young population as well as GDP growth in the region. Mathias thinks there are still opportunities in the two sectors even since the emrgence of super apps such as Grab and Gojek.
“In some businesses, the winner takes it all,” Mathias says. “But this is not the case in fintech.” Fintech companies still have huge potential with room for multiple sub-sectors to develop. And that will create more space for startups.
On consumer tech, it might be more difficult for startups to grow as leading players in the market have already devoured market share. But opportunities lie where technologies evolve. E-commerce, for example, is morphing into a social media-led purchasing habit with more sharing and retweeting options. Startups can still cut a share amid the fierce competition.
Finding the right talent and continuous funding for business development is becoming a challenge for Southeast Asian and Indian startups. And as for an exit strategy, Mathias says that strategic sales of portfolio companies is the one he most frequently uses. But that also depends on the startup's own development. Sometimes the founder just doesn’t want to sell too early and sees a chance to grow even bigger.
