Singapore VC Openspace hails ride with Go-Jek
Singapore
OPENSPACE Ventures' co-founder Hian Goh remembered the time that he met Go-Jek's founder Nadiem Makarim in 2014. Then, the start-up had fewer than 500 drivers, though the ambition was to "Uberfy" it.
The challenge to Mr Nadiem from Openspace, then known as NSI Ventures, was to get 10,000 drivers in 12 months. "He did it in three months," Mr Goh recalled with a laugh during an interview with The Business Times.
Openspace's early investment into Go-Jek, which is expanding into Singapore, the Philippines, Thailand, and Vietnam with a US$500 million war chest, has pushed the Singapore-based venture capital (VC) fund into the top global rankings in recent times - a rare sighting for Singapore VCs.
Openspace Ventures, which was formerly the VC arm of private-equity fund Northstar Group, emerged recently as the second among all early-stage VC funds of the 2003-2015 vintage around the world, data from Preqin showed. It was also ranked the third-best VC fund based out of Asia.
Mr Goh sees its investment in Go-Jek as a lucky break, thanks to Northstar, an active investor in South-east Asia which made the introduction to the start-up.
Go-Jek is powering a lot of the returns in the first fund set up in 2014. That fund delivered a 46 per cent net internal rate of return as at the first quarter of 2018. It also had a 2.6 times multiple on its invested capital.
Mr Goh is keenly watching how Go-Jek will hit the grounds beyond its home turf of Indonesia, noting that the ride-hailing company has plans to expand aggressively. He also noted that the regulators in the Southeast Asian region have been supportive, and have offered "a warm reception".
"Nobody wants a single player to take the market," he added.
To be sure, Go-Jek is just one of 15 companies that Openspace has taken under its wing. Mr Goh noted that while it's early days for the rest of the portfolio, the other start-ups that include restaurant booking app Chope, insurtech firm CXA Group and retailer Love, Bonito have turned in a healthy performance thus far.
Notably, most of Openspace's portfolio companies have raised follow-on funding. The US$230 million in follow-on funding that excludes Go-Jek is 2.5 times that of its US$90 million invested by its 2014 fund.
To be sure, the fund also sold its holdings in online grocer Redmart in late 2016. The selling sum was undisclosed, but it's likely that investors broke even - at best - on the deal.
Openspace, now as an independent VC spun out from Northstar, has more than US$150 million assets under management that are mainly from global and regional institutional investors. It sees itself as a "rare bird", in Mr Goh's words, by nurturing a closer relationship with its portfolio companies. His staff strength of 14 includes an in-house headhunter that Mr Goh would tap to help his portfolio companies pursue senior hires.
"It's an expensive business model to pursue when 40 per cent of the team members are not even investment professionals," he added.
Mr Goh has also been known to ask his portfolio companies for to-do lists.
Founder of CXA Group Rosaline Chow Koo noted that Openspace feels different from the rest. "Openspace's analyst feels like he's been a part of the CXA finance team over the last four years and actually has a desk here in our office," she said.
Mr Goh also has a mission to get money to entrepreneurs' hands because of his own entrepreneurship past. He started his own company Asian Food Channel in 2005 that he sold in 2013 for US$66 million. A year later, he went into venture capital, eager to address the dearth of Series A funding in South-east Asia.
Without adequate funding, entrepreneurs with a refreshing idea would not be able to take on incumbents, and make a mark in this part of the world, as start-ups in Silicon Valley have done, he observed. "I felt very worried that if no one brought that business model to South-east Asia, we would never get excellent performances, and we'd end up having a lot of false negatives."
Openspace is still exploring the fintech space, noting that there has been a strong deal flow. For now, Mr Goh noted that the payments space is very challenging, but that Openspace can work off Go-Jek's exposure to payments. The fund is more eager to look at opportunities in credit, such as in peer-to-peer lending, where non-traditional credit scoring can help offer credit to the underbanked.
On the emergence of early-stage funding in South-east Asia, Mr Goh noted that investors in the venture capital are savvy enough to spot the good from the duds.
While there are still bubbly spots of investments coming from family friends and the like, such funding does not tend to stick. "That kind of hot money gets decidedly cold when you go back to ask for three million more," he quipped.
