Silicon Valley's Rocketship.vc unfazed by 'crazy' fintech valuations in South-east Asia

Singapore

INVESTING in South-east Asian fintech has become a daunting prospect, as the rush of global capital pushes valuations sky-high. But that is not stopping Silicon Valley-based venture firm Rocketship.vc from hunting for opportunities here, its partner Madhu Shalini Iyer tells The Business Times.

"We have found the fintech valuations in South-east Asia to be a bit crazy," said Ms Iyer. One key reason for this is that many investors expect South-east Asian startups to follow the same growth trajectory as unicorns elsewhere.

"There are a lot of opportunities now which (investors) are wanting to recognise early, but then the valuations become crazy because there's always comparisons to China and India," she said.

But frothiness aside, Rocketship.vc is bullish on the region. Having made its first South-east Asian bet earlier this year, it is raring for more.

As Ms Iyer sees it, there is still so much "value creation" in South-east Asian tech for investors to tap on.

The venture capitalist had a front-row seat to the startup boom here - she was previously chief data officer of Indonesian tech giant Gojek from 2016 to 2017, and helped to set up its Singapore office.

She subsequently served as chief data officer at a San Francisco-based fintech startup, EthosLending, and then moved to Rocketship.vc in September last year. The venture firm is one of a growing number of Silicon Valley investors entering the South-east Asian deal space.

"There is a lot of US interest; all of that compounds to high valuations in fintech. This is going to be an interesting space to watch, for sure," agreed Ms Iyer.

Founded in 2014, Rocketship.vc has two funds - its first closed in 2015 at US$40 million and the second raised US$100 million last year.

Rocketship.vc made its first South-east Asian play in February, investing an undisclosed sum into Indonesian fintech startup BukuWarung.

Founded by two former executives from Carousell, BukuWarung offers digital bookkeeping and payments solutions to micro SMEs. It bears some resemblance to Khatabook, an India-based digital bookkeeping startup that Rocketship.vc had previously backed.

Just about four months after Rocketship.vc's investment was announced, BukuWarung disclosed that it had raised US$60 million in Series A funds led by yet more prominent US investors - Valar Ventures and Goodwater Capital.

US investors no longer are of the mindset that they will only invest in companies within a certain radius of Silicon Valley, said Ms Iyer.

"There's no more '15-mile (24km) investing', where you invest in companies that are no more than 15 or 30 miles away. That's all so passe now. You're going to see that much more of aggressive attitudes of funds from all over, not just the US," she said.

Within the fintech space, Ms Iyer is particularly interested in digital payments - a segment that has been flooded with e-wallets but remains notoriously hard to penetrate.

"There's (digital) wallets, but there is still a lot of difficulty with unified payments platforms which help businesses with payments on the cloud. There's just a lot of potential in many different ways; the market is completely not cracked. It's very fragmented; that fragmentation is what we are going after," she said.

Other fintech verticals of interest include digital investment tools and crypto exchanges. The latter segment is still nascent in South-east Asia, but some interesting companies have surfaced, she said. Ms Iyer is particularly keen on the use of crypto technology for the secure transfer of money.

Rocketship.vc is not just focused on pure fintech plays, but also on companies that get into fintech as part of their organic growth. For instance, an agritech company could get into the lending space to offer specialised solutions, Ms Iyer said.

To be sure, investing amid travel restrictions is challenging. Ms Iyer is based in California, which is in an almost opposite timezone from South-east Asia. But she has gotten used to meeting founders over video calls.

The South-east Asian growth story is after all too compelling an opportunity for global investors. Ms Iyer is bullish about the exit potential of startups here, amid the maturing crop of unicorns such as Gojek and Grab.

"We are in a little bit of a frothy environment in the technology sector. But irrespective of that, I think global entrepreneurship and value creation are here to stay. There's a lot of unknowns, even now, but there is an infrastructure being laid out and we are already seeing it in South-east Asia."

Rocketship.vc hopes to "lean in and be bullish about the right players", she said.