Tsao family's shipping business turns to venture capital in search of fresh ideas

Singapore

MARITIME companies constantly think of ways to reduce their hefty fuel costs. It's a complex matter - fuel consumption is affected by weather, the route, vessel age, the cargo, and how well the hull is maintained.

Yet, technology could make this issue one of the lowest hanging fruits in a list of problems to solve.

As the maritime sector grapples with inefficiencies, the potential for innovation is enough to nudge a 55-year-old Singapore-based shipping group into the world of startup investments.

IMC Group, founded by late shipping magnate Frank Tsao, has launched a corporate venture capital (VC) arm under its maritime and logistics unit.

IMC Ventures will invest in pre-Series A and Series B startups with a focus on environmental sustainability and social impact.

Its parent company has allocated US$15 million to the fund, half of which will be deployed to Singapore startups, 20 per cent to startups in other parts of South-east Asia, and the remaining 30 per cent equally to companies in the US and Europe.

Discussions for some proof-of-concept (POC) agreements with startups are already underway. IMC is working with a Singapore-based Internet-of-Things startup to highlight anomalies in engine performance.

It is also working with an Israel-based computer vision company to detect fires faster than a fire alarm can, and talking to a London-based startup that can help with voyage optimisation using satellite data.

This is new territory for IMC, known for its long history in the traditional maritime sector. Founder Mr Tsao fled his hometown in Shanghai in 1949 after the outbreak of civil war, later establishing a shipping business in Hong Kong.

He moved the company's operational headquarters to Singapore in the early 1990s and helped champion the country's development as an international maritime hub. In 1968, he helped the Malaysian government establish its first national shipping line.

Today, IMC Group is present across 15 countries and has interests in natural resources, fund management, and lifestyle and real estate businesses. It employs more than 9,000 people.

But it wants to do more.

"We've been seeing how technology has changed in the logistics sector, especially in the last three to four years. But we haven't really seen that kind of exponential growth when it comes to the maritime side," said James Ong, director of M&A and business development at IMC Group, who sits on IMC Ventures' investment committee.

Mr Ong said IMC wants to catalyse the pace of tech development in the maritime sector. The group is also hoping that its embrace of technology will give it a competitive edge and help it offer better products to its clients.

A newly formed innovation team has been tasked with spearheading POCs and assessing the suitability and pricing of technology. The group's management realised that it needed a team dedicated to the pursuit of technology and not overly burdened by their other key performance indicators, said Mr Ong.

IMC Ventures has yet to make any investments, but it is in talks with 10 startups. The firm plans to invest US$500,000 to US$1 million in each startup, with the potential to go up to US$2 million for promising ones. Follow-on investments will range from US$1-1.5 million.

Startups will get access to IMC's network of clients and operational expertise, said Mr Ong, who was previously partner at supply chain company YCH Group's corporate venture arm.

IMC Ventures has also invested in global VC iGlobe Partners and Singapore-based Quest Ventures to increase its tech exposure. It is currently doing due diligence on a US-based fund.

The venture arm will focus on technology in the key areas of data analytics, green shipping, capacity and route optimisation, and cost savings and vessel performance.

For instance, shipping data can be analysed to predict global trade movements and pinpoint inefficiencies in the supply chain. And with the large carbon footprint caused by the maritime industry, there is ample room to look at how ships can be better designed and more efficiently run using newer technologies, said Mr Ong.

The two other members of the investment committee are Loh Niap Juan, chief corporate officer of IMC Group, and Bruno Lorenzon, head of industrial group finance at IMC Industrial Group, IMC's maritime unit.

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