US edtech fund Owl Ventures takes a shine to S-E Asia

Singapore

US-BASED Owl Ventures is seeing growing appetite from South-east Asian investors for education technology (edtech), both for attractive returns and as a form of impact investing, the firm's managing director Ian Chiu and operating adviser Ilaria Chan told The Business Times.

Riding on this momentum, Owl Ventures is looking for investment opportunities in South-east Asia, while also encouraging more of its existing portfolio startups to set foot in this region.

Founded in 2014, Owl Ventures has backed a slew of hot edtech startups, including Indian edtech unicorn Byju's and the Netflix-esque learning platform MasterClass.

With five funds and over US$1.2 billion in assets under management, Owl Ventures bills itself as the world's largest edtech-focused venture firm.

It closed its latest two funds, with a combined capital of US$585 million, in September. One is Owl Ventures' US$415 million fourth fund, targeting edtech startups at the Series A stage and beyond. The other is a US$170 million opportunity fund to provide growth capital for existing portfolio companies.

South-east Asian investors figured prominently in Owl Ventures' most recent fundraise, Mr Chiu said. The firm saw "a significant uptake from family offices of all sizes" in countries across South-east Asia, from countries such as Vietnam, Indonesia, Thailand and Singapore. Owl Ventures' other limited partners include sovereign wealth funds and institutional investors.

"We have South-east Asian investors in our prior funds, but what we really saw in the last fundraise was a huge surge of activity from South-east Asia - both in terms of new investors, as well as more dollars. Part of that is because people are starting to realise, and directly appreciate, the impact of edtech and the long-term secular drivers that support the sector," he said.

He added: "Historically, edtech had been viewed as a bit of a niche category, but in the past few years, it has become mainstream... Investors appreciate the fact that edtech solutions are being rapidly adopted around the world, the infrastructure to support delivery of these solutions has improved dramatically and the desire for education attainment leads to US$6 trillion of education spend each year, and growing."

A desire to contribute to social good, beyond just pure profits, is another factor pulling investors towards edtech, said Ms Chan, who is also a private investor and group adviser to ride-hailing firm Grab. She joined Owl Ventures as an adviser in August 2019.

"Education has always been an anti-cyclical, recession-proof sector... As an investor, if you're looking at promising, sustainable growth areas to invest in for the long haul, it's very natural to look at education, especially education that can scale, which is really edtech," Ms Chan noted.

She added: "If you are an investor who wants to see masses flourishing as a result of your investment, you definitely want to see investments into companies and sectors that skill and equip people... you invest in something that has that multiplier effect."

Beyond building relationships with South-east Asian investors, Owl Ventures is also currently on the lookout for regional investment opportunities.

"We've been really increasing our activity in terms of conversations with other investors in South-east Asia local market funds. We also now have Ilaria as our South-east Asian adviser, which is indicative of our interest in the region," Mr Chiu said. "Over time we do also expect to invest in a South-east Asian company that serves (this region)."

In addition, the venture firm is "pushing" its portfolio companies to better serve the region. Some of these companies have already dipped their toes in, such as Copenhagen-based virtual labs startup Labster, which has over 40 employees in the region and an office in Bali, Indonesia.

US edtech firm Quizlet, another Owl Ventures investee, saw user activity in Singapore and The Philippines surge when schools were shut due to Covid-19.

Looking ahead, Owl Ventures is ready to ride on what it sees as an edtech boom in South-east Asia.

"The more relationships we can establish in South-east Asia, the more likely it is that we can not only find interesting companies to invest in here, but also have more of our international companies come to South-east Asia," Mr Chiu added.