Venture capital firms share long-term investment strategies

Singapore

A STRICT seed-stage focus and building brands out of consumer trends are some of the investment strategies that venture funds will deploy in South-east Asia over the next five years.

Panellists at the DealStreetAsia PE-VC Summit on Wednesday shared their plans for their upcoming investment vehicles after having spent a few years dabbling in the region's startup scene.

Nikhil Kapur, partner at venture capital (VC) firm STRIVE, said the firm will expand regionally but keep its focus strictly on seed investments - a stage known for being high-risk, high-returns.

"I think half of our investments have been made in companies that have not yet launched. We give them their first cheque," said Mr Kapur, whose firm announced the first close of its US$130 million third fund in May.

But for early-stage investing to work, investors must be one step ahead of everyone else, he said. To this end, STRIVE has been keeping a close eye on the small and medium-sized enterprise (SME) sector. While many startups have focused on the consumer, SMEs remain largely underserved, said Mr Kapur.

For DSG Consumer Partners, the consumer-focused backer of Chope and Redmart, the trick is to map out the consumer landscape and question why there are particular categories that do not exist. For instance, the firm invested in India's cold brew coffee brand Sleepy Owl, which was a pioneer in its market, said managing director Deepak Shahdadpuri.

Asked whether it is risky to chase fickle consumer trends, Mr Shahdadpuri stressed that DSG identifies long-term trends in consumer behaviour and builds sustainable brands around it. For example, the firm is looking closely at developments in gut health as consumers become more health conscious.

Meanwhile, predominantly early-stage investor Golden Gate Ventures is teaming up with South Korea's Hanwha Asset Management to raise a growth fund, reportedly at US$200 million.

Michael Lints, a partner at the firm, said that as its portfolio companies matured, many of them started seeking long-term partners. Some also asked the VC whether it could be more involved and "hands-on" in the startups' next round of fundraising.

"So we decided it made sense to have a separate vehicle focusing on growth," said Mr Lints.

Golden Gate Ventures has been "regional since day one", and it plans to keep focusing on South-east Asia - at least for the next five years. "We see a lot of opportunities in the B and C stage," Mr Lints said, adding that the firm will still go on funding startups in the seed and Series A stage.