GIC's US$104m music bet raises hopes for regional start-ups

[SINGAPORE] Singapore sovereign wealth fund GIC's US$104 million investment in Taiwan's KKBOX has raised hopes about investor appetite for start-ups, and comes as the music streaming industry is becoming a force to be reckoned with.

GIC said on Thursday that it had taken an equity investment in KKBOX, a Taiwan music streaming service that claims more than 10 million users in Taiwan, Japan, Hong Kong, Singapore, Malaysia and Thailand.

KKBOX co-founder and chief executive Chris Lin said the proceeds of the investment would be used to fund the company's overseas expansion and to improve technology and service.

KKBOX's major shareholders include Japanese telco KDDI, which took a 76 per cent stake in 2010; and Taiwanese phone maker HTC, which took an 11 per cent stake in 2011. Taiwanese telco ChungHwa Telecom is a 30 per cent shareholder of KKBOX's Taiwan subsidiary. KKBOX management currently holds about 23 per cent of the company's shares.

Deals the size of GIC's investment have only recently begun to appear in the region, and GIC's latest move could be a precursor of more in 2015, said technology incubation firm Golden Gate Ventures founding partner Vinnie Lauria.

"Global and US start-ups will not be the only tech firms to dominate this region - there will be many locally grown start-ups that can take over the region," he said.

The deal comes as music streaming continues to expand worldwide. A report in The Economist this year placed the number of paying subscribers at 28 million worldwide, generating US$1 billion revenue in 2013 - over 50 per cent more than in 2012.

Mr Lauria reckoned that KKBOX's ability to operate across markets and to reach the mobile platform are positive for the company's outlook.

But KKBOX is also operating in an area with robust competition. Website analytics firm Alexa ranked KKBOX.com as the world's 3,158th most popular website, behind regional rivals Xiami.com, ranked 2,896th, and Douban.com, ranked 315th. Europe's Spotify.com was ranked 658th globally.

KKBOX is not the only technology business that GIC has invested in this year. In February, GIC took part in a US$750 million equity fundraising by workface management solutions provider Kronos Inc; in May, it led a group of investors as Brazilian online sporting goods retailer Netshoes raised US$170 million; in June, GIC was part of a US$752 million acquisition of plagiarism prevention and student feedback solutions provider iParadigms; and in July, GIC was part of a group that invested US$1 billion in Indian e-commerce company Flipkart.