Elixir Capital Management sets up a US$150M fund for Series A
Known as the Straits Fund I, the US$150M fund set up by US-based Elixir Capital Management will target Series A funding in Southeast AsiaBy Dhaleta Surender Kumar 24 Mar, 2014
Malaysia government’s wholly-owned subsidiary and venture capital company, Malaysia Venture Capital Management Berhad (MAVCAP) will be the anchor investor in the fund. However, the fund will be managed by ECM. There are other undisclosed investors too in the fund from US, Europe, Japan and Africa.
According to Abrar Hussain, Founder and Managing Director, Elixir Capital Management, Malaysia and Indonesia are the primary two main target markets. A portion of the fund will be targeted at Singapore too. “We see a strong cultural connection between Indonesia, Malaysia and Singapore and that helps. Looking at the size of the three markets, likely means that most of the fund will be deployed in Indonesia.”
Hussain though clarified that Straits Fund I is “not geographically limited but will focus on the ASEAN region. “Any company, for that matter from any country, which could be India too, that wants to cross-over to Indonesia and Malaysia is on the radar,” said Hussain.
Despite a strong startup community in Singapore, the founder felt that it was not the No 1 target market because of the cost factors. “Singapore is a difficult market to justify cost-wise,” he said, adding, “As for other countries in the region, we don’t have as much of a network in Thailand. The same goes for the Philippines too, but we haven’t seen many companies cross-over too. We have seen excellent entrepreneurs in Vietnam, but the country has significant language barriers. That leaves us with Indonesia and Malaysia. Indonesia, due to its market size is the biggest opportunity; Malaysia has a good blend of low cost and talented entrepreneurs.”
The companies may not necessarily be technology companies, but they could be tech-enabled.
“These may not be tech companies, per se, but they apply technologies to traditional industries and can fundamentally change how the industry works. Good examples are logistics and payment systems industries,” Hussain said.
“These companies target the rapidly growing consumer middle class in the region and create differentiated brands that can engender trust and loyalty in the product,” he added.
The fund is targeted at companies looking for Series A funding and are in the growth stage. These companies have a product, which essentially is fully developed and their business model is already deployed in the market and is generating revenues (not necessarily profitable). It has a team, which is largely formed, but needs capital to scale and can scale quickly post investment.
The fund will invest between US$2 million to US$6 million, and will claim minority stakes in the company – anything between 25 per cent to 40 per cent.
Hussain said that there were many early stage funds in the region. Also, there were numerous late stage investors investing more than US$50 million in the region, but there was a dearth of growth-stage investors. Besides, working in the USA, he realised that many Silicon Valley companies felt that they missed the Asia growth boat. “To make sure they don’t lose the market opportunity in ASEAN, Silicon Valley companies are looking to acquire companies in the region. These companies are not just looking to acquire the intellectual property, but want to acquire local talent and local customer base. We realised that there is a market opportunity in Southeast Asia and these points essentially guided us to come up with the fund,” the Managing Director of ECM said.
The fund may look at large conglomerates too, which need a major realignment in strategy. Elaborating, Hussain said, “There are many owner-driven companies, which are going down because of wrong management decisions. We may look at such companies that need need a realignment in strategy. Also, there are companies that are part of large conglomerates that may be better off as independent companies. We will work with conglomerate to carve out the business.”
He clarified that the conglomerate will still be a shareholder.
The fund has had a look at over 100 companies (including both growth-stage and part of large conglomerates) till now.
The fund is looking for more deal flow from other areas too. “We have good networks in Malaysia and Indonesia. We try to work with early stage investors that are looking for funding for their portfolio companies,” the Founder said.
As a value-add, Hussain said that ECM will provide a hands-on investment approach to companies, assisting them with managerial development, financial controls and strategic development.
“Besides, we have wide range of resources and contacts in Silicon Valley and globally to provide advisers / mentorship, partnerships, sales and even acquisition,” he elaborated.
The fund will be aiming to make an exit within three to five years. “Our deep contacts in Silicon Valley help us to achieve exits outside of the ASEAN region,” Hussain said.
For the record, ECM was founded in 2011 by Abrar Hussain and Arshad Ahmed; and has offices in Silicon Valley (USA) and Kuala Lumpur (Malaysia).