Nova Founders Capital is a fintech-focussed VC fund founded in 2012 that recently opened a second office in Hong Kong, cementing the financial hub as its headquarters both on paper and in practice. While Nova still has around 200 people in Malaysia and 120 in the Philippines, the 30 or so now stationed in Hong Kong rank amongst its most senior. It has 11 offices globally.
Recently raising a US$50 million equity injection from Richard Li, son of renowned businessman Li Ka-Shing, Nova is now in ‘active expansion mode’, looking to invest in around 10 startups in Southeast Asia in 2015 and committing between US$1 million to US$5 million per round — but not ruling out larger investments of up to US$100 million.
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“We haven’t been too vocal over the last three years, but that’s changing a bit. We are an Internet investment holding and have a two-tier strategy. There are certain business models and topics that we are excited about, especially in the financial services sector — everything that touches banks and insurances,” Raphael Strauch, Founding Partner, Nova Founders Capital told e27.
Last year Nova made five or six investments worth a total of about US$20 million, the largest round being worth US$9 million.
“We’re global in everything that we do, but have the strongest footprint in Asia because we got started here. If you look at markets in Asia, it’s sometimes difficult to find great investment opportunities, either because the teams in terms of quality are not on par or because the business models we’re excited about haven’t been started yet — in which case we would start them from scratch,” he added.
German-born Strauch, who was previously one of the three global partners at Rocket Internet, has built over 30 companies in the past couple of years. He, along with other partners now at Nova, together built the largest portion of Rocket’s existing e-commerce portfolio.
While Hong Kong was always the VC’s headquarter from a legal perspective, it wasn’t traditionally its most important office in terms of where its most senior people sat. Now, with a growing focus on fintech, it makes most sense for the fund to really put roots down in the city. Ultimately, 2015 will see the Hong Kong operations grow and truly become its Asia headquarters.
“The whole region is not very well developed, so it depends how you look at it,” Strauch said in response to a perceived lack of development in Hong Kong as a startup location. “Do you look at it from a VC or entrepreneur point of view? As a typical VC looking to invest in a company and then turn around and focus on something else… it’s very difficult — simply because of the quality of the teams you find here. It’s very hard to find great teams.”
Nova intends to be much more active on the company building side of investing due to this perceived shortcoming in finding ‘great teams’. More focus will also be given to Europe rather than just Southeast Asia in 2015.
Advantages in Hong Kong include good access to capital to fuel growth, as well as an educated and tech-savvy population resulting in good early traction with locally-offered products. The fantastic infrastructure also helps. On the downside, Hong Kong is a small market of just eight million, which will always be a limiting factor.
“Indonesia has a surprisingly good and active startup scene, and it’s a relatively local market. It has investment opportunities much better than in other parts of Southeast Asia. Whenever we touch Indonesia, we also get great traction, so I think it’s a great market to start a business out of or to invest in,” Strauch said.
“China we don’t touch. We have a non-China strategy. I think it’s a great market, but it’s also very local and I’m humble enough to understand that there are other people who understand China better. I don’t believe I’m one of the few foreigners who are going to crack China. Therefore we stay out of it. Southeast Asia is such a big opportunity with little competition. Why would I go into [China] when it’s much more competitive?” he added.
Nova is most excited about Thailand and Indonesia in 2015. Emerging markets like Myanmar and Cambodia have some good opportunities, but are simply not big enough in terms of GDP, nor ripe enough in their Internet development, to lure Nova just yet.
A key learning from 2014 has been that success is often not a business model or market problem, but an execution game. It’s all about the people, and Nova is extremely focussed on finding top-notch teams. It sees that as even more important in Southeast Asia than in other parts of the world.
With two significant Series A rounds by Hong Kong online lending startups making headlines — Advanced Merchant Payments’ US$5 million at the end of November and WeLab’s US$20 million this week — Nova also plans to ‘get exposure’ to the lending space going forward. The banking and insurance space in Asia also excites Nova due to a lack of innovation in recent years. It’s ripe for disruption.
“Ultimately we are very approachable,” Strauch said, aiming his comment at interested startups. “Everything that touches banks and insurances, more on the B2C than the B2B side… Whoever sends us an email usually gets a response in about 24 hours. We’re very upfront whether we’re interested or not. Feedback always comes right away.”
Nova wants to fill the gap that exists for startups looking to raise in excess of the US$250,000 figure, with there still not being enough funding for Series A stage rounds in the region.
“The reason why we would never invest in 30 or 40 things in a given year is because we want to add value operationally to whatever we do. It’s not a must, but we would like to share our expertise and bring to the table all the learnings that we have from the past 30 companies we’ve started. That’s something not many other investors have and it’s a big differentiating factor,” Strauch concluded.