Speaking in Singapore at the AVCJ Private Equity & Venture Forum 2013, Patrick Grove, Group CEO of and Founder of Catcha Group, presented the challenges and shortcomings of the region’s venture capital industry during his keynote speech on the closing day of the Forum.
Addressing an audience of over 250 fund managers, leading private equity GPs, LPs and advisors, Grove’s keynote speech, entitled The State of Venture Capital in ASEAN: The Good, The Bad and the Future, drew attention to the gap in ASEAN venture capital and how it has been unable to meet the demands and development in the region, particularly when compared to that of more mature markets such as the US and Europe.
“In June, ASEAN overtook the US for number of Internet users; by the end of July this year, ASEAN will over take the US for number of 3G connections; and in 7 years, it is predicted that ASEAN’s middle class will be bigger than that of the US,” commented Grove. “Already the Top 3 cities globally for social media mobile usage are Bangkok, Manila and Jakarta – all located in ASEAN. The upshot: the ASEAN market is on track to become the same size as US.”
A major focus of Grove’s speech was the growth of online business in the region, both online and through mobile. He noted that while the size of this sector in ASEAN is set to overtake that of the US within a few short years, there is still a huge funding gap.
“The US has over 1,000 VCs while ASEAN, a region covering ten nations including Singapore and Malaysia, where my company is headquartered, has in the region of 20,” he added. “Even compared with our Asian neighbours ASEAN is lagging behind. China has around 600 VC funds; India has 400. The ASEAN number reflects a significant lack of support given the projections for the regions.”
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Patrick Grove is co-founder, Group CEO and major shareholder of Catcha Group, an international investment group that controls numerous companies involved in media, new media, e-commerce and entertainment and holds 50 other private investments in the online space. It has successfully completed three separate IPOs to date for different core businesses.
The funding gap in the post seed stage is also echoed by Chua Kee Lock, the Chief Executive Officer of Vertex Venture Holdings, a Temasek Holdings Pte unit. The venture capital firm focuses on seed stage and series A investments in startup firms, with a focus on Asia and Europe. To date, Vertex has invested in more than 350 companies since its inception in 1988.
“Singapore has solved the problem of seed-stage incubation,” Chua said in an interview with Bloomberg Businessweek on cash gaps in Singapore for startups, “However, they need to be prepared to give the big money. When the business idea looks interesting, somebody needs to give the big money, and that’s the issue here.”
While Singapore has managed to plug the gap in the seed stage through government grants as well as the technology incubation scheme under the National Research Foundation (NRF), there is a huge focus now what happens next.
The TIS comes under the umbrella of the National Framework for Innovation & Enterprise (NFIE), which was formulated in 2008 with a S$360 million (US$280 million) budget to advance R&D-based innovation in Singapore with a goal for commercialization. Under the TIS, the NRF will co-invest with the chosen technology incubators in Singapore-based high-tech start-ups. Incubators have the option to buy out NRF’s equity share within 3 years of investment. To date, there are 14 approved TIS incubators on the NRF list.
While we have heard a lot of investments made by these 14 incubators, there are not a lot of news on follow up investments. Are there enough venture capital firms to bridge the post seed stage investments? Or do scaling startups need to look abroad for funding opportunities?
Organized by the National Research Foundation under the Prime Minister Office, Techventure conference will feature key investors such as Kevin Hale, partner at Y Combinator, Mr Chua Kee Lock, CEO of Vertex Management, Lim Kuo Yi, CEO of Infocomm Investments and many more to discuss about the state of investments in Asia.