Although headquartered in California with a global focus, Fenox Venture Capital is better known for its significant number of investments in Southeast Asia. Since its inception in 2011, the fund has invested in 115 companies globally, a significant chunk of which are in Southeast Asia. Its portfolio firms include Singapore’s 99.co and Indonesia’s Hijup.com. The firm also has nearly 13 exits to its name. It is currently working on a few more deals in Southeast Asia.
Unlike other VCs in the market, Fenox is mostly focussing on corporate partnerships. So far, it has partnered with around 50 corporates, and runs and manages 17 funds for them.
e27 recently had a telephonic conversation with Fenox’s Founding Partner and CEO Anis Uzzaman, who is based in California. In this freewheeling interview, he talked about the fund’s objectives, its portfolio companies, new investments, and the Asian startup ecosystem.
Edited excerpts are below:
Since launch, Fenox has invested more than 100 companies. How do you pick companies for investments? What are the key criteria that you look for in them?
So far, we have invested in more than 115 companies. We do investments in four different regions.
1- Europe and pan America, mainly US Silicon Valley: It includes Israel as well. We do invest mainly in companies working in Artificial Intelligence, Robotics, AI, Big Data, IoT, AR/VR, and blockchain. For investment in these regions, we basically look at the startups’ technology and IP achievements. We check how many patents they have to their name. We also look into the uniqueness of their technology. We mainly invest in the Series A, Series A-plus, and Series B stages.
2- East Asia, mainly Japan, South Korea, China and Taiwan: When we invest in companies in this geography, we mainly look at their global growth potential. We see if these startups have a goal to grow globally where Fenox can play a major role. We check their track record. Here, we mainly invest in Series C and Series D level of companies.
3-Southeast Asia: This mainly comprises Indonesia, Singapore, Malaysia, Vietnam, Thailand and the Philippines. In this part of Asia, we mainly invest in Seed and Series A stages. We pretty much invest in early-stage startups. E-commerce and B2C companies are our main focuses.
4- Region comprising Bangladesh, India, Pakistan and Myanmar: In this part of the world, we invest in Series B stages.
Do you basically invest in companies attacking global markets?
Well, these could be companies attacking global markets. As a global VC, what we can do is to help our portfolio companies expand globally. We have a lot of American companies who want to go to Asia after taking capital from us. When we invest in a company, say, in Indonesia, we also want them to have a footprint in Silicon Valley. Our job is to assist them expand globally using our global network.
Of the total investments you have made so far, a major chunk are in Indonesia. Why so? Is it because you have a special affinity to this market? Or are there any other reasons?
If you look at Southeast Asia, the region has about 600 million population. Among various countries in the region, Indonesia has the largest population with about 260 million people. When we opened our Asian headquarters in Jakarta, its huge population played a decisive role.
The government is also putting a lot of time and support in us, and there is a lot of infrastructure help coming from the government. They are also encouraging us to bring training programme and mentoring to this region.
You have invested across categories, including healthteach, AI, IoT, robotics, Big Data, VR, AR, and fintech. Which one of these categories have the potential to change the landscape in emerging markets like Indonesia and why?
We have talked about region 1, where we invest mainly in AI, Big Data, IoT, etc. If you ask me if these technologies can change the landscape in Indonesia, the answer is absolutely yes. AI can become big in markets like Indonesia, India, Bangladesh, Pakistan and Southeast Asia. This is software and not hardware, and software can be developed in any place.
Nowadays, every one starts with IoT and Big Data. They are collecting massive data and they now need to learn how to use this data for the future, that is AI. You can see a lot of tech applications in Southeast Asia in the AI space.
People in the region also understand these technologies very well. In these market, IoT, Big Data etc are very popular now.
In Asia, the population is very big. But when it comes to robotics, we are still lagging behind countries like the US. No e-commerce firms in Asia have started using robotics in warehouses. What could be the reasons? If you look at developed markets, Amazon is already using robotics in warehouses…
You will be surprised to know that companies like Amazon or Alibaba started deploying robotics only recently. Robotics sounds like a very easy space, but the the fact is that years ago, these companies were struggling to deploy robotics at warehouses.
I would say robotics will take some more years to make its way into Asia. It is not that we are not deploying robotics; it has made its way into the US and China and it will make its way into India and Indonesia, too.
Another fact is that no Alibaba or Amazon is using robots in their warehouses in Indonesia or India. As more people start using internet for shopping, these companies will be forced to make their warehouses bigger and bigger, and that will enforce and justify the costs of the use of robots in warehouses.
While you have backed 100-plus companies, you have not invested in unicorns such as Tokopedia, Go-jek and Grab. Do you regret not investing in these firms?
As an investor, when a company that you have not invested becomes a unicorn, you would think “I wish I could invest in it”. As a matter of fact, we were not there when Go-Jek started.
You will be surprised that we were about to invest in Tokopedia, but my investor partners did not force me to go and make that investments, because at times as an investor, you need to take into account several factors. Of course, I repent this decision now that I could not be a part of Tokopedia or Go-jek, but at the same time I feel happy I have ended up investing in some of the firms who have done really well.
Had Grab and Tokopedia approached you for investments?
Actually, Go-jek did not approach us, but we had approached Tokopedia and had discussions with its founder William Tanuwijaya in its early stages, but things didn’t work out. We had an opportunity to invest in them when they started in 2012, but I didn’t get the support from my investors.
Any new investments in pipeline?
As you know, in Indonesia, we also run a startup incubator called GnB Accelerator. We grow about two batches every year, and 12-14 companies graduate each year. So far, close to 20 companies graduated from GnB. We have invested in all these firms.
On an average, we invest in about 15-20 companies in Southeast Asia each year. We are in the process of making a few more deals now, many of them are follow-up. Some of the companies who took seed money from us are going for Series A.
You had plans to set up an India-focussed fund last year and hired Venktesh Shukla as general partner. But it didn’t work out as Shukla left within just a month of joining. Any new updates on this fund?
We were planning to launch a US$50 million fund last year and hired Venktesh Shukla as general partner. However, we had to put the plans on hold after Shukla left us owing to some previous commitments. We are now reviving the plans and are on the lookout for a new partner, who has great knowledge of the local market.
We want to start with a strong team and a General Partner who can help Indian companies grow. We are waiting for the right capable partner. It is sad it is taking a bit of time. Hopefully, we will launch it in 2018.
The psychology is that we want to be in a region we understand very well. The general partner has preferably to be from India, or someone who understands the market.
As you know, India is a major startup market and all major global VCs have significant operations in India already. Don’t you think you are a late comer?
As I mentioned earlier, I personally take care of the current operations of Fenox. In India, we don’t want to get started in an incomplete fashion. Of course, we can start with our current manpower, but we want a strong team and I think a very good general partner is important to start the fund.
We have a lot of pressure from investors. They have already committed more than US$20 million to this fund, and are waiting for us to find the right capable partner.
China is another super power where you don’t have a presence. Are you planning to partner with big corporates like Tencent to launch a domestic fund?
I just want to give you the news that we have just received the licence to open up a startup incubator in China. The incubator will be located in Chengdu. We have also received funding from the Chinese government for the programme. We are also opening a new office which will help us expand our footprints in China.”
The incubator, which is yet to be named, will follow the same working style adopted by GnB Accelerator. When a company joins our programme, we give them US$50,000 funding in exchange for a 10 per cent equity. We train them for a few months by trainers and mentors from Silicon Valley and local markets. We will follow the same model in China as well.
When the startups graduate, Fenox will also help them connect with new VCs and help them raise the next round of funding by conducting a demo day.
We also run an event called Startup Worldcup. We are running it in China and India. It is helping is expand our footprints in these markets. Last year we held the worldcup it in 12 countries, and this year we will do it in 30 countries.
How do your domestic funds work? Is it that you invest from your main fund? Or do you form a partnership with local VCs?
As of now, most of of our funds targeted towards different regions are based in the US. One thing I need to highlight is that 100 per cent of Fenox’s current investors are large corporates. We have 25 large corporates from around the world who are investors at Fenox. They all want the fund to be located in in the US.
But as we want to be more and more local, we are trying to shift our focus to become local. We are starting a fund in Tokyo right now. We have invested in many firms in Indonesia and we are now planning to form a fund for India.
You also recently partnered with ASUS to launch a US$50 million fund. How is the fund progressing
We are very close to making our first investment from this fund. One of the many unique characteristics of Fenox is that we manage corporates funds around the world. ASUS gave us US$50 million to invest in AI/VR/robotics/IoT. They want to invest in India, the US, and Japan. We also manage fund for other big corporations. We manage a US$20 million fund for a big manufacturing company in Taiwan as well.
Through this funds, we create a partnership between startups and the corporates. We are the middleman. We currently manage 16 different funds in parallel.
Do you have any exits in your kitty?
As of today, we have made 13 exits, including nine M&As and four IPOs.
Many VCs and startup I regularly talk to tell me that there’s Series B and C crunch in Asia. What do you think? If yes, how can we resolve it?
They may be right, that there is a shortage of Series B and C in Asia. There is lot of interest to invest in Series A stages, but when it comes to Series B and C, you need institutional investors or large corporations to come in and co-invest.
If you look at the current trends in the world, large corporates now realise that without participating in innovation, they cannot sustain in the market. Their traditional R&D people cannot help them remain innovative 100 per cent. So, they are looking to invest in innovative startups. This is why more and more corporates in China and Japan are coming out to invest in startups.
This is why Fenox is important in the market. We run funds for very large corporations. These large firms partner with traditional VCs, so they can participate in innovation. They don’t want to remain just corporates anymore, and so they are asking professionals like us to help them. Corporates are now coming out to help Series B and C companies to deal with more mature products. As more and more corporates come out and partner with traditional VCs, we can successfully address the shortage of Series B and C investments.
What are your view on cryptocurrencies and ICOs? Do you plan to invest in companies operating in this segments? Do you encourage companies to raise funds through ICO?
Look at our portfolio, we have invested in some of the world’s top blockchain companies.
The future of blockchain and cryptocurreny is very bright, and we will continue to invest in this area for sure.
As for ICOs, I will not encourage companies to raise funds through ICO, because in most countries, there is no formal structure for this. There are lots of risks involved. China and South Korea have already banned ICO, and the US government is very very serious and super careful about ICOs.
You have authored a book Startup Bible – The Silicon Valley Way of Developing Success. Are you currently working on any other book?
I wrote the book in different names in different countries. In Indonesia, it is known as StartupPedia: How to set up technology startup, and in Japan it is called Startup Bible.
I am trying to find some time to write more books. I want to write about critical problems faced by startups in different stages of their life.