Global impact investment firm Capria is doubling down on its efforts to advance local fund managers in South and Southeast Asia. Capria’s goal is to invest in 2-3 funds in Southeast Asia and 1-2 additional funds in India, where it already operates the leading early-stage venture fund Unitus Ventures.
Dave Richards, Capria Co-Founder and Managing Partner, and Kate Loose, Capria Network Manager, recently returned from two weeks in Singapore, Jakarta, and Bangkok where they meet with more than a hundred investors, fund managers, and ecosystem players. They kicked off the trip with an event co-hosted with the International Finance Corporation (IFC) in Singapore which drew 75 key players from across the region to explore ways to collaborate to bring more capital to early and early-growth stage companies in the region.
Dave and Kate summarize a few of their learnings from the trip as well as trends they are seeing in the region.
- Growing opportunity and starting to see more funds forming. Over just the last 5-8 years there has been a big growth with the establishment of 10+ new early stage venture capital funds focusing on Southeast Asia. As the capital markets are getting more formed, this has opened up the opportunity for a more diverse array of players. For example, the market used to be dominated by corporate venture capital which focused on the strategic business interests of the companies and not necessarily on the best entrepreneurs driving the most innovation. There is now a trend towards independently owned and operated investment firms following global best practices and raising capital from global investors. Many of the local and regional corporates and wealthy families are now functioning as sponsors of these funds providing anchor investment commitments and offering access to their business assets for promising portfolio companies.
- Different financial instruments needed by entrepreneurs and being deployed by rising firms. The majority of the early stage funds in the region are venture capital firms, but we are starting to see an increased opportunity for different investment instruments or event a multi-instrument approach. In particular, mezzanine debt finance, venture debt, and early growth private equity are significant opportunities for fund managers and currently have almost no competition which should enable strong returns.
- Rise of impact. To date many firms investing in the region are delivering impact but haven’t necessarily thought of themselves as impact investors. An opportunity that we see is that firms that can successfully deliver impact alongside market-rate financial returns will have a competitive advantage raising capital and attracting entrepreneurs. Some early pioneers in this space are Aavishkaar, Patamar Capital, Insitor, and others.
- New geographical opportunities. Many of the fund managers we met with were based in Singapore investing across the region or based in Jakarta with a largely Indonesian-focused strategy. However, we are also starting to see activity outside of these two centers. Specifically, Bangkok provides an interesting base from which to invest into Cambodia, Laos and Myanmar. Myanmar is the “hottest” new market right now with multiple funds seeking to expand investing there, although it is still very challenging due to lack of regulatory and infrastructure development.
- Entrepreneur support ecosystem is developing rapidly. In order to support this rise in investing firms and successful startups, the entrepreneurial ecosystem is starting to develop. Not only do we see more entrepreneurial led investing firms, people who have entrepreneurial experience and not just financial services backgrounds, but the startup support activity in the region is growing. There are networks such as the Angel Investment Network Indonesia (ANGIN), co-working and innovation hubs such as Spectrum in Singapore and Hubba in Bangkok, and events such as TechinAsia and AVCJ.
We are encouraged by the activity in the region and hopeful that it will continue to develop rapidly. Capria is seeking to develop long-term partnerships with 2-3 SE Asia fund managers over the next 6-12 months. If you know anyone who is launching a first or follow-on fund, considering launching a fund, or has insight into ecosystems supporting early-stage companies, we would welcome the opportunity to connect.