According to Harvard Business School, 75% of venture-backed startups fail. Startups have one of the hardest possible business tasks ahead of them -- every single one of them is attempting to bring a new product to market. Perhaps that is why failure seems to be a critically important part of the startup ecosystem. Despite the risks involved, Asia’s moneyed families, who are rising in the ranks of the world’s richest people with assets of more than $17 trillion, are showing an increased interest in the region’s red-hot tech scene.
More specifically in Southeast Asia, where an assortment of extremely wealthy families have dominated the investment landscape for years, tech startups are garnering a lot of attention lately as more digitally-savvy heirs take control of their family fortunes. The expectation is that these new investments will generate higher returns and revamp corporations that are several generations old.
According to Singapore-based Investor Ozi Amanat who has been recruiting some of Asia’s richest families to invest in K2 Global, the Tech VC firm he founded in 2015, tech is the future and wealthy families along with their next generation are waking up to this certainty. “It’s evolutionary and inevitable,” says Amanat, who believes these families are embracing tech trends and disruptive technologies in order for their businesses to survive and thrive in the years to come.
Amanat, who grew up in the United States, thinks Western families rely mainly on relationships, connections and experts in certain fields to find breakthrough opportunities, while Asian investors tend to depend on their own internal staff. They prefer a hands-on approach and a controlling stake in the businesses they invest in. Both approaches work well for general investing but for tech investing specifically, Asian families are realizing the merits of building long-term relationships with the VC ecosystem.
“I founded K2 Global with the vision to be a blue-chip VC firm with a long-term view. The fund is set up with a seven-year lifespan. K2’s recent backing from the Singapore government of up to S$100m ($75 million) to co-invest in early-stage tech startups is an eight-year partnership. So, we invest with the long-term in mind and I think this appeals to Asian investors. With that said, one of K2’s investments was in Spotify and we returned capital from that investment within two to three years.”
Indeed, the music-streaming company’s strong listing gave the firm well over 300% returns on this investment. Amanat is bullish about Asia and in additions to the U.S.-based tech unicorns he has already invested in, such as Uber Technologies, Spotify, Magic Leap, Airbnb, Twilio and Palantir, he has backed Asia-based startups such as Paytm and Paktor, with an eye on many other emerging startups in the local ecosystem.
Similarly, Singapore-based tycoon Satveer Singh Thakral is thrusting his century-old family business into tech. Started in Bangkok as a textile trading operation in 1905, the business is now a conglomerate spanning 35 countries and employing over 15,000 people worldwide, focused on retail, real estate, logistics and hospitality. Thakral started the Singapore Angel Network with his father through which his family has invested in about 100 tech startups.
Kuala Lumpur-based tech entrepreneur Patrick Grove, co-founder and CEO of the Catcha Group, which controls new media, online classifieds and e-commerce businesses is one of the largest investors in the digital sector in emerging markets and has taken five tech startups to IPO including iProperty Group, Rev Asia, iCar Asia, iBuy Group and Frontier Digital Ventures. Grove predicts a massive shift and increase in Asian investors in tech over the next 24 months.
Meanwhile, Hong Kong’s 35-year-old Matthew Tai has been transferring part of his family's fortune, amassed by his father and uncles in real estate, into a series of tech start-ups. "My family's traditional business was about development of land," Mr Tai said. "But that's history. The new world is the cyber world." About 15% of Tai’s S$95 million ($70 million) capital is in tech investments, compared with zero two years ago.
Some of the key players already in the game are $93 billion SoftBank Vision Fund, state-owned Chinese Tencent Holdings, Alibaba, Singapore-based GIC and Temasek Holdings. The latter recently invested in the Indonesian ride-hailing startup Go-Jek, a rival of Uber and Grab, as part of a $1.2 billion fund-raising round. Temasek's recent tech startup investments have also included online fashion retailer Poshmark, payments firm Bill.com and augmented-reality headset developer Magic Leap.
The fresh influx of Asian wealth promises to increase valuations for the most promising tech firms. Even if today it is estimated that Asian investors are still only putting relatively small amounts of their capital into tech and mostly at the earliest stages, Southeast Asian startups hit yet another record in 2017. The region’s startups pulled in $7.86 billion from investors last year, an over threefold rise from 2016’s $2.52 billion, according to Tech in Asia’s data.
Those startups that do thrive, surge in valuation quite dramatically, making it essential to pick a potential winner early. “To pick the right investments, I always look at the founders and the founding team first and then at the business. In the early days of a company so much depends on the velocity and the visceral connection I feel to the founders and the business,” shared Amanat. And if Asian tycoons are currently only investing a fraction of their family’s hard-earned capital into tech, then surely as technology keeps evolving and disrupting our lives, this amount has nowhere to go but up.
