Capsquare eyes early-stage Indonesia

Competition is also intense, with corporate strategic investors, hedge funds and large family-owned conglomerates all looking for deals.

In such circumstances, what strategy should a local GP pursue? For Capsquare Asia Partners the answer is to seek out early-stage opportunities. The goal is to improve transparency, governance and management so that these companies are suitable for the mid-market being targeted by so many existing and first-time managers.

"We target focus on mid-market companies, looking to deploy $10-15 million per transaction, mostly for control positions, and we might exit to private equity firms or trade buyers," says a source familiar with Capsquare. "Many GPs are looking to deploy $20 million or more and they are usually getting minority stakes and no control."

Investors appear suitably convinced by the Capsquare approach. The firm has reached a first close on its debut fund, having accumulated more than two thirds of the target amount. It expects to complete fundraising - around $75 million from LPs plus $8 million from the GP - in the fourth quarter of 2012 and perhaps as soon as late October.

The target pales when placed against the two most recent Indonesia funds: Northstar Pacific Partners raised $820 million for its third vehicle in summer 2011 and Saratoga Capital closed its second fund last month at $600 million. However, there are at least five other GPs in the market targeting debut funds of $200 million and upwards to invest in Indonesia and Southeast Asia, and none has reached a first close.

Capsquare signed up an anchor investor in early 2012 - an Asian fund-of-funds - and this helped generate interest among other LPs. The investor base includes endowments, fund-of-funds, pension funds and family offices. North America accounts for the majority of capital raised so far.

Capsquare's leadership team consists of Ridwan Budijono and Christian Sugiarto, formerly of Headland Capital Partners and Northstar, respectively. The full complement of 15 professionals has been in place since late 2008. Among them are people with experience in Capsquare's target industries: FMCG, retail, education and healthcare.

The private equity firm previously invested in six companies on a deal-by-deal basis, sourcing capital from the founders' industry and personal networks. Current assets under management come to around $30 million. "Having a track record of investment is important because Indonesia is an opaque market," the source says. "There has been a lot of publicity about how investors have flocked to the market, but now we are seeing a bit of outflow. Indonesia is not easy to navigate."

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• Topics
• Southeast Asia
• Fundraising
• Venture
• Indonesia
• Fundraising
• Venture