Q&A: Vulcan Capital's Tommy Teo

Q: Can you provide some background on Vulcan Capital?

A: We are an investment arm of Vulcan Inc that focuses on generating long-term value across a diverse portfolio of industries and asset classes from early-stage venture to public equities, fixed income, and real estate. Here in Singapore, M.J. Yu [a former partner at Ethos Partners] and I will focus exclusively on early-stage VC. We’re both Singaporean with several years each of private equity, venture, and technology investment experience. We’ll be making sector-agnostic investments at the seed to Series B-stages with check sizes of $1-10 million. In this initial phase, we’re deploying $100 million into Southeast Asia.

Q: How is the capital organized?

A: There is a broad set of companies and assets housed under Vulcan Inc as a foundation, including Vulcan Capital which operates as a family office with an evergreen pool of capital and a single LP. We draw capital as and when deals are done, but on the deployment side, we act like any other VC. One differentiating factor, however, is that we don’t have typical VC investment, harvest or exit periods. We think about exits like any VC, but we’re looking for companies that we can invest in across multiple stages. 

Q: What is the role of philanthropy in your investment approach?

A: We are focused entirely on performance-driven investment. Paul Allen set up Vulcan Capital to be benchmarked against its peers in financial terms. But those returns are dedicated to fund philanthropic activities. Basically, Vulcan Capital makes the money, and the rest of the Vulcan Inc organization determines how to deploy that into our philanthropic initiatives. There is a very clearly defined set of roles. It’s also a very distinctive mission in terms of Southeast Asia. We think we are probably the only platform of our kind that directs returns to philanthropy in a very targeted way. That’s a key part of our pitch that will set us apart from a lot of other funds in the region. 

Q: What is your impression of the rising international competition in Southeast Asia?

A: We are excited by the growth and very heartened to see more capital and more players come in. That continues to validate what we see as the underlying drivers of a very long runway ahead of us as far as start-ups are concerned. Everyone recognizes that we’re still in the early innings here, and early-stage investing is not a zero-sum game. Founders are cognizant that they need to build out their networks and cap tables in a way that will help them push their companies forward. That will foster a spirit among investors of being open to what companies need at any given stage of development. So, we’d like to see even more capital come into the region. 

Q: Why establish a physical presence?

A: If you’re going to be involved in early-stage direct investment, then you need boots on the ground. You need a local team to be able to deploy effectively, whether it’s at the end point of investment, during a holding period, or even at exit. The initiative to establish an office in Singapore had been in the works for the past three years. This is Vulcan’s first international office, so we wanted to spend a lot of time making sure that we understood what the right locations were. It was a major move and had to be done in a measured way.

Q: What were the considerations?

A: When you’re committing to a region, you’re looking at a 10 to 15-year mandate at the very minimum. It’s a commitment to our employees on the ground, the communities we’re investing into, and most importantly, the companies that we back. It came down to two cities and Singapore was ultimately chosen for a variety of reasons. It’s a stable environment, it attracts capital and talent globally, and it has great governance infrastructure, especially in the early-stage space. It’s a natural gateway for investing into Southeast Asia.  

Q: How would you describe the opportunity set in the region?

A: There are several macro drivers that attracted Vulcan to Southeast Asia, including growth in technology use and the start-up environment. An ecosystem has emerged across all the major cities of the region in the past five years. You’re seeing a new class of unicorns and other large companies, as well as a strong group of young companies falling into a second wave. 

Q: What has been the progress so far?

A: We’re basically at day one here in Singapore and excited to get operations going. We’ve had a steady and healthy pipeline of referrals, and we’ve talked about collaborating with fellow VCs and other stakeholders, including companies that have come to us from our personal networks. M.J. and I had been engaging with the community in Southeast Asia for quite some time, so that has helped. We’ve evaluated some of the recent referrals, but we’re in no rush to deploy. We want to make sure we set the bar high. That said, we expect to make maybe a couple of investments by the end of the year. 

Q: Have you seen any patterns developing?

A: The pipeline tends to follow the activities in the market. We’ve seen that consumer internet is a huge category, and that is playing off the digital native demographic. What’s happening now is that these digital natives are bringing out a new class of enterprise solutions platforms. So, as far as end-customers are concerned, the companies themselves are also becoming more digitally native. That will lend to an interesting next phase for this market.  

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• Topics
• Southeast Asia
• GPs
• Technology
• Vulcan Capital
• Singapore
• TMT