Corporates embrace VC to understand disruption - AVCJ Forum

“We are trying to build out digitization of the corporation. For a big company with 200 subsidiaries it is a considerable effort to make digitization part of our DNA,” said Meliza Rusli, chief of corporate development and strategy at Astra International. “One strategy is to embrace digitization in our investments.”

The local conglomerate notably participated in the latest round of funding for ride-hailing and delivery platform Go-Jek, which closed earlier this year at $1.5 billion, giving the company a post-deal valuation of more than $5 billion. Astra, Indonesia’s leading automotive distributor, contributed $150 million. Djarum Group, which controls Bank Central Asia (BCA) among other assets, also participated.

Astra has an early-stage initiative as well, having teamed up with a local partner to back start-ups in the seed and pre-Series A stages. It doesn’t enter into investments with the expectation of near-term financial returns. Rather, the key question is whether the target company is complementary to one of the conglomerate’s existing divisions and drive synergies.

Philippines-based Ayala Corporation invested in the local business of online fashion retailer Zalora last year with a similar mindset. “If someone is going to be disrupted we would rather be the disrupter,” said Michael Montelibano, head of business development at Ayala. “We invested in Zalora… because we decided the company would disrupt our malls business in the Philippines. We wanted to be part of it, learn from it, and see how we could future proof the malls business.”

Ayala acquired a 43.3% stake in the business, with its subsidiary Ayala Land taking 1.9% and two other Ayala-controlled companies – Globe Telecom’s VC subsidiary Kickstart Ventures and a unit of Bank of the Philippine Islands (BPI) – taking 3.8%. The company thought that it could in turn support Zalora through Ayala Land’s retailer relationships and the payments capabilities of Globe and BPI.

Montelibano is expected to deliver financial upside from these investments, which may include synergies. “I have to report to my CFO and battle for capital,” he said. “Our energy business is growing leaps and bounds, so I have to defend our investments in VC – and you have to wait for a return. These companies might not be profitable when we invest but ultimately we need a financial return.”

It remains to be seen whether Southeast Asian corporates have the staying power to become a consistent part of the VC ecosystem. In recent years, there has been a flurry of interest from Indonesian groups – acting in a corporate capacity or through family offices – but industry participants note that some of these companies are now slowing down. For many groups across the region, though, there is a recognition that they need to participate in technology-driven change.

“Real estate is pretty traditional, but we have come to realize that start-ups have gone from retail and entertainment to the domain sector for enterprise productivity,” said Yoke Kee Ang, executive vice president in the group managing director’s office at Malaysia’s Mah Sing Group. “As a real estate player with a lot of domain knowledge we’re going to leverage that and get technology companies to work with us.”

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• Topics
• Southeast Asia
• Technology
• Early-stage
• Expansion
• Indonesia
• AVCJ Events
• TMT
• Venture
• Ayala Corporation
• Astra International