Openspace hits $120m first close on SE Asia growth fund

The full target for the vehicle – known as OSV+ - is $200 million. Openspace raised the same amount for its third venture capital fund, which closed earlier this year. While the VC fund concentrates on Series A and B rounds, OSV+ is positioned to enter at the Series C and D stages.

Existing LPs in the firm’s VC funds account for 75% of the OSV+ first close. They include the US Development Finance Corporation, an Australian superannuation fund, a large European insurance company, and family offices from around the world.

OSV+ has already made three investments: remote patient monitoring and digital therapeutics business Biofourmis, which closed a $100 million Series C in late 2020; Indonesian mobile healthcare platform Halodoc, recipient of an $80 million Series C in April; and FinAccel, operator Indonesia-based digital lending platform Kredivo.

Openspace has not specified the funding round for FinAccel; the most recent investment in AVCJ Research’s records is a $90 million round in late 2019. Since then, the company has received $200 million in debt facilities from Victory Park Capital. On August 2, FinAccel said it would merge with a special purpose acquisition company (SPAC) established by Victory Park at an equity valuation of $2.5 billion.

“Instead of raising larger and larger base funds, it made sense to split them apart in the first cycle because there are different risk profiles attached,” Shane Chesson, co-founder and a partner at Openspace, said of the decision to launch OSV+. “Many LPs love venture but feel it is too risky at the early stage. They prefer mid-stage exposure where the risks are down, valuations are higher, but the path to distributions is faster.”

At the same time, portfolio companies often want to see the lead Series A investor – a role Openspace typically fills – remain on the board and influential within the cap table. The GP also felt that being active in the mid-stages would improve overall coverage, enhancing its credibility and clout when dealing with start-ups, strategics, governments, and other stakeholders.

Jessica Huang Pouleur was recruited last year to lead the OSV+ strategy. She previously spent a decade with Providence Equity Partners, opening the firm’s Singapore office and building out Southeast Asia coverage, before going on to head up strategy, M&A, and business development for The Walt Disney Company in Asia Pacific.

Openspace is best known as the first institutional backer of Indonesia-based ride-hailing and local services behemoth Gojek, which recently merged with local e-commerce platform Tokopedia. It capped out at Gojek’s Series B, but there are other situations where the absence of a growth fund has resulted in paper gains foregone. They include the Biofourmis Series C, where Openspace was only able to take a small part of its pro-rata allocation because OSV+ wasn’t up and running.

“There are five or six portfolio companies where later-stage follow-ons were missed, amounting to about 3x of returns on a pro-rata of about $60 million,” says Pouleur. “We already had a pro-rata allocation to the round, we knew the companies and could see the growth trajectory, we just didn’t have the capital to make those investments.”

OSV+ is likely to complete a fourth investment in the next three months, and up to two more by the end of the year. The fund has a five-year investment horizon, but it should be fully deployed within three years based on the current pace and pipeline opportunities. While there is scope to back new companies, most of the capital will go into follow-ons.

There are strict qualification criteria. OSV+ focuses on mid-stage growth companies with pre-money valuations of at least $150 million and annualized revenue of at least $15 million. It wants market leaders with a strong product-market fit, established senior management teams, and a clear growth trajectory. Typically, these businesses need capital to enter new verticals or geographies.

In addition, priority is given to start-ups that have demonstrated how they can become profitable or have positive unit economics. Of the three investments made so far, Halodoc is the only one that is expected to remain loss-making for an extended period, although all its services are now being monetized. The others are profitable or seen as pushing into profitability.

Pouleur adds that the need for a growth strategy reflects how the Southeast Asia technology ecosystem is evolving. When Openspace was founded in 2014, there was a funding gap in the Series A and B space, but that has been filled by an influx of new participants. Now the gap is in the later stages, although global private equity firms – multi-strategy players and growth equity specialists – Chinese GPs, and strategic investors and corporate venture funds are increasingly prominent.

“We do see more traditional private equity guys trying to play earlier. They want to write $400 million checks, and to get that access, they need to invest earlier than they would have done historically,” she says. “Broader involvement is a positive sign. When you look at the opportunity set, there is still more than enough to go around.”

Growth-stage interest is likely to intensify as liquidity events become more commonplace. FinAccel is the third Southeast Asian unicorn to agree to a SPAC merger, after Grab and PropertyGuru, while Bukalapak is poised to list in Indonesia. Chesson predicts that a wave of start-ups will test Indonesia’s public markets.

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• Topics
• Southeast Asia
• Fundraising
• GPs
• Venture
• Technology
• LPs
• Openspace Ventures
• Fundraising
• TMT