Malaysia's Vynn achieves first close on second VC fund

“A lot of the family offices that we secured as LPs [in Fund I] were mainly looking at VC as an asset class to invest for financial returns. But as these LPs have matured, they are looking at how they can derive business value on top of the financial returns,” said Victor Chua, a managing partner at Vynn (pictured), who launched the firm in 2018.

“The current fund seems to be able to attract more strategic LPs simply because the corporates and family offices in Southeast Asia are getting more mature and taking more risks in looking at new areas of business.”

Fund II launched about 12 months ago with a target of USD 30m. Chua expects to take another 12-18 months to reach a final close. Most of the capital to date has come from outside Malaysia.

Corporates and other strategic investors represent about 70% of committed and pending LP commitments to the new fund. Chua added that most interest has come from actors in supply chain-related industries. He also noted that strategic investors were often attracted to the fund’s small size because it gave them more meaningful exposure to the portfolio in relative terms.

Fund I closed on less than USD 30m in 2021, falling short of the USD 40m target. This was blamed on pandemic-related pressures. It is hoped that Fund II will represent a step up in fund size despite the conservative headline number.

There are several re-ups from Fund I, which was anchored by government tech investor Mavcap, although participating investors have not been identified. Commitments from growth equity investor AEI Capital, industrials-focused conglomerate Sime Darby, and financial technology developer Wide Technologies Indonesia were confirmed last month.

Vynn has honed an expansive approach to specialisation since the first vintage, exploiting the overlap between mobility, logistics, travel, and fast-moving consumer goods to be at once diversified and thematic. 

Its main proof-of-concept to date is a pending IPO from Malaysia-based and regionally active used car trading business Carsome. The company has raised more than USD 600m from private investors and was valued at USD 1.7bn on closing a USD 290m Series E in early 2022. Last June, it raised a bridge round of undisclosed size from existing investors and pre-IPO debt specialist Evolution X.

Carsome’s backers include Asia Partners, whose core value proposition is helping companies list in the US, and 65 Equity Partners, a division of Temasek Holdings that invests on condition that the target company eventually lists on the Singapore Exchange. A dual IPO was expected in 2022 at a valuation of USD 2bn but it was postponed due to market conditions.

“We are preparing the company to be IPO-ready. Over the last couple of years, we have gotten a Big Four auditor, set up committees, and more recently announced our first independent director,” Carsome CEO Eric Cheng said at a press briefing last month, adding that the company was on track to be profitable within two months.

“The plan for us is to see when the market is ready for an IPO for us. In the meantime, the most crucial thing is how do we make sure that in terms of the operating metrics and financial metrics, we look attractive to the market, so when there is a window of opportunity, we can go pretty quickly.”

Vynn has yet to make any investments from Fund II, but automotive is prominent in the deal pipeline as well as in the LP base. This includes electric vehicles (EVs) in both two-wheel and four-wheel formats. Chua, who is on the Carsome board, noted that Vynn was interested in the software and upstream manufacturing aspects of the EV space.

“From a portfolio management and value-adding angle, it’s far better for companies to know that their investors are able to understand their industry and are able to bring in strategic partners and clients,” he said. “[A thematic investment approach] allows GPs to become quasi-operators. We actually make the effort to help with business development and figure out new product models.”

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• Topics
• Southeast Asia
• Fundraising
• Venture
• GPs
• Malaysia
• Vynn Capital
• Travel
• Logistics
• Consumer
• Transportation
• automobiles