InnoVen sees potential in maturing Southeast Asian entrepreneurs

"It's been a pleasant surprise for me that the founding and management teams are so much stronger than they have been in the past. And a lot of them have startup experience," said Chao, who joined InnoVen not long after its acquisition by Temasek and the subsequent purchase of a 50% stake by UOB.

InnoVen has just completed its first investment in the region, having agreed to provide a total of $5 million in loans to Malaysia-based gym membership app KFit and Thai fashion retailer Pomelo. Both companies intend to use the loans to develop their businesses in the region.

KFit launched in May 2015 with an undisclosed amount of seed funding. It later raised a $3.25 million round in July led by Sequoia Capital, followed by a $12 million Series A round in January led by Venturra Capital. Pomelo was founded in 2014; its backers include Jungle Ventures, which led a $1.6 million pre-Series A round the same year, 500 Startups, Fenox Ventures, and Queens Bridge Ventures.

Both companies were sourced through InnoVen's connections with their prior investors, Chao said. The firm plans to follow a similar strategy for future Southeast Asia investments, picking the most promising portfolio companies from regional VC funds rather than pursuing a specific sector focus itself. InnoVen believes there are many entrepreneurs in the region with promising business plans that need capital, but are unwilling to dilute their equity with further fundraising rounds and unable to source short-term funding from traditional sources.

"One of the things I've noticed in Southeast Asia is that traditional banks aren't addressing this market," he added. "A lot of startups have come to us saying we've tried the traditional banks, and they just won't lend to us, given that we're not profitable and we can't get personal guarantees from everyone on the board. So the banks don't understand this segment."

Part of the attraction of Southeast Asia's entrepreneurs for InnoVen is their forward-looking nature. The firm believes companies that look to reach out beyond their local base make better investment prospects.

"We've seen a lot of companies be more regional in nature, and I don't think people understand how difficult that is," Chao said. "Southeast Asia's not as homogeneous as other markets, and it's just much more difficult to operate in several different regions at once. So I've also been impressed that founding and management teams are looking at building, not just a one-city presence, but really looking to be regional from day one, if not global."

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• Topics
• Southeast Asia
• Technology
• Consumer
• Expansion
• Mezzanine
• Malaysia
• Thailand