Fund focus: EV Growth fills the gap

Southeast Asia’s growth-stage funding gap has long been a source of frustration for start-ups, and VC investors have plenty of sympathy. Early-stage funds lack partners that can come in and help a company move up to the next level. YJ Capital, the corporate venture arm of Yahoo Japan, is one of many that believes an opportunity is in danger of being overlooked.

“There are a lot of seed and Series A investors, but it’s quite rare to see VC funds focused on Series B or above, even though we expect a lot of internet services-based business models to emerge in the next 10 years,” says Shinichiro Hori, CEO of YJ Capital. “We thought this was the right time to find the next decacorn or unicorn company in the region, and for us to find future business partners in this space.”

Capturing this pent-up appetite for growth capital is the aim of EV Growth, a partnership between YJ, Sinar Mas Digital Ventures (SMDV), and East Ventures that recently closed its debut fund at $200 million. This beat a target set last year of $150 million. 

Commitments came from the likes of SoftBank Group, the parent company of YJ Capital, Temasek Holdings-backed Pavilion Capital, and Indonesia-focused Indies Capital.

For the first fund, the participants aim to keep a tight geographical focus; 90% of the companies backed so far are Indonesian, and EV expects the remaining investments to continue this trend. Each partner is supposed to bring unique strengths: YJ offers business insights and strategic alliances with its affiliates in Japan and the portfolio of its parent SoftBank; SMDV can provide similar tie-ups with Indonesia’s Sinar Mas Group; and East is expected to play a major role in building the deal pipeline.

“One of the fund’s strengths is in sourcing power, and East has a huge network of early-stage companies in the region,” Hori says. “They can deliver some good deals to EV Growth before they introduce them to other VC funds in the region, so that we can make a decision very quickly.” 

IDN Media, a multiplatform media provider based in Indonesia, is one of several portfolio companies that have come to EV Growth through this avenue. Having invested in IDN in 2016 and 2017, East was perfectly positioned to refer the company to EV Growth for its Series C round earlier this year – which the firm led with participation by Japan’s Line Ventures.

IDN is one of 12 investments so far that account for up 40% of the Fund I corpus. EV Growth is currently recalibrating its expectations for the remainder of the vehicle to account for the higher-than-expected demand. 

“I was very surprised at the speed of disbursement – we may finish investing the fund by the end of this year,” explains Hori. “Since our investment momentum is very strong, and we are very confident in the market, I think we will move very quickly and look to raise our next fund starting early next year or even this year.”

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• Topics
• Fundraising
• Southeast Asia
• Technology
• Growth
• Venture
• East Ventures
• Sinar Mas Digital Ventures
• Fundraising
• TMT