Fund focus: Vertex pumps up in SE Asia, India

Vertex Ventures, the VC arm of Singapore's Temasek Holdings, understands the local touch required in early-stage investment and the detailed, ground-level work that goes with addressing emerging business segments in complex jurisdictions. But that doesn't stop it from addressing Southeast Asia and India – a region of two billion people – as one contiguous target. 

To some extent, this is about synergies between the two subregions. For example, Instarem, a portfolio standout focused on digital payments, is based in Singapore but gets 60% of its revenue from India. But more broadly, there is a sense that as polylingual assemblages of variously developed states, Southeast Asia and India are modernizing in comparable strides, especially in terms of technology. 

"Regardless of how the rest of the economies are doing in Southeast Asia and India, the digital economy itself is growing quite significantly," says Ben Mathias, a managing director at Vertex. "It's growing at about 40-50% per year, depending on which country you look at, and that's across the board. We're seeing growth across smart phones, e-commerce, ride-sharing, the gig economy, and direct-to-consumer brands."

Vertex has leveraged this momentum with a $305 million final close on its fourth Southeast Asia-India fund, beating a $230 million target. Almost all Fund III LPs re-upped; they were joined by several new institutional investors, including a sovereign wealth fund. Investments are expected to follow the historical strategy: early-stage, consumer internet, enterprise and financial technology, and a rough 70-30 allocation split for Southeast Asia and India.

There will be a few new twists this time around, however. Recently developing categories of interest include vernacular language-focused models that target increased connectivity in regional areas and social commerce businesses that mesh with the browsing style of a new generation of first-time internet users. At the same time, Fund IV will contend with an increasingly competitive deal environment as dry powder mounts across the combined region. Mathias notes that this has translated into increased deal flow and some unnecessarily increased valuations, especially in consumer segments. 

The high-risk, high-reward context here is further highlighted by Vertex's broader fundraising activity. In the past two weeks, the firm has also closed its fourth China fund and its debut global growth fund. But there are no delusions about the pitfalls and possibilities of going all out in a climate of uncertainty.  

"We've been through multiple cycles, so we know when to be cautious and when to be aggressive. And right now, we do need to be very disciplined about the investments we make," Mathias says. "A correction could happen any time, and when it does, we want to be ready with capital. The macro growth factors are still there, and those will continue for a few more years."   

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Southeast Asia
• Venture
• Technology
• India
• Vertex Management (II)
• TMT