Deal focus: Circulate makes early moves in a must-win battle

Singapore’s Circulate Capital, a newly established GP dedicated to reducing marine plastic pollution, is well versed in the idea that big problems often have to be tackled by thinking small. Its target is an environmental disaster almost inconceivable in scale: 8 million tons of plastic are dumped into the world’s oceans every year, which is equivalent to a garbage truck unloading every minute. The plan is to start turning this around by making seed investments in start-ups in India and Southeast Asia.

The logic here is intuitive. A combination of rapid growth in consumerism and lagging waste management infrastructure means that developing Asia is responsible for the majority of plastic being dumped but ill-equipped to address the issue. Circulate is taking a grassroots approach with a debut investment of $6 million, which will be shared by two recycling businesses, Mumbai-based Lucro Plastecycle and Jakarta-based Tridi Oasis. 

Lucro specializes in flexible materials such as shrink wrap, which are often among the most difficult plastics to recycle, while Tridi Oasis focuses on bottles, perhaps the leading culprit in consumer packaging waste. These are not just minnows chipping away at a mammoth problem; they are also fairly narrowly defined players even within their own niche. Post-consumption plastics management encompasses an entire ecosystem of specialist operators, including collectors, sorters, and aggregators.   

“We consider ourselves to be full value chain investors, and in plastics, that includes innovative materials that could replace single-use plastics and returnable or reusable business models that reduce the need for single-use,” says Rob Kaplan, CEO of Circulate. “But in the short term, most of the investment and value-add opportunities are going to be in the processing stage because that’s a key bottleneck in getting those materials to the suppliers of companies like Coca-Cola and Unilever.” 

Coca-Cola and Unilever are LPs in Circulate’s debut fund, which is targeting $150 million. Their participation is both a practical supply chain resiliency investment and an exercise in corporate responsibility, but it may prove most uniquely useful in offering operational support to an underserved category.

As manufacturing-focused start-ups, Lucro and Tridi Oasis are rare creatures in the digital world of Southeast Asian VC. This disadvantage is hoped to be offset by meaningful partnerships with Circulate’s heavyweight LPs as well as a portfolio management philosophy that prioritizes technical value-add and strategic M&A over customer acquisition programs.

“If you go into an incubator, accelerator, or co-working space in Singapore or Jakarta, there’s not a lot of hardware start-ups in those communities – their goals are to be the next fintech or sharing economy leader,” says Kaplan. “That’s why companies like Tridi Oasis, where you have two women who want to build a manufacturing business, are unique and exciting. If the companies we’re investing in are successful and grow into really strong, resilient cash flow businesses, they’re going to be in the top 1% of entrepreneurs.”

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

• Topics
• Southeast Asia
• South Asia
• Cleantech
• Industrials
• Early-stage
• India
• Indonesia
• Circulate Capital
• manufacturing