Fund focus: B Capital begins second innings

Four years ago, when Kabir Narang moved from India to Singapore, he was not expecting Southeast Asia’s digital economy to triple in size with more than 100 million internet users coming online.

“At some level, I think even companies like Ninja Van underestimated how rapidly they could grow,” he says. “We've been surprised by the scale and the ability to scale, which also means it's an exciting time for us going forward.”

Narang, formerly with Eight Roads Ventures, relocated to co-lead Asia investments at B Capital, a venture capital firm established by Facebook co-founder Eduardo Saverin and Raj Ganguly, previously a vice president at Bain Capital. B Capital’s growth mirrors that of Ninja Van. The firm now has 22 people in Singapore, while its first portfolio company has branched into six countries.

Saverin launched B Capital after moving to Singapore in 2009. He and Ganguly raised a debut fund of $360 million in 2018. Last week, a successor vehicle closed above target at $820 million but the brief remains the same: providing growth equity to start-ups across financial technology, enterprise software and consumer-focused internet technology.

India, Southeast Asia and the US remain the core geographies, with Latin America and Australia addressed on an opportunistic basis.

Enterprise software companies that have global ambitions and start-ups laying the groundwork for digital infrastructure upgrades continue to appeal. In the past year, B Capital has also invested in pure consumer-focused start-ups like Indian scooter rental app Bounce and app-driven Indonesian coffee chain Kopi Kenangan. 

“While B2B and B2B2C remains a big focus, our investments are following the growth of mobile internet services in South and Southeast Asia,” says Narang, adding that he expects large corporates as well as small to medium-sized enterprises (SMEs) to embrace digital tools throwing up new opportunities in the region.

Operational heft

B Capital, which now has more than $1.4 billion in assets under management, claims that strong support from new and existing LPs for Fund II is partly due to the firm’s institutional setup. Over the years, business development and operations professionals have been brought in to help portfolio companies with fundraising and recruitment, as well as introduce them to larger companies that can be collaborators or even be potential suitors.

Meanwhile, the Boston Consulting Group (BCG) remains involved as a strategic partner. The global consulting firm assists B Capital with due diligence, market analysis, CXO-level introductions, identifying customers in new markets, and assessing the feasibility of emerging revenue segments.

Earlier this year, the GP recruited Rashmi Gopinath, formerly a managing director at Microsoft-backed venture capital firm M12. She notes that BCG’s support was a big draw.

“Capital has become commoditized. It's hard to replicate the value we bring through BCG helping portfolio companies with their growing pains,” Gopinath explains. “Having come from a corporate investor background, I have seen the value that a corporate partnership can bring to portfolio companies. It’s rare for financially-focused institutional investors to deliver that.”

Gopinath, who is based in the US, adds that the firm’s global presence means the team stays objective when deal sourcing and is consistent in its pursuit of companies that match up to international peers.

Fund II is likely to see B Capital explore new areas within the enterprise software like start-ups that offer workforce automation, customer relations management or supply chain solutions. The team is also targeting cybersecurity and businesses that help improve development, security and operations (DevSecOps) in online tools.

“Traditionally, cybersecurity was thought of as how one secures software once it has been built but we are now seeing a shift – it is becoming embedded into the coding process,” Gopinath says. “We believe there is a huge market opportunity.”

With the software-as-a-service (SaaS) business models gaining traction, the rapid growth of cloud-based technologies should create openings even in deep technology and the sub-sector involved in solving usability problems for emergent technologies.

“I've met companies that are looking to develop technologies that can launch satellites into space at a much lower cost,” Gopinath adds. “It's fantastic to see start-ups tackling difficult and technically challenging problems from India and Southeast Asia.”

For companies in the US, B Capital positions itself as a partner with consulting expertise, a global network, and experience investing across economic cycles. To those in India and Southeast Asia, the goal is to serve as a guide through the nervy later investment stages – a crucial role given exits remain uncertain.

Early days

Narang believes that emerging regions like Southeast Asia are slowly but surely following in the footsteps of other markets. Nevertheless, B Capital remains one of few growth capital providers in the region that fill the gap between Series B and D rounds, with a sweet spot of $10-60 million per deal and the capacity to go bigger if necessary.

More recently, the likes of Jungle Ventures, Vertex Ventures, East Ventures, Gobi Partners and Vickers Venture Partners have increased their fund sizes or raised dedicated growth vehicles. However, to participate beyond Series C rounds they are likely to rely on co-investors. 

“Southeast Asia is going through what China or India experienced a few years back,” Narang says. “Start-ups that received seed and Series A rounds five years ago have scaled. We will need more capital and it's healthy to have an ecosystem with multiple high-quality players.”

Even with the rapid developments of the last four years, there remains a sense that Southeast Asia and India are still at a relatively nascent stage as technology investment destinations.

“We are in the early part of a long innings during which you will see a big impact whether that's in software or the way technology shapes industries,” Narang adds. “The pace of digital innovation, automation and digital transformation will accelerate.”

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• Topics
• Fundraising
• South Asia
• Southeast Asia
• Technology
• Growth
• B Capital
• Singapore