Fund focus: Wavemaker turns crisis into opportunity

Singapore’s Wavemaker Partners was detailing an on-target final close for its third fund at $100 million earlier this year when COVID-19 put the city-state into lockdown and caused a handful of LPs to get cold feet. The VC, which focuses on enterprise and deep tech in Southeast Asia, knows its mandate can be a tough sell at the best of times, and had to swallow $6 million in retracted commitments as anxiety piqued. 

“While we were waiting for things to open up again, we were a bit nervous that more investors might change their minds too,” says Paul Santos, a managing partner at the firm. “So we just kept talking to people. Thankfully, a few undecided investors decided to invest, and then there were a few more we had just met who decided very quickly. We were eternally grateful and relieved at the same time.”

The 11th hour LPs pushed Fund III into oversubscription at $111 million. This compares to $66 million for its 2017-vintage predecessor. LPs include US private equity firm Concentric Equity Partners, Temasek Holdings and its affiliate Pavilion Capital, the International Finance Corporation, Keppel Corporation, and Aglaia Family Office. Vulcan Capital, a US-based VC set up by Microsoft co-founder Paul Allen that launched a Singapore office last year, is also involved.

Santos sees enterprise-facing and deep tech companies as an undervalued opportunity set in Southeast Asia. Perceived values for consumer models targeting the region’s aspirational masses of 650 million are relatively close to the companies’ actual values, while value perceptions of B2B plays are comparatively muted, suggesting more upside for early movers.

Proof of this thesis is not limited to Wavekmaker’s fundraising success. The firm has tallied eight exits to date with a total enterprise value of $491.5 million. These include Indonesian mobile point-of-sale system Moka and Philippines fintech player Coins, which were both acquired by Gojek in deals worth $130 million and $72 million, respectively. Meanwhile, cloud communications software provider Wavecell was bought by US-listed 8×8 for $125 million.

The Fund III plan is to double the check size from the previous vintage to $500,000 to $1 million, while reducing the targeted portfolio size from 75 to 50-60 companies. COVID-19 is expected to be a significant factor in deployment, with 95% of businesses in the region identified as small to medium-sized enterprises in need of digitization in a challenging, locked-down landscape.

“We think many opportunities will come from new regulations that will be enacted because of this experience and from new habits that were formed during the crisis that will stick even after the crisis has been resolved,” Santos says. “Think of videoconferencing. It’s been around for ages and had a certain level of adoption pre-COVID-19. Then the lockdowns forced people to use it more than before. Many people have found instances where they will now accept video meetings even when in-person meetings are possible.”

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• Topics
• Venture
• Technology
• Southeast Asia
• GPs
• Wavemaker Partners
• Venture
• TMT