Fund focus: East Ventures expands its LP rolodex

When East Ventures raised its first growth-stage fund as part of the EV Growth joint venture with Sinar Mas Digital Ventures (SMDV) and Japan’s YJ Capital, now Z Venture Capital (ZVC), it attempted to use a placement agent. Things didn’t work out.

EV Growth’s corporate connections helped it score a quick USD 100m first close against a USD 150m target. Weighing agent fees against the USD 50m balance didn’t add up. The vehicle went on to close on USD 250 in 2019.

Fund II, which closed last week on USD 400m, was another story. After dissolving the co-GP structure, East took over the EV Growth project, with ZVC staying involved as an LP and investment committee advisor. Roderick Purwana, who founded SMDV in 2014 and anchored early funds for East, remained to lead the new fund as a managing partner at East.

The firm had become comfortable, even complacent, with its existing LP base. This changed with the latest fundraise, which totals USD 550m including a concurrent seed fund. While about 65% of the overall corpus came from existing Asian backers, successful engagement of UBS as a placement agent this time helped bring in some US and European investors.

“The agent really helped us in terms of organising the data, putting things together, the narrative messaging, and new connections. Truth be told, the LPs we got from them ended up being quite a small portion because of the high re-up rate. But it’s very good to start the relationship,” Purwana (pictured) said.

“Hopefully, as things open up now and next year, we can do some non-deal roadshows in the US and Europe and meet some of these people, because next for us are endowments and other long-term players.”

The strategy is sector agnostic, with much of the deal flow stemming from the in-house early-stage program. Investments will span Southeast Asia but a strong focus on Indonesia will remain. East says its ecosystem of 250 companies is a key deal sourcing and portfolio support tool.

The macro situation is top of mind. There are some expectations of a flight to quality and possibly a modest normalisation of valuations, but competition for deals is likely to increase. Recent growth areas such as e-commerce and gaming could slow down at the growth stage, although travel is seen as set for a rebound.

“We’ll be mindful about deployment, but we’ll definitely still deploy during this market,” Purwana said, evoking themes such as the Ukraine war, rising supply chain bottlenecks, rising inflation, rising interest rates, and the spectre of a USD 26bn investment loss by SoftBank Group’s Vision Funds.

“It’s a bit dangerous to overcorrect or say how dire things are because the fundamentals are still there. You’re seeing in Southeast Asia, and Indonesia in particular, the need for digital and technology upgrades and how it’s affecting people’s lives.”

The confidence suits East’s newly cemented identify as a multi-stage and significantly institutionalised investor with more than USD 1bn in assets under management. Tapping global LPs while closing the early-stage and growth funds in unison for the first time helped drive this point home. But the standout sign of maturity is arguably in corporate responsibility.

East has done much to formalise an environmental, social, and governance (ESG) framework this year, including becoming the first VC firm in Indonesia to sign the UN’s Principles of Responsible Investment. Last month it released an inaugural sustainability report.

Returning to the subject of navigating the current uncertainties, Purwana added: “People always either overpredict or underpredict. We’ve been around since 2009, so we’ve seen economic cycles. It’s very important to have a consistent strategy throughout. You have to be able to respond to conditions, but you must have discipline.”

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• Topics
• Southeast Asia
• Fundraising
• Venture
• Technology
• GPs
• Indonesia
• East Ventures
• YJ Capital
• Sinar Mas Digital Ventures
• UBS