Anatomy of an Investment

By Rachel Lau – Managing Partner, RHL Ventures

Southeast Asia’s start-ups are drawing in more money every year. Last year alone, the amount of equity funding, at USD6.5 billion, was double the figure in 2016 and involved approximately 500 deals.

While start-ups are receiving more funds than ever before, much of this is buoyed by the USD100M+ ‘mega-rounds’ led by global giant corporates and into regional unicorns like Grab, GO-JEK, Tokopedia and Traveloka.

Outside of the unicorn funding stage, start-ups are finding it difficult to secure funding at post-seed, early stages.  Crucial Series A to C funding often doesn’t materialise – creating a ‘funding barbell’ with most investments being channelled to either seed or later growth rounds.

The question remains: what about all the stages in between? The key moments for growth in start-ups life? The post-seed bottleneck is strangling many promising start-ups at a moment when Asia needs innovation-driven growth more than ever.

 

Fostering holistic change

Part of RHL’s mission is to step in during these vital middle-stages; allowing companies that have growth traction but insufficient capital, network or expertise to reach the next level.

RHL looks for innovations that solves everyday problems. What is the value proposition? Does it make people’s lives easier and better? And does it really disrupt the existing industry?

As a firm, RHL invests across industries with a focus area of agriculture, financial, property, healthcare, manufacturing and consumer. It doesn’t matter what sector you are in – what we need to know is whether the sector will keep growing and if your company has the ability disrupt and innovate the existing ways of doing business.

 

Digitalising sports talk

GameOn, a Silicon Valley company we’re working with, came up with an innovative chatbot for the sports industry. We decided to back them after their founder, Alex Beckman, approached us on how to build a stronger platform in Southeast Asia – after having already developed chatbots for the English Premier League (EPL), the National Football League (NFL) and the 2014 Olympics in Brazil (in collaboration with Sports Illustrated).

By using AI, machine-learning and Natural Landscape Processing on its cloud-based platform, GameOn links its users to their content; albeit with better context and curated to match one’s favourite sports interests.

If there’re two things we can say about people in Asia, is that we’re passionate about our games and the need to socialise. However, the platforms currently present in the region haven’t kept apace with growing demands by sports fans for a more intuitive chat interface.

Essentially, we’re working with GameOn to help stir up more fan discussions during regional sports events like the Asian Games or Arsenal games; which tend to be the one of the rarer occasions that people gather in full throng to back their respective countries.

 

Building a dating app fit for Asia

As people become more reliant on their phones for everyday interactions, we see the norms of dating evolving to be more digital. One out of four people have met their partners online. When it comes to dating apps, Tinder still rules for now. Yet, its reputation of being a hook-up platform may soon see it caught up by a slew of new alternatives that are designed to suit Asian dating trends better.

That was the motivation behind our decision to work with Coffee Meets Bagel, a dating app founded by three sisters in San Francisco. The app works differently from Tinder as the data required by members goes through an algorithm to help find matches curated to one’s interests and preferences; instead of being thrown in a random pool of strangers based on your location and orientation.

Coffee Meets Bagel focuses on developing real connections between people. As such, one’s profile on the platform needs to be more detailed than the meaningless one-liners typically presented on Tinder. It limits the number of people you can be matched in a single day; which helps users think twice before casually swiping for a match.

For us, Coffee Meets Bagel is the app designed for how we Asians date. Its data-driven process helps us narrow down better-suited matches and cut the time used to just meet someone new. It also helps to filter out inappropriate messages from dodgy matches – helping to ensure that the dating process can foster real conversations, rather than being degraded to the sharing of unwanted explicit imagery.

 

Guiding creative disruption

VCs across the world have been trying to search for the next big disruptor. But we understand that finding them may not be obvious at first. It requires the investor to go beyond just providing funds and help add value to their investees via mentoring and networking.

Disruption by technology can happen in any industry.

We know the importance of having entrepreneurs take the lead for their business’s growth, which is why we prefer to be partners, working side by side, and take equity stakes of up 30% in a firm – leaving the management rights with existing executives and owners.

We’ve outlined our philosophy as patient capital, as such as it helps to circumvent constraints put up by conventional private equity and public investors, namely conflicted interests in capital ownership and the restrictions to short-term market performances.

Our aim is to create a sustainable model to empower entrepreneurs, who in turn will be better positioned to innovate new breakthroughs.

Our goal is to create innovations that are truly global in scale and that leave no one behind.

Changing the Region via A Fund

RHL Ventures is a combination of the talents of our core partners and our extended networks and business interests. This allows us to bridge the highest levels of the private and public sector in South East Asia and establish a platform that extends beyond simple network and introductions. As millennials rooted in the region who have worked and flourished overseas, we have returned to share knowledge of global best practices and merge this knowledge with a comprehensive understanding of the local business landscape.

We apply world-class due diligence, transparency, research and risk assessment in the context of emerging markets which allows us to see opportunities others miss; undervalued assets, strong long term growth potential and businesses offering truly relevant innovation.

A key differentiator for RHL is that we view Southeast Asia as a single integrated region – not a patchwork of small and mid-sized nations – but an emerging engine of global growth with over 600 million people and an almost three trillion dollar economic area with its own political intricacy and economic nuances.

Our approach is therefore to partner with people with similar values and backgrounds to navigate through these challenging yet promising emerging markets. Our network and understanding allows us to accurately assess the potential of start-ups and SMEs in this regional context. We provide the expertise, investment and local partners that can drive local success to regional and global levels. Add to that an ability to support each company with patient capital and drive growth via linkages to supply chains, allied businesses, and markets – you have a true start-up accelerator.

Robert Kuok once said – “to understand drivers of economies, we first have to understand politics in the region.” Therefore, we work closely with governments and government agencies to advocate for key policy changes in the hope of creating an environment that will support innovation and growth. By generating such broad synergies, we ensure that our investments thrive in the current ecosystem. Crucially our roots in the region give us a much longer term perspective on our investments – which we term ‘Patient Capital’ – ensuring that our focus isn’t on short-term gains but sustainable growth that will strengthen the broader ecosystem. For us, that is the way we are giving back to the next generation of Southeast Asians.

Beyond financials, the breadth of expertise we channel allows us to evaluate and elevate the firms we invest in. For example – if a firm has developed a method for boosting the productivity of soil we can easily secure the plantations and the experts to conduct a rigorous test.

We channel the engineers, doctors, scientists, students and farmers who will be using technologies, applications and platforms allowing us to assess potential and also generate growth.

What we offer is a truly comprehensive solution from analysis to testing, funding and finding partners and sales channels. We can also structure exits via acquisitions through our network of corporates and the public market. RHL works through every aspect of a firms life cycles spurring growth, driving opportunity.

Fundamentally that is what RHL is about: transforming Southeast Asia into a region full of opportunity.