The number of VC funds available in the region compares unfavourably even with our Asian neighbours
Asian GPs generally have no startup experience, which adds to the problem, says Catcha group CEO
THERE is a gap in the Asean venture capital space and it has been unable to meet demands in the region, particularly when compared with that of more mature markets such as the United States and Europe, according to Patrick Grove (pic), group chief executive officer and founder of the Catcha Group.
Speaking at the AVCJ Private Equity & Venture Forum 2013 in Singapore, the Catcha chief pointed to the low number of venture capitalists (VCs) versus the size and potential of the market.
In June, Asean overtook the United States in terms of the number of Internet users; by the end of July this year, Asean will overtake the United States in terms of the number of 3G (Third Generation mobile telephony) connections; and in seven years, it is predicted that Asean’s middle class will be bigger than that of the United States, he said in a statement issued by his company.
“Already the Top 3 cities globally for social media mobile usage are Bangkok, Manila and Jakarta – all located in Asean,” said Grove. “The upshot: The Asean market is on track to becoming the same size as the United States.”
Yet, the United States “has over 1,000 VCs while Asean, a region covering 10 nations including Singapore and Malaysia, where my company is headquartered, has in the region of 20,” he told an audience of 250 fund managers, private equity general partners (GPs), limited partners (LPs) and advisors in his keynote address The State of Venture Capital in Asean: The Good, The Bad and the Future on the last day of the forum.
“Even compared with our Asian neighbours, Asean is lagging behind – China has around 600 VC funds; India has 400,” he added. “The Asean number reflects a significant lack of support given the projections for the regions.”
Grove believed there are a number of factors contributing to this funding and venture capital gap, not the least of which is the lack of business experience of VCs in the region.
“A good GP is one who had had hands-on experience in starting and exiting startups; someone who can roll up their sleeves and get their hands dirty,” he told the audience of industry professionals.
“Would you take flying lessons from someone who has never flown a plane? Would you undergo a surgical procedure administered by someone who has never done surgery before? So why invest in a general partner who has never started, grown and subsequently exited a company before?
“And yet this is often the Asian model of a GP: He or she will be a banker, consultant or mid-level manager,” he argued.
“Ultimately, what is needed are greater limited partner commitments; more quality GPs with an execution track record who can add real execution value, a focus on proven ideas, and a regional approach,” he added. “Exits are not impossible.”
Grove has publicly listed three companies, including two on the Australian Securities Exchange. His Catcha Group controls numerous companies involved in media, new media, e-commerce and entertainment, and holds 50 other private investments in the online space, with a combined value of US$350 million.
This year, it disposed 90% of its online digital advertising business Catcha Digital Media to Japanese e-marketing company Opt Inc.
Disrupt: ‘It’s hard to raise money in Malaysia’
Japan’s Opt acquires 90% stake in Catcha Digital Asia
Patrick Grove about to get his hattrick
Catcha to invest US$150mil in online businesses in Asean
For more technology news and the latest updates, follow @dnewsasia on Twitter or Like us on Facebook.