- Singapore-based Golden Gate Ventures said Tuesday it is teaming up with South Korea's Hanwha Asset Management to invest in growing technology start-ups in Southeast Asia.
- A source familiar with the matter said the firms are looking to raise around $200 million in funds and already have about $80 million worth of commitments from investors.
- Golden Gate Ventures declined to comment on the amount of funds it was looking to raise with Hanwha.
The firms are looking to raise around $200 million in funds and already have about $80 million worth of commitments from investors, according to a source familiar with the matter.
Both Golden Gate Ventures and Hanwha Asset Management declined to comment on the goal for the fund's size or on how much had been committed so far.
In a press release, however, the companies said investments will focus on start-ups that are raising funds in the so-called Series B round — at that stage, start-ups have moved past the early development phase, achieved a few important initial milestones, and are looking for financing to grow their businesses to meet user demands.
Start-ups in Southeast Asia receive fewer investments during Series B funding than their counterparts in the U.K. and the United States, according to Golden Gate Ventures, an early-stage venture capital fund in the region.
"Just like there was a Seed-stage gap in 2013 that closed by 2015, then a Series A gap in 2015 that closed by 2017, now there's a Series B gap that started in 2018," Vinnie Lauria, a founding partner at Golden Gate Ventures, told CNBC by email.
Seed and Series A refer to early-stage fundraising efforts from new start-ups.
A 2018 report from the Singapore Venture Capital & Private Equity Association revealed that less than a third of early stage-funded companies in Southeast Asia successfully raised Series B financing. In the U.S. and the U.K., around of half of them secured Series B funding by the end of 2017.
Lauria explained the emergence of widely successful start-ups in Southeast Asia in recent years, including ride-hailing giant Grab, its rival Go-Jek, e-commerce platform Tokopedia and travel booking site Traveloka, has turned the region into an attractive choice for global investors, including large private equity funds from the U.S.
But those investors prefer to finance larger, more established start-ups because they are perceived to be less risky, according to Lauria. "Their funds are so big, writing a $15 million check is like the average person making a $15 investment," he added.
Other investors have reportedly said a lack of high-quality start-ups contribute to the funding crunch at the Series B stage.
Last year, global investment firm KKR poured about 200 million Singapore dollars (roughly $148 million) into Southeast Asian real estate portal PropertyGuru during a late-stage funding round.
Southeast Asia is a lucrative opportunity for investors because of its potential — a commonly cited study from Google and Singapore's Temasek Holdings predicted the region's internet economy will exceed $240 billion by 2025 as affordable mobile internet drives rapid growth in sectors such as e-commerce and ride-hailing.
Golden Gate Ventures and Hanwha, which has $80 billion in assets under management, predict there would be between 80 to 110 Series B investment opportunities available over the next two years and that number could potentially double within four years.
"We are looking to invest into start-ups targeting Southeast Asian markets and raising Series B financing of $15-30 million," Lauria said.
Clarification: This article has been updated to clarify that KKR invested about 200 million Singapore dollars (roughly $148 million) into Southeast Asian real estate portal PropertyGuru.