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Four Things Start-ups Need to Know About SEA’s Equity Landscape

Four Things Start-ups Need to Know About SEA’s Equity Landscape

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BY Melissa G. Bagamasbad - 19 Oct 2017

PHOTO CREDIT: Getty Images

Started in 2016, ALTUS Digital Capital (ADC) is a private equity firm that invests in financial and human capital in local digital companies. They also give expertise to the businesses they invest in, as well as the right people to lead and make them grow.

ADC co-founder and managing director Randy McGraw says that when it comes to investments, they favor going to ASEAN over mature markets like China and Japan, as they have higher chances of success. “The emerging markets of Southeast Asia are all in very early stages of everything and lacking capital access, skill sets, and digital strategies. We’ve added a lot of value to that situation,” he states.

ALTUS has three areas of focus: fintech, e-commerce, and media. They are strong believers in such OTT platforms as Netflix, Amazon Prime, and Hook, as well as big data apps.

In the coming years, ADC will continue making investments and sticking to their niche. Thus, they will be increasing projects in digitalization in the next three to five years. They will build human resources and strengthen their portfolio in robust sectors. ADC currently manages a portfolio that covers 250+ loans and 4,200 properties in the Philippines, Thailand, and Vietnam. Its digital capital products include the female millennial shopping site, iamClaire, and GoSPCE, a platform connecting hosts and guests looking for conventional and unconventional spaces for work and play.

McGraw also shares insights on why Southeast Asia remains a good place to invest in. Read on, start-ups:

1. Southeast Asia explosive start-up scene is driven by millennials

SEA is hot in the start-up scene, according to McGraw. This is largely because of the strong millennial mindset, wherein young individuals desire alternative jobs beyond the usual nine-to-five corporate work. ASEAN markets are also emerging due to an increase in consumer disposable income.

2. Markets where there is high GDP and developed infrastructure are prime areas of investment

Indonesia and Philippines, which both possess high GDP, are aggressive markets for expansion, says McGraw. These countries, as well as Vietnam, are also interesting because of present infrastructure. “Indonesia is very much mobile-oriented, while Vietnam has a very large cable structure. They all offer Internet service — not cable-driven, but fiber-driven. The market is quite different but the point is they have access to all fast networks,” says McGraw, adding they intend to focus on these areas and try not to overextend themselves. Myanmar, Cambodia, Laos are premiere markets where the investment climates aren’t sophisticated yet.

3. ADC is interested in markets where they are comfortable in establishing relations.

It’s not what you know, but who you know. And in the world of investment, the importance of networking cannot be overstated. McGraw says ADC is keen on establishing strong ties within the countries they operate. In the Philippines, for example, ADC is very bullish because there is larger comfort in working with foreigners among Filipinos. “It’s about developing deep local relationships,” he says, “and learning and choosing the right partners.”

4. Investments in “steady” emerging consumer markets are in the offing.

Another reason why McGraw says Altus is interested in the Philippines is that it’s consumption-driven. “It’s a huge consumer market here,” he relates. “It may not be as advanced as Singapore but the Philippines should be a digital leader in five years.”

McGraw adds that the Philippines isn’t as capricious as Indonesia, which is why it’s better in terms of investment prospects. Indonesia can be quite challenging because of nebulous censorship rules.