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Why this Private Equity Firm Doesn’t Want to Take Over Your Company

ALTUS Digital Capital says it knows what it takes to hurdle the roadblocks to digitalization

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BY Tanya Mariano - 26 Apr 2017

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PHOTO CREDIT: Getty Images

Emerging markets in Southeast Asia are fast becoming digital, and there is a massive opportunity for growth. The region’s population of some 600 million is largely unbanked and uninsured; disposable income is rising particularly among the growing segment of middle class consumers; and smartphones are becoming cheaper — allowing people to go online even without a desktop.

“A lot of the conditions that are required for digital to take root in the market are starting to become apparent. Stars are aligning in the right way, so to speak,” says Randy McGraw, director and co-founder of ALTUS Digital Capital (ADC).

But McGraw thinks there are several pain points that are holding the region back — pain points which ADC, a private equity firm headquartered in Manila and with operations in Singapore and Thailand, can tackle head-on.

He enumerates these: a deficit in digital skill sets; strategic paralysis because companies don't know how to innovate and respond to the challenges of the digital world; and insufficient access to capital, particularly when it comes to innovations where risk and reward are unclear.

McGraw is confident that ADC’s hands-on, owner-operator private equity model is a smart way to address these issues: “We help solve these by providing capital access, building digital strategy, and deploying our all-digital team.”

“We're not the traditional private equity firm in the West that says, ok, you're dying or you have a problem, so I'm gonna buy your company or at least buy control of it. I'm gonna fix it up and figure out an exit strategy quickly, which often entails displacement of people,” he says.

“We came up with this model, in fact, to be diametrically opposed to that. We are a partnering model. We don't have to take over your company. We can build a new, adjacent company.”

To illustrate, he cites a hypothetical joint venture with an insurance firm: “Something we will never do well is underwrite. So, we can work with an existing company and maybe create a new brand alongside that which is geared towards millennials.”

 

A platform approach that's social, data-driven, and mobile-first

ADC’s leadership team is made up of experts in digital and finance. McGraw was previously with DIRECTV in the U.S. then SingTel, and had founded a digital media start-up in Japan. Co-founder Pavan Gidwani is a seasoned fund and asset manager, and vice president and chief analyst for digital products Liam Mendoza was the first local senior executive at Rocket Internet in the Philippines and was in charge of Lazada’s marketing.

In McGraw’s words, ADC is an “owner-operator, private equity firm with a digital activation platform,” a framework which enables them to lower the costs and risks of building and operating digital businesses.

In-house, they have programmers that are well-versed in advanced languages such as Scala, a team of creatives, and a fully digital production studio for content marketing creation.

Data and analytics underpin much of ADC’s thrust: they have a unified data warehouse for all investments, which means all their ventures, no matter how varied, can benefit from this shared data pool. “Instead of five different companies with five different cultures and five different data sets, we build once and apply it multiple times to every investment that we make. So we economize on time, cost, own a lot more data, and can leverage insight more rapidly,” he says.

The company believes in mobile-first, particularly in emerging markets, says McGraw. “Anyone that's ever been to Indonesia will know that fixed Internet basically doesn't exist. Everything is mobile, day one. So we're mobile, day one.”

 

Investing in social commerce and shared spaces

In 2016, their first year of existence, ADC made two investments.

The first is iamClaire. — a health, beauty, and wellness social commerce platform catering to millennial women.

Social commerce, says McGraw, is the next evolution of e-commerce. He says, “Research will tell you that millennials, in particular, don't buy anything without [consulting their networks]. And whether you're buying lipstick or services, nobody in emerging markets consults the brand. They look to their social networks and opinion leaders for information, and emerging markets vastly over-index in this type of behavior.”

iamClaire., says McGraw, is “a self-contained ecosystem and a highly curated experience.” It’s an e-commerce platform that incorporates content created by ADC as well as by users.

“We’re not trying to be Lazada. We're a very focused, curated platform that creates media and community together and basically creates a fun buying experience for the consumer.”

Their other investment, GoSPCE, aims to be the “Airbnb for shared work and shared play spaces.” It links consumers with hosts who have unused space that can be repurposed for work or play -- an empty room above a bar that has Wi-Fi, air conditioning, and a big table, or an empty field in the middle of the city, for instance. Pricing schemes depend on the host, and can be done hourly, weekly, or monthly.

McGraw says they have big plans for 2017. He can't divulge much, but expect ADC to look into fintech and other applications for the GoSPCE platform.