Tech Veterans are on a Mission to Turn Top U.S. Start-ups Into Asia-Pacific Listed Unicorns
How the Global Public Offering fund will figure into Southeast Asia’s tech start-up ecosystem remains to be seen
PHOTO CREDIT: Getty Images
Exciting times are seemingly ahead for the Asia-Pacific tech start-up ecosystem.
Just today, technology veterans Jeff Stewart, the co-founder and former CEO of Singapore-based fintech pioneer Lenddo, and Key Compton, who founded several North American-based technology companies, have announced the launch of a new Global Public Offering (GPO) fund that will enable investment into United States-based firms and will take them public on Asia-Pacific exchanges.
The GPO was established under the premise that the United States’ IPO (initial public offering) market is broken for small capital growth companies. While public offerings by such companies have once opened doors for further growth, the current situation in the United States reveals that the path to list in the U.S. has become nearly impossible.
Last year, only 18 American companies completed IPOs that raised less than $50 million as compared with 557 companies in 1996. Based on today’s standards, even when inflation adjusted, firms like Intel, Oracle, Cisco, Amazon, and NVidia would all be too small to IPO in the U.S. As such, global public offerings are set to become the preferred path to multi-billion dollar valuations, otherwise known as “unicorn” status.
“We believe a public offering lays the foundation for growth, providing companies with improved credibility, transparency, and financial flexibility,” says Stewart. “The U.S. public markets have failed an entire generation of growth companies. Instead, companies are resorting to private investment rounds that result in complex capital tables that lead to misaligned interests among stakeholders. Meanwhile, the global capital markets have matured to the point where Asia-Pacific IPO proceeds exceed the NASDAQ and NYSE combined, creating an immediate opportunity for North American growth firms to pursue global public offerings.”
New kid on the block
The GPO fund will invest in world-class, technology-enabled, growth companies with private valuations in the $100 to $200 million range and with the explicit goal of conducting a global public offering in coordination with major Asia-Pacific exchanges within 12 months of investment. The investment thesis is straightforward, with the GPO Fund focusing on founder-led technology companies that can grow aggressively in the Asia-Pacific region where wealth creation is particularly dramatic. The region represents more than half the world’s population and 22 of the world’s 37 megacities. As such, Hong Kong, Taiwan, Tokyo, Shanghai, Shenzhen, Singapore, and Australia all host vibrant and well-run stock exchanges.
Stewart and Compton have invested the last 12 months pulling together the fund’s initial team and determining the universe of investment targets. Given the fund’s focus on global opportunities, the team has elected to use an Initial Coin Offering (ICO) to raise capital for the fund.
While it is unclear how quickly blockchain-based ICOs will be appropriate for growth companies, the team believes that blockchain-based capital markets will gain broad adoption. “Conducting our own ICO will provide valuable learnings and allow our portfolio companies to have a front row seat in defining what constitutes a global public offering,” says Compton. “There are obvious advantages to blockchain-based technologies, distributed ledgers and smart contracts, and they will help to evolve financial systems everywhere. Our hope is to advance the current state of the art and utilize the GPO Fund to make long-term and constructive contributions to the global capital markets.”
How will this affect Southeast Asia?
The increased competition coming in from North American tech companies raises the question: Will this be a David and Goliath situation, with the Southeast Asian start-up playing the role of the former?
Not quite so. According to Paul Ong, associate director at InnoVen Capital, there has been a shift in the way the tech ecosystem has viewed Southeast Asia. Used to be that companies looked at the ASEAN market as “one huge market, because when you put all the population together, it’s larger than India and sizeable enough to compare to China.”
But Ong says this is a “slight miscalculation”. Hyper-localized and culturally different, Southeast Asian countries do not operate as a single unit at all. To crack each market is not as easy as it seems. “If you look at the most prominent and successful start-ups in the region, most of their business concentrate still on a single consumer market or two. Companies like Go-Jek, Tokopedia, and Traveloka focus on Indonesia, for example, and they have been very successful at executing their strategy because they know the market and that’s sort of the direction to go,” says Ong.
While the GPO indeed presents an interesting development, it’s not the only trend that’s keeping the ecosystem on its toes.
“There’s also an influx of investment money from China that’s coming into Southeast Asia, and that might signal a wave of potential Chinese investors coming into the region. And if you look at Southeast Asia, we’re at that point of time where structurally, the current investors and the size of their funds aren’t enough to support larger investments into existing or new companies. Hence, the so-called series B gap that’s happening in the market right now. So it’s going to be interesting to see where these larger rounds of funding will come from,” ends Ong.