KUALA LUMPUR -- Singapore-based Indies Capital Partners has closed the funding round for its tech vehicle after raising over $70 million, said the fund's Managing Directors Harold Ong and Pandu Sjahrir.
Indies Pelago Investments was launched in November 2018 with a target of raising $65 million. The vehicle subsequently raised over $70 million, which is already half-deployed across eight companies in Southeast Asia.
The fund focuses on generating risk-adjusted returns through the secondary purchase of mid- to late-stage, high-growth technology companies in Southeast Asia.
"We’re very happy with the reception so far," Ong told DealStreetAsia. "We are now concentrating on investing and executing the strategy we had in mind, and we think it will probably take us the next 12-18 months to deploy the rest of the capital ... so far, the strategy has really come to fruition, as shown by the fact we have invested half of the fund across eight deals. We remain bullish that we will continue to see high-quality opportunities."
The vehicle will be led by Ong, who has over 14 years of private equity experience at The Carlyle Group, and Sjahrir, who is a board member of Indonesian ride-hailing unicorn Gojek.
The managing directors said the vehicle is "indicative of the maturing Southeast Asia technology ecosystem," which has seen tremendous growth and strong investor interest in the last few years.
Venture and growth capital technology investments in Southeast Asia has increased significantly in the past few years, from around $1 billion in 2015 to over $15 billion in 2018. Many of those companies have now reached Series C funding and beyond.
The innovative fund provides a form of intermediate liquidity for early investors and management teams, such as founders and CEOs, current and ex-managers with stock options.
"We know companies are staying private longer because of the funding available in the market, but early investors will need to show returns and DPI (distribution to paid-in capital)," said Sjahrir. "The ecosystem is ready for something like this because now you have a number of companies that are seven to 10 years old that have become unicorns or are on their way to becoming unicorns, having gone through several rounds of funding."
Founded in 2009, Indies Capital Partners focuses on private credit and special situations investments in Indonesia. It has invested close to $1 billion across asset classes on behalf of institutional investors and private clients. In 2017, it formed a strategic alliance with global alternative investment firm Varde Partners to co-invest in private credit opportunities in Indonesia.
The firm closed its second private credit fund at $145 million in September 2018, supported by existing investors including financial institutions, corporate clients and family offices in the region. Indies Capital’s first private credit fund was launched in 2014 and closed at $100 million.
Having a tech-focused fund will also allow plenty of opportunities with the private credit platform of Indies, he said adding: "Focusing on the same mid- to late-stage cohort of tech companies, we have started to offer a structured equity and debt product (similar to venture debt but for later-stage companies), that will allow these companies to extend their fund-raising runway whilst providing less dilution than a purely equity alternative."
The tech fund will cut check sizes between $1 million and $10 million, with $5 million to $7 million being the sweet spot. The vehicle has an investment holding period of about four years. Ong added he will focus on deals in Singapore and Indonesia.
"That’s where the deepest VC ecosystems have developed, and the bulk of capital has been deployed. So, we will predominantly invest in these two markets, with Indonesia perhaps the bigger of the two, and a few deals scattered across the rest of the Southeast Asia region," added Ong.
Meanwhile, on valuations, Sjahrir said the fund applies a fair value discount based on buying a different class of shares.
"When you're buying earlier stage shares, whether it's common shares or earlier preference shares, you're not buying on the same terms as the last investors, because they are senior in preference within the cap stack and typically have other rights such as boards seats or reserve matters. Hence we apply a fair value discount based on buying a different class of shares. It's ultimately a negotiation, but we are fairly transparent about how we go about it," he said.
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