PUBLISHED OCT 3, 2015, 5:00 AM SGT
Grace Chng – Senior Correspondent
Armed with a war chest of US$600 million (S$857 million), Singapore’s largest and oldest venture capital firm is going global.
The infusion of cash will allow Vertex Venture Holdings to invest in start-ups in the hot seats of innovation and technological disruption – United States, Israel and China – after having been mainly focused on Singapore and Asia.
Chief executive Chua Kee Lock identified healthcare as a new area of funding in addition to its ongoing interest in technology, media and Internet-based start-ups.
The funds will be invested in firms ready to expand with proven products and revenue streams, he told The Straits Times.
Typically, each start-up in this growth phase would receive funding of $2 million or more.
Europe is the only region that has no Vertex presence but Mr Chua said he is looking to open an office there.
Vertex’s new war chest was the result of an investment from its parent company, Temasek Holdings.
Mr Chua said the success Vertex has enjoyed in the past few years gave Temasek and Vertex chairman Teo Ming Kian confidence that it could go global.
The firm’s research also showed that top venture capital companies like America’s Andreessen Horowitz can make returns of about 30 per cent.
There will also be sustained technological disruption in various industries due to a variety of factors, including lower cost of computing and communications, he added.
“The challenge for us is, can we benchmark to the best?”
Vertex thinks it can as its return on investment for its last fund of US$250 million was about 30 per cent. This fund has invested about US$190 million in around 30 start-ups in Asia.
The rest of the cash will be used for follow-on funding for its portfolio companies.
Vertex was an early investor in luxury e-commerce portal Reebonz and mobile taxi app GrabTaxi. It has publicly listed about four start-ups, including mobile game developer IGG, which was listed in Hong Kong in 2013.
It has also sold another six, including Chinese app distribution platform 91 Wireless, for undisclosed figures.
Mr Chua said with a global network, Vertex can have first dibs on potential billion-dollar start-ups because it will have insight on emerging and disruptive technology trends in the world. This information can be shared across its network, giving the firm an advantage in spotting the potential winners.
“Now we’ll be able to match our interest with our investments.”
Vertex’s global foray has already begun to pay off.
It will reap a tidy profit when its portfolio company, medical device maker Twelve, which it funded about four months ago for an undisclosed figure, is acquired for US$458 million by medical technology and services company Medtronic. The acquisition was announced in August.
Its global strategy focuses on co-investments with its investment partners in the US, China and Israel.
Vertex has used part of its war chest to make substantial investments in venture funds set up by its partners.
Each fund is between US$120 million and US$200 million.
“We allow our partners to form their own funds, but we also invest in their funds. They get a chance to be their own bosses but they remain part of the Vertex family. This way, the partners can help each other,” said Mr Chua.
To align the interests of everyone, a small percentage of the global profit each year will be shared by the 30-man investment team in the Vertex network.
Mr Chua noted: “This way, the partner in Israel who helps one of us in Singapore will feel that he is contributing to the pot of bonus.”
<Courtesy of Straits Times/SPH Media>