For this month’s member interview, we sat down with Daren Tan, Managing Partner of Golden Equator Ventures to speak about the rebranding of the venture capital firm that invests in high-growth technology companies in Southeast Asia. He also shared with us his opinions on the ramifications of the COVID-19 global pandemic on the start-up sphere as well as provided insightful tips on how founders can pivot their strategies in these trying times:
Golden Equator Capital (GEC) recently went through a rebranding process and is now Golden Equator Ventures; can you tell us more about the reasons behind this change?
The venture capital arm started in 2014 under the Golden Equator Capital (GEC) brand, a fund management business with different funds including our venture fund, Technology and Innovation Fund.
During the first couple of years, we created strong regional branding for GEC, with our VC team constantly maintaining a high profile within the industry. It was inevitable that GEC began to be associated primarily with our VC team – an association that was not fully representative of the brand, as it also has a private capital arm and funds focused on mezzanine, growth, and acquisition financing solutions.
The venture capital and the private capital businesses have different teams, expertise, proposition, and target audience. So, the rebranding serves to create two brand identities to clearly position and strengthen what each business stands for.
In short, we (the VC team) are now known as Golden Equator Ventures and the private capital investor team as Golden Equator Partners.
The COVID-19 outbreak is causing a prolonged global economic slowdown. What are the effects that you are seeing in the VC space?
I think that every industry has been affected in some way or other.
There has been a global slowing down of consumer demand, coupled with supply chains being compromised – factors that have caused concern for the business community. That being said, major industries have also seen valuations bottoming out at a realistic new normal with markets experiencing much needed corrections.
Companies that are fund raising will have to continue to show the ability to excel in difficult markets. It is during times like these that we see companies with promise and resilience come out stronger. Let’s take 1998 as an example; while it was seemingly all doom and gloom, we also had behemoths like Alibaba that emerged fromthe crisis and evolved into a global powerhouse. Times of adversity allow businesses to prove an accurate product market fit with the tenacious few coming out even stronger.
Our role in all this is to help our portfolio companies ride through this unprecedented challenge to become even stronger and more resilient. We also conscientiously keep a lookout for startups or companies that would make a great addition into our bench of portfolio companies.
What sectors in tech will be most adversely affected and are there any that will experience growth?
I think that many would agree that the traveltech and hoteltech industries would be experiencing the worst brunt of this pandemic.
On the positive side, the global climate will provide for exponential growth of the healthtech as well as media and entertainment spheres. Taking one of our portfolio companies M17 Entertainment as an example, in early March, the company’s revenue from live streaming during a single day totalled SGD 1.2 Million – a new record!
With people spending more time at home, social influencer and social marketing companies such as Gushcloud will also experience a boom in the short to medium terms. Other online platforms like Netflix will also increase their user bases for obvious reasons. Watch out for businesses such as Malaysia-based Dahmakan that is in the cloud kitchen space offering food deliveries and established players like Grab Food to increase revenues during this #stayhome times across the region.
Don’t expect these figures to go back down significantly even after the crisis as humans are creatures of habit. These companies will also have strengthened their branding during this period and created routines in everyday lives that will stay around for some time to come.
How are founders of your portfolio companies dealing with this crisis and how are you supporting them during this time?
Our core belief is that we will always be The Partner of Visionaries for our founders, which was why we have double down on support mode for all our portfolio companies since the start of this year.
As I said before, no one is fully removed from this crisis. We are studying consumption patterns and looking at ways to build opportunities – our main mandate for them now is to help them get good at survival mode and steady growth, instead of fast expansion. Cash flow and sustenance are paramount at this juncture.
What advice would you give to founders that are trying to raise funds during these uncertain times? Would you recommend raising additional capital?
This all boils down once again to resilience and the need to adapt. The whole industry has to rethink and pivot their approach towards operations – and this includes the funding process as well.
While I do think that one option could be to go for bigger rounds, it then begs the question of feasibility and whether investors are now still willing to do big tickets. One key thing for startups to focus on would be cashflow, profitability, plans on getting through this period of uncertainty, and perhaps a bit less on exponential growth that has often been the focus of high-growth startups in the last years. We are entering a new normal, and that requires us to rethink our approaches that’s more focused on establishing the right product market fit and ensuring that all core executional and operational pillars are established, but with flexibility to scale up and down depending on the what the market requires.
Psychologically, founders should be prepared for a more arduous process, as investors will take a more prudent approach. Start-ups need to show strength, confidence and a fighting spirit to obtain their trust in these times – that would be the minimum preparation before going into fund raising mode.
You work closely with Korean VCs and recently talked about why Southeast Asia is becoming increasingly attractive to Korean investors. What are the key reasons behind this trend?
South Korean VCs have increased their focus on Southeast Asia since the Moon Jae-in administration launched a New Southern Policy in 2017 – a commitment to increase trade with SEA and prosper together with the region.
Southeast Asian countries allow for considerably higher returns on investments and growth opportunities than in South Korea, where growth and returns are more muted.
Southeast Asia also presents a fertile ground for the convergence of technological expertise and abundant, affordable labour when compared to the resources that many of these investors have back home.
It is also good to note that investing is a two-way street – so it’s beyond what SEA startups can offer but also what Korean investors bring to the table. The draw for SEA startups is the fact that Korean investors are keen to offer their strong networks back home to present an attractive expansion plans or exit strategies.
Can you tell us about your experience with SPECTRUM so far?
I would have to use to word ‘Fabulous’ to describe my experience here thus far.
As part of the parent holding group, Golden Equator Ventures moved in at the very beginning. It has been a joy to watch the culture grow and develop – constantly evolving and adding new partners allowing for a vibrant and eclectic environment. It is always great to find new ways to engage as well as collaborate with new members in the space to advance business opportunities.
Do watch this space to find out more on the company’s developments in the future as well as insights on our other members within the space. As always, you can keep up-to-date with what is going on around SPECTRUM here.