Venture capital firm Qiming Ventures is expanding overseas, following the trail of Chinese investment into Southeast Asia.
Founded in 2006, Qiming Ventures has about $4 billion under management, including investments in electronics company Xiaomi and bike-sharing firm Mobike. It also currently has offices in Shanghai, Beijing, Suzhou, Shenzhen, Hong Kong as well as Seattle.
“We’ll probably open an office in Singapore,” Helen Wong, a partner, Qiming Ventures told FinanceAsia on the sidelines of a conference organised by DealstreetAsia in the Lion City.
“As VCs, we want to follow the Alibabas and Tencents of this world,” said Wong, an early investor in Alibaba.
Wong said that when she started investing in around 2005, it was the US that the firm first looked to for innovation. But now it is China that is a hot-bed for dynamic companies, particularly in the internet space, thanks to the country's huge and growing mobile internet market, she said.
Wong previously worked at GGV Capital.
Looking forward, Wong expects to see a rise in Chinese companies heading to Southeast Asia, partly driven by the growth opportunity in the region and also by increased regulation at home.
Regulators in China are cracking down on certain industries, she said. In August, China said it planned to regulate the release of new online games to curb a rise in myopia among youths.
Some overseas regulators are also making Chinese investors increasingly unwelcome. In the US this has been amplified by rising US-China trade tensions.
“[In Silicon Valley,] there is a lot more hesitancy on the part of start-ups -- especially in the deep tech area -- to take Chinese money, so I do see a lot more Chinese [strategic investors] are interested in Southeast Asia instead,” Wong said.
“So you see a wave of Chinese companies going to Southeast Asia,” Wong said.
So far the fruits of that surge are not immediately obvious in terms of mergers and acquisitions deal data, which can be skewed by single bumper deals. Chinese investment in Southeast Asia hit $28 billion in 2017, boosted by a Chinese consortium’s $16 billion acquisition of Singapore’s GLP, according to data provider Dealogic. But so far in 2018, the equivalent figure is $3.4 billion.
PATCHWORK OF COUNTRIES
Among the challenges faced by Chinese investors turning to Southeast Asia is the myriad of cultures and regulations across the region.
One solution is to use large, cross-border companies as proxies for growth.
“We try to identify opportunities that are pan-Asia. [Ride-hailing firm] Grab is a good example; [everybody] in the region needs transport,” Wong said.
Qiming Ventures also plans to ramp up activity in the largest economy in Southeast Asia. “You’ve seen a lot more unicorns emerge out of Indonesia recently for good reason, so we’ll put more resources there,” Wong said.
Wong sees room for Chinese business models and technology to be replicated in Southeast Asia, which is why Chinese entrepreneurs are increasingly setting up shop there.
One company Qiming Ventures has already invested is Akulaku, an Indonesian installment financing company that works with e-commerce companies but also has its own app. It was started by a Chinese entrepreneur, William Li, who leveraged off the Chinese experience in consumer lending.
Akulaku’s most recent fundraising valued the company at around $300 million to $400 million, according to a separate venture capital source. Akulaku has not responded to requests for an interview.
To be sure, some regulators are looking to slow down and even block a wholesale transfer of businesses from China.
Indonesia’s financial watchdog, the OJK (or Otoritas Jasa Keuangan), said in July it was clamping down on more than a hundred unlicensed peer-to-peer lenders who had fled a similar tightening of rules in China.
Another challenge is rising valuations.
One Indonesian company looking for a sky-high valuation, when Wong noted that the population of Indonesia was one-fifth of China's but its GDP is half, responded with: “we don’t need to go further”.
