Chua Kee Lock, the Chief Executive Officer and President of Vertex Venture Holdings, a subsidiary of Temasek Holdings, said that venture capital investing is like the Chinese divination guide tongshu in a recent interview with the South China Morning Post, since it includes some degree of guesswork. But he also said that the company will keep investing in technology, particularly in China, in the light of its trade tensions with the US.
“Nobody has all the answers and we value healthy deliberation. It’s just like tongshu, we look into the fortunes [of the market] and follow certain guiding principles while adjusting how we invest over time. It’s pattern recognition and that is the hardest part of the venture capital business”.
Vertex Ventures manages funds totaling US$2.5 billion with offices in Singapore, the United States, China, Israel and India. The company focuses on early-stage investments, with every fund operating independently.
Vertex Ventures was the first to invest in ride-hailing company Grab, one of its biggest successes. Grab, now the foremost internet platform services company in South East Asia, has a whole menu of different offerings, and in June of this year had a valuation of US$10 billion.
Another of Vertex Ventures’ initiatives in Singapore has been to invest in SoCash, an app that lets customers withdraw money from retail merchants, which may seem counterintuitive, given the Lion City’s push toward going cashless.
Mr. Chua said, “We’re trying to solve problems in the sectors we identify and sometimes we unintentionally end up disrupting [market leaders]. But it’s better to disrupt yourself than get disrupted by others”.
Grab is just one example of how Vertex Ventures focuses its investments on technology in South East Asia, specifically on enterprise software that helps SMEs, since 9 out of 10 companies are small-and-medium-sized companies. At the same time, it is also concentrating on work grounded in scientific research, known as deep tech.
Mr. Chua was asked in the interview concerning the effects South East Asia’s outcome should the US-China trade war continue indefinitely.
The CEO of Vertex Ventures pointed out one advantage from trade tensions, a number of locals who were educated in the US have come home to start businesses due to tighter immigration policies in the United States. He claims that entrepreneurs with experience translates to better investment returns.
In spite of unstable conditions in the market. Vertex Ventures will keep on investing in businesses in the year to come, and even beyond. Mr. Chua believes that these circumstances may just present the most ideal conditions for opportunities for investing.
“During bad times, the market becomes more cautious, which is a good thing because valuations become more reasonable, things get cheaper. Investors who are not confident will invest less, but we will continue. For any business, it’s about consistency.”
At the moment the firm is leaning toward investing in Chinese tech companies, due to the trade situation growing more tense, as China may look toward more local solutions.
But Mr. Chua does not discount the fact that some of the investments of Venture Ventures may likely be affected by tense market conditions. The CEO compared the situation to two fighting elephants with ants trampled underfoot. He said, “There will always be people who get hurt in a trade war”.