Munich-headquartered venture capital firm Picus Capital entered Asia last year. It is now shoring up its presence in East and South Asia, particularly in China, where it recently opened an office. Picus is closing its first Chinese investment this week, just as it is finalizing its sixth deal in India.
The firm focuses on early-stage tech startups across finance, logistics, health and wellness, renewable energy, real estate, education, and e-commerce. In India, it has backed companies that are addressing infrastructure gaps in areas like finance and healthcare, or have developed B2B SaaS solutions for the global market.
Picus’ investment thesis in China aligns with its global focus areas. It hopes to team up with local entrepreneurs seeking an investor with a global perspective. KrASIA spoke to Alexander Kremer and Florian Reichert, partners at Picus Capital, about Asia’s changing startup landscape.
The following interview has been edited and consolidated for clarity and brevity.
KrASIA (Kr): Has your perspective on the Chinese market changed in any way due to the recent regulations?
Alexander Kremer (AK): There have been a number of positive developments for foreign investors in China. For example, FDI in China last year reached an all-time high, which was also the highest globally. The regulatory changes in the last few weeks mean we are looking at certain sectors differently from before. It doesn’t change our overall stance toward the Chinese market. We have seen a lot of Chinese companies pivoting or adjusting their business well.
Kr: Which sectors will you avoid in China? Which might you take a closer look at?
AK: With the latest regulations, K–12 education is not an interesting sector anymore. A lot of these companies will pivot to adult education, which will make that space very crowded. We would have considered them before, but not now.
We see opportunities in enterprise tech, which has been lagging behind the consumer internet space. We are interested in the new Chinese companies going overseas. For instance, D2C brands like Perfect Diary and Genki Forest. We are also excited about industries like health, cross-border e-commerce, asset management, insurance, D2C brand enablers, the influencer economy, and remote work.
Kr: Many bigger Chinese companies like Huawei have been ostracized overseas. Does that make it difficult for other Chinese companies to go global?
AK: Chinese companies are looking at specific markets; these might be different than what they were looking at a couple years ago. They are more becoming sophisticated at managing international operations, including PR and government relations. They are constantly adjusting in the regions where they want to be active. There might be some political forces at play, which are outside their control. But there are signs of success, like in cross-border e-commerce.
Kr: As investors, what similarities have you observed in China and India?
Florian Reichert (FR): Many Indian entrepreneurs reference the Chinese market for trends that can be transferred to India, like social commerce. This is attributable partially to the entrepreneurial drive in Indian society, which is something we observed in China in the past.
AK: The development gap between big and smaller cities is common in India and China. Before, businesses focused on building solutions for the urban population. But now, a lot of companies, in order to grow, are building innovative solutions that interact with the offline world to target the population outside of big cities.
Kr: With the current funding deluge in India, do you think deals are getting too expensive?
FR: We are observing this globally. There’s a lot of money in the market, which is increasing round sizes and valuations. However, I can’t say deals are overpriced, because the market is determining the price. As compared to China and India, there’s less capital in Southeast Asia, which makes the region a bit less competitive.